🎓 High referral rewards = worse customers
🎓 High referral rewards = worse customersLarge referral rewards (e.g. Get $50 if you invite a friend) boost the referral rate (+750% in one experiment) but lower the average profitability of newly referred customers (-48%).New to Ariyh? Join 7,509 evidence-based marketers for 3min insights 💡 based on research 🎓 to grow your business 📈 If you find these insights useful please share them with your colleagues and friends, Ariyh grows thanks to you! Today’s insight is brought to you by… Campaign Monitor Campaign Monitor's email template builder makes it easy to create and send beautiful, mobile-ready emails that stand out in a crowded inbox. Choose from a pre-built template, or import your own branding and have a custom template created for you. Create your own for free today. Want to sponsor Ariyh? Here’s all you need to know. 📝 IntroA higher referral reward (e.g. $50 vs $10) will bring you more new customers. But will those customers be profitable? P.S.: Keep an eye out and get excited for what’s coming up next week! It’s something that will benefit you all ;) Previous insight: Frame your product as the ‘gift’ in a bundle (100+ more insights here) Higher referral rewards increase referral rates but reduce profitabilityImpacted metrics: Customer acquisition | Customer lifetime value 📈 RecommendationCarefully choose the size of your referral incentives (e.g. “Refer a friend and get $30”, “Gift $10 to a friend if they join, you will also get $10”). High financial rewards greatly increase the number of referrals but strongly reduce the average lifetime value of newly referred customers. You could easily end up acquiring customers at a loss. 🎓 Findings
New here? Subscribe for the latest marketing research 💡 from top business schools 🎓 in 3min practical insights 📈 🧠 Why it works
✋ Limitations
🏢 Companies using this
⚡ Steps to implement
🔍 Study typeField experiment (on 247 referrals of a major European online bank from 2013 to 2015) and market observation (of 20,564 referred customers of a German telecom provider from 2009 to 2012). Germany 📖 ResearchWolters, H. M., Schulze, C., & Gedenk, K. (October 2020). Referral reward size and new customer profitability. Marketing Science. 🏫 AffiliationsUniversity of Hamburg, Frankfurt School of Finance & Management, and Xing. Germany Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely. Rate today’s insight to help me make Ariyh's next insights 🎓 even more useful 📈 How was today’s insight? Want to sponsor Ariyh or ask a question? -> Reach out at thomas@ariyh.com Want an evidence-based revenue boost? -> You can ask me for Personalized Recommendations. I will analyze your business and tell you exactly which new research you should use and how. New to Ariyh? -> Subscribe below or read other 3min marketing insights here |
Older messages
🎓 Frame your product as the ‘gift’ in a bundle
Tuesday, November 30, 2021
Frame a product as the 'free gift' in a bundle instead of the main product (eg “Buy softener and get Ariel detergent [primary product] free”). Sales were up to 78% higher in a series of
🎓 Far is prestigious, near is mainstream
Tuesday, November 23, 2021
If your brand is prestigious, place products far from the customer or model in an ad. If your brand is mainstream, position them close.
🎓 Say “Thank you” not “Sorry”
Tuesday, November 16, 2021
After a service failure, use appreciation (“Thank you for your patience”) instead of an apology (“Sorry to keep you waiting”) to improve satisfaction, repurchases, and word-of-mouth.
🎓 The “Sold-out” effect
Tuesday, November 9, 2021
Display some sold-out options to increase quality perceptions of your products and increase sales (people said they were 22.7% more likely to buy in one experiment). Don't show too many or the
🎓 Invent ‘Special Days’ to launch promotions
Tuesday, November 2, 2021
Promotions on unusual 'Special Days' (eg World Tourism Day, anniversary of first purchase) are more effective at increasing sales. In one experiment, people were 25% more likely to buy.
You Might Also Like
94% of users mistrusted a site because of
Friday, April 19, 2024
Today's hack A study found that web design was 1466% more powerful than content when it came to mistrust A study found that web design was more powerful than content when it came to mistrust. When
Amazon, the everything spy
Friday, April 19, 2024
Also in today's edition: Saffron's Southern chill; Oil's fair in love and war ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
This is how you see success as an Affiliate Marketer
Friday, April 19, 2024
Are you an action taker who's ready to take back your financial freedom, location freedom, and time freedom? View in browser ClickBank Hey there - this is important. Please read this message from
🔍 Good Content vs. Bad Content: Chocolate Brands
Friday, April 19, 2024
And why new age brands will beat legacy brands.
Revealing one of the easiest niches I've found
Thursday, April 18, 2024
...and how I easily find hundreds of niche ideas like this
50% Off 3 Courses + Weekly Masterminds
Thursday, April 18, 2024
Hey Reader, EcomCrew Premium is home to hundreds of e-commerce sellers who have built 7- and 8-figure businesses. Through the years, we've provided useful resources and guidance to these
Anyone heard from Dick?
Thursday, April 18, 2024
Plus: Big tech may have reached its peak, and why all billionaires are a$$hats.
This is the white-collar recession
Thursday, April 18, 2024
And the top six social media skills
[Webinar] AI Bootcamp: Supercharge Your Social Workflow Today
Thursday, April 18, 2024
AI doesn't have to be daunting!
Get pumped about email testing (no really!), get a peek at what’s new in Litmus, and more
Thursday, April 18, 2024
The latest email resources from the Litmus blog and a few of our favorite things from around the web last week. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