Double-sided Referral Programs: Are They Really Worth the Hassle?

Referral programs have long been recognized as an effective marketing strategy to generate new business. However, in recent years, a referral variant method known as double-sided referrals (or two-sided referrals) has gained popularity. These programs grant benefits to both the referrer and the referred person, creating a win-win situation for all parties involved. But are double-sided referral programs truly as effective as they claim to be?

What are double-sided referrals?

Double-sided referrals are a form of referral program where both the advocates and invited friends (or referrers and referees) claim benefit from spreading the word about your brand.

In traditional, single- or one-sided referral programs, a person refers someone to a brand or service, and if that referral leads to a successful transaction or interaction, the referrer receives a reward or incentive, skipping benefits for the invited party altogether.

In the case of double-sided referrals, however, the concept is expanded to grant benefits to both the referrer and the person being referred. When one person refers to another to a brand or service, and both parties engage in a transaction or interaction, they both receive rewards or incentives as a result.

Double-side cost or double-side benefits?

Without proper market research and budget analysis, two-sided referral campaigns can turn out to be a fool's errand, as this referral structure can get expensive quickly.

If you decide to implement double-sided referrals into your marketing strategy, you have to remember that too big discrepancy between incentives for both parties makes them not as effective as they may seem on the surface.

According to marketing research, while a referral program can have benefits for both the promoter and the referred friend, these advantages can quickly diminish if there is a significant imbalance in the rewards offered to each side. If, for instance, a referrer receives more benefits than a referee, the positive effects of the program can be easily undermined, resulting in a misfire.

That's why many double-sided programs, most often than not, choose to provide identical rewards and value to both parties. This approach simplifies communication (for example, using the phrase "Give $10, Get $10") and highlights the importance of fairness and equality for all participants.

Economics of the two-sided referral program with equal rewards comes down to striking a balance. When planned correctly, it doesn’t have to be more expensive than a one-sided deal – for example, if you used to offer $20 off for advocates, you can split it into $10 off for each party in a two-sided program structure.

Remember to start from an estimation of a budget, list necessary promotion limits, and dig deep into your sales data. Comprehensive research allows you to choose incentives with the highest chances for conversion. Last but not least, you need to verify what is possible with your referral software and make sure you have a proper infrastructure in place.

Why are two-sided referrals more effective?

General rule of the thumb suggests that two-sided referral programs are more effective in generating successful outcomes compared to one-sided referrals. Here are a few reasons why:

1. Reciprocity

Two-sided referrals tap into the principle of reciprocity.  This mutual exchange encourages active participation from both parties, including a promoter and a referee, and fosters a sense of reciprocity and goodwill. In general, it makes a referring customer feel better about themselves as they don’t come off as selfish.‍

2. Expanded reach

Two-sided referrals help expand networks by introducing brands to a wider circle of contacts. Since such a referral structure is simply more attractive, double-sided referral campaigns more often become viral and increase mass adoption, creating new opportunities for a given brand.

3. Enhanced first impression

Offering a benefit right from the start increases the perceived value of the product or service. The new customer sees tangible rewards or advantages associated with their decision to join, which reinforces their belief that they made the right choice. This positive perception contributes to a more positive customer experience overall.

Challenges of running two-sided referrals

While talking about what’s technically available, you need to keep in mind two things. Firstly, two-sided programs require two different batches of incentives. This is the easiest part. It gets more complicated when it comes to syncing both levels into one, traceable workflow. The truth is, without automation, it can’t work. There are at least three basic endpoints that you (or rather your software) need to control:

• How many recommendations come from one customer?
• If each “new” customer who tries to redeem the code is really new in your database?
• If a new customer redeems a code, should it trigger a reward for a referrer?

Things are usually much more complex. Every program needs rules based on time frames, cart volume, or budget limits. This is why every redemption is preceded by an advanced process of validation. You need to be sure that both the advocate and the invited friend meet all the required conditions. Without referral levels synced into one consistent workflow, you expose yourself to misuses and fraud.

What distinguishes a good referral marketing software is the referral tracking. It should be able to gather data from each endpoint. These data are crucial for fraud detection and figuring out what's working and why. Keep in mind that analyzing customers’ behavior and program performance is the only way leading to improvements.

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How Ovo Energy launched a referral program in one sprint?

OVO Energy, an energy retailer established in 2009 as part of the OVO Group, embarked on a mission to revolutionize the energy sector. Their primary objective is to achieve carbon neutrality by 2030, all while empowering OVO Energy members to significantly reduce their ecological impact.

