We are setting up a referral program for Iconery.com. We will incentivize customers to share our site with others.
Our jewelry will sell for $100 - $1,000, mostly ~ $250.
We've been thinking about giving $1 for every signup customers bring but are scared of possible fraud and overall unsure whether this is an appealing proposition.
We've settled on $50 for every friend who comes and purchases.
I am super aware that we won't know the answer until we test, but still, what's your take on that? Is $50 too much? Do you have other suggestions or can you point us to a very successful referral program in a relevant industry?
First of all, there is no such thing as "Growth Hacking".
It's all (clever marketing).
Now, affiliate systems are nothing new to the ecosystem. They are being used from small up to giant startups (i.e. Airbnb) nowadays.
Let'a break this down into 2 parts:
1) Incentivising existing users to invite their friends/share your offer
2) Incentivise those friends/people who see the affiliate offer to join
To better refine the amount with which you will incentivise new users to join, you will have to look at your Customer Lifetime Value (CLV).
If your CLV is over $50, let's say $100 then yes it's ok to offer $50 for the new user (the one who sees the affiliate offer) because in the longterm she will bring you profits.
That's assuming you are at a stage that you care about your cash and you are not, for example, a very early stage startup that is super-thirsty for users, in which case you could consider over-paying to acquire customers.
Now, to incentivise existing users to share your link/offer, what you can do is offer them $10 or $20 credit (or coupon) to user in their next order from you.
In general I would suggest splitting the total amount at half, so if you want to give away $50 in total, do it something like:
"Gift $25 to a friend and earn $25 for your next order at blah blah jewlery".
Don't expect huge rates unless you truly give a heck of a deal.
Consider promoting specific products to further incentivise (your best sellers maybe?)
Hope the above are valuable for you.
You can call me for more info.
If the lower end of the retail price range for your jewelry is $100, why would you be giving away $50 in cash?
Presumably, the margin on a $100 piece of jewelry is such that its wholesale cost is roughly comparable to that $50 in cash.
So if the choice is between giving away $50 in cash versus giving away $50 indirectly in the form of products worth more than $50, why would you pass over the opportunity to place your products with your customers?
There are dozens of ways to spend $50 on marketing. But the best way -- surely -- is to put your branded jewelry around the necks or on the hands and wrists of people who will go out in public wearing / promoting you!
I'm sure you could structure this in various ways to make it just as cost effective as giving away cash. At worst, the cash probably ought to be in-store credit.
Yet you might also want to consider incentivizing a person to refer 2 people or 3 people or 5 people as a minimum in order to redeem free merchandise of various price points. Anyone who sees that they are 1 more referral away from a $500 piece of jewelry will be much more eager to bring in another friend than someone who has already been paid $50 apiece for each referral thus far.
At the end of the day it comes down to what metric matters most in your business. I don't have enough info about your business model and products to give definitive advice but you should only pay a referral commission for referrals that move your business forward. You are on the right track by only paying comissions for people who are referred, sign up AND make a purchase, rather than just sign up.
Facebook is an example we can all relate to. Zuckerberg has always only reported ACTIVE users, not registered users because ACTIVE users are what make Facebook valuable.
Whatever it is that will make your company more valuable whether it's users, usage, revenue, profit, volume of sales, frequency of sales, etc. is what you should incentivize.
Hope this helps, let me know if you need any clarification. Here to help!