Benefits of a Referral Program for B2B SaaS

Written by Joran Hofman, Founder of Reditus

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A referral program turns customers you already have into an acquisition channel. For B2B SaaS the payoff comes down to four things: a cost you control, leads that arrive pre-qualified by someone the buyer trusts, customers who tend to stay longer, and a loop that grows as your user base grows. The benefits below are the detail; the sections after them cover the limits and how to measure whether it works.

1. You control the acquisition cost

You decide what earns a reward, for example a new paid client, and how big the reward is. Compare that with paid ads, where the spend goes out first and the conversions may or may not follow. Price the reward against what a new paid client costs you through your other channels: a reward that looks generous is often still the cheaper option.

2. Leads that convert better

A referred lead arrives with a recommendation from a colleague or peer, so the trust is already there. A personal, one-to-one recommendation is still the best way to get someone to use a product.

3. Customers who stay longer

Referred customers were pre-qualified by someone who knows your product, so they tend to stay longer, which raises their lifetime value.

4. A viral loop inside your product

Each new customer can become an advocate. An in-app referral program creates a viral loop within your own application, and it keeps growing as long as your user base does.

5. A closer bond with your users

Asking happy users to recommend you, and rewarding them for it, makes them part of your growth. Rewards like credits or product perks also keep the value inside your product.

6. Easy to launch next to your affiliate program

With an in-app referral tool the program runs inside your product with little upkeep. On Reditus it is included in every paid plan, runs on the same installation as your affiliate program, and has no limit on advocates.

Examples of referral rewards

Credits: account credit for every referred customer who starts paying.
Extra trial time or a discount: for the advocate, the new user, or both.
Product perks: extra features or swag. Snitcher's advocates collect points for swag, from a gift voucher up to an iPad.
Money: one Reditus customer pays €150 for every new paid client a user refers, and it has worked really well.

What a referral program will not do

Being straight about the limits saves you from launching one for the wrong reason:

It will not rescue a product people are unhappy with. Referrals measure satisfaction before they are a channel, so a program launched on top of high churn mostly proves the churn.
It will not produce volume on its own. Each advocate sends a few people at most, so the ceiling is set by how many active users you have.
It will not replace an affiliate program. Affiliates reach audiences your customers can't, which is a different job: see referral program vs affiliate program.
It will not work with a tiny reward or an invisible widget. People need to see the program at the right moment, and the reward has to be worth a recommendation.

How to tell whether it is working

Track these four to see whether the program earns its place:

Share rate. The share of active users who send at least one invite. If this is near zero, look at visibility and timing first, then at the size of the reward.
Invite-to-signup rate. How many invited people create an account. A weak number here often means the invited person gets nothing out of it, which is the argument for a double-sided reward.
Signup-to-paid rate compared with your other channels. Referred signups should convert at least as well as your other channels. If they don't, look at who your advocates are sending you.
Retention of referred accounts. Compare their churn with accounts from other sources at the same age. This is the benefit that shows up last.

One note on the reward itself: credits and discounts keep the value inside your product, but they also lower the revenue of an account that was going to renew anyway. Size the reward against what a new customer is worth to you and what it costs you through other channels, not against what feels generous.

FAQ: benefits of referral programs

Are referral programs only for B2C SaaS?

No. B2B SaaS companies benefit just as much, especially when referrals come from trusted professionals and teams. On Reditus the affiliate program is built for B2B SaaS, and a B2C SaaS with a signup form and Stripe can use the in-app referral program too.

Do referral programs work at an early stage?

Yes, once you have paying users who like your product. Launch it together with your affiliate program and start with your own network: see should you start with referrals or affiliates first?

What's better: cash or non-cash rewards?

Both can work, as long as the reward is big enough to be worth a recommendation. Credits and discounts fit many B2B products; cash works too, as the €150 example above shows.

Does it cost extra on Reditus?

No. The in-app referral program is part of every paid plan, starting with Growth, and you can set it up during the 14-day free trial.

Relevant articles

For more on reward design and the mistakes that hold programs back, see the referral strategy guide.