Referrals are the holy grail of growth loops. Every growth marketer worth their salt knows how to acquire, retain and engage users, but the last stage of the pirate metrics funnel–referral–is less explored, and a much harder thing to get right.

Over the past few years we at Move78 have built multiple growth loops for different products, specifically consumer tech and B2C products. When building Go-To-Market strategies for our partner brands we researched referral mechanics in consumer apps, and while it initially seemed like there are a million complicated ways to getting referrals right, we realised that referral incentives all essentially fall into 3 main categories. Each mechanic works for different products and services, so you should think about which one to use in your product depending on what you have built.

Retrospectively, these mechanics will seem completely intuitive and almost obvious, but there is a lot of value to this simplicity. Depending on the type of your product, a specific type of referral rewards mechanic may work best for you, and in some cases you may need to use a blended approach.

The three referral mechanics

1. Monetary

This is the most obvious way to reward users for referring their friends and family. Monetary rewards are the go-to solution for most fintech apps, some delivery apps and ride hailing apps. But watch out, as it might not work for everyone, particularly if your app has an exclusivity value, or is impact-led.

Monetary rewards also fall into two sub-categories, and you need to think about which one makes more sense for your app.

1a. Discounts → More relevant for apps offering products and services that users want to purchase, works for retail and marketplace products. This can also be free delivery, or a faster service.

1b. Cash rewards → Only works if there is an in-app wallet, or for fintechs. The classic example of this is Monzo, and more recently Revolut, who have offered users rewards as high as £200 to refer their friends. Onlyfans also use this for their creators; allowing creators to refer friends and earn a percentage of their friends’ income for a fixed period.

2. Social

We all seek social status, and social connections are a strong driving force of human behaviour. Apps such as Instagram, LinkedIn and games like Clash of Clans have built billion dollar businesses on the social rewards mechanics. Social referral rewards also fall into two subcategories.

2a. Sharing content → This works best for social media apps, enabling users to build networks with their friends. Getting their friends on the app is its own reward! But this could also work for some content and discovery products. Allowing users to share links to TikToks, and making it possible to view videos without having to log in for example is a key growth lever at TikTok.

2b. Status symbols → Think of badges and account tiers/levels or in-game status symbols like a gold suit of armour. These mechanics work best for games, and products where users have a public-facing profile where they can show off their achievements. Google does a great job of leveraging this in their Google Maps local guides programme. Fintech apps have also used this tactic recently in a more physical way. Monzo launched a campaign in summer 2022 offering users access to three exclusive neon cards if they referred 2 friends.

3. In-app value

The third and final reward type is in-app value which can be offered to users so they get the best out of your product. This is either additional premium features, or exclusive content. This approach has been used by Netflix and Spotify in the past (and continues to be used by some Onlyfans creators).

3a. Features → If your app is a tool that helps users do tasks, or is offering software as a service, you can reward your users for referring their friends by giving them access to additional, premium features. Dropbox has used this mechanism by offering users free additional storage for referring their friends.

3b. Content → If your platform is a content platform like Netflix (or our partner, Waterbear) you can reward your users with exclusive content accessible only to users that refer their friends. This approach also works for offering users merch (e.g; “refer your friends and get a free tshirt!”), or in retail businesses, allow your users to buy exclusive merchandise (or jump ahead in waitlists) by referring their friends.

Which one to pick

On a high level, you may need to test a mix of a few of the approaches to get your rewards mechanics right. Depending on which category of products you fall into, the choice may be clear, or less so. Definitely test different approaches, and think about using multiple mechanics in different parts of your product. If you’re building something new, and not just another delivery or ride hailing app, remember that companies like Uber and Deliveroo experimented for years before landing on their successful strategies, so it could take a while to find your winning strategy.

There may also be other rewards mechanics that don’t fall within this categorisation, so if you have figured out a novel way, or can think of someone who has, please do reach out to me (or don’t–your idea may be worth a lot of money)!

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