To swiftly revolutionize the Spanish market, OVO Energy made a strategic decision to employ a two-sided referral program. Their team sought an innovative, adaptable, and cost-effective tool that could be seamlessly utilized by the marketing department, without the necessity to ask developers for any additional help. They desired a readily available software solution, crafted and maintained by a specialized company focused on promotion management, freeing up their time from the burdensome tasks of designing, creating, and upkeeping any code. As an API-first referral management system, Voucherify proved to be an effortless solution for their team, enabling a fast and seamless implementation process under the wing of our team of experts, who provided advice and support at every step of the way.

Read the full story >

Real-life examples of successful double-sided referrals

If you are still lacking inspiration and haven't got an idea on what your double-sided referral scheme should look like so as to succeed, below are some real-life examples of innovative campaigns that reward both referrers and referred customers:

1. Dropbox

Dropbox implemented a referral program at the end of their six-step process to welcome new users. They used their own product as an incentive to encourage people to refer their friends and family. Their referral program is easy for customers to share by email, using a special link, or on social media.

In the referral program, when someone signs up through a unique referral link, it triggers the referral process. If you refer someone successfully, you get 500 MB of extra storage for each referral, and you could earn up to 16GB in total. The person you referred would also get 500 MB of free storage after signing up with the referral link.

Because of this program, there was a significant 60% increase in the number of people signing up. In just the first 18 months, it resulted in over 2.8 million new referrals.

2. Tesla

Tesla offers its customers a special referral program that they can share with their friends and family. When someone uses this code to buy a Tesla vehicle, both the person who referred them and the new buyer receive benefits like free Supercharging, solar roof, wall chargers, and more. In a tweet about their Referral Program, Tesla mentioned that customers can refer a friend to purchase a new Model 3 or Y using their referral link and give them a $500 discount. In return, the referrer can receive up to 10,000 credits that can be used for Supercharging, software upgrades, and other rewards.

In addition to these reward changes, Tesla has put some restrictions on the amount of referrals each owner may get. In order to prevent fraud, owners are now restricted to five referrals each calendar year, according to Tesla's updated terms and conditions.

As a result, Tesla achieved its highest production and delivery numbers so far, and with these enticing Referral Program perks, it is expected that Tesla's sales will continue to grow even more.

3. Paypal

The referral program used by PayPal works on top of a simple system of rewards, where both the person referring others to join PayPal (referrer) and the person receiving the invitation (referee) can earn rewards.

Instead of only giving rewards to advocates, PayPal implemented a strategy that ensures both existing and new users receive the same rewards. This implementation of a double-sided referral program is clever because it's easier to attract new referrals when both parties know they can benefit from them. The rules of this program are pretty straightforward; you have the opportunity to invite a maximum of ten friends and receive up to $100 in cash back (equivalent to 10,000 points) when they make a purchase or send money totaling $5 within 30 days of signing up.

Besides expanding their customer base, PayPal's referral program structure also helped increase their profits. As more referrals were made, the company earned more profit from transaction fees.

4. Olaplex

Love is in the hair, right? OLAPLEX has a variety of hair care items that aim to assist individuals in fixing, safeguarding, and fortifying their hair. To motivate their customers to tell others about their brand, OLAPLEX operates a double-sided referral program called "Share the OLAPLEX Love."

As part of this campaign if you refer a friend who makes a successful purchase, you, as an advocate, will receive a complimentary full-size Nº.8 Moisture Mask. Additionally, the friend you referred to will also receive the same hair mask with their first order, making it a win-win situation for both of the parties involved, since there is no discrepancy between the rewards they earn.

How to build two-sided referrals with Voucherify?

1. Create a referral campaign

In the Voucherify dashboard, navigate to the "Campaigns" section and click on "Create campaign." Select the "Referral codes" campaign type.

2. Choose the right incentive workflow

In the incentive workflow section choose which event will result in conversions and, selecting those to be rewarded in your referral campaign, click on the “referrer and referee” button to build a two-sided refer-a-friend program.

3. Configure referral rewards

Define the rewards for both the referrers and the referred customers. With Voucherify, you can use customer segmentation to target the appropriate audience with tailored incentives, and then attract users with one-of-a-kind awards for both the advocates and the invited customers.

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Voucherify gives you a variety of incentives to choose from, including:

• Percentage, amount, unit, and fixed amount discounts.
• Product rewards & free samples.
• One-off & rechargeable gift cards.
• Free entry to giveaways and contests.
• Loyalty points.
• Free or discounted shipping.
• Dynamic discounts that change value.

4. Set up tiers to spice-up your referral program

Tier-based referral programs encourage people to recommend more than one friend. It becomes substantially more worthwhile for the advocates to invite more friends if the prizes are increasing in value. Additionally, it slightly gamifies the program, making it an enticing experience for those who participate.

By following these steps, you can create and manage a double-sided referral program using Voucherify. Remember to tailor the program to your specific business needs and goals and communicate the benefits as well as terms and conditions of your referrals clearly to your customers.

Learn more about on how to launch a double-sided referral program with Voucherify

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