Loyalty in the SaaS industry

Building customer loyalty, fighting churn, and lowering the cost of acquisition are very important for any SaaS business. In all forms of marketing, it costs more to acquire new customers than it does to continue to sell to the loyal customers you already have.

Although loyalty programs may sound too retail-oriented for a software company, it is a great customer retention strategy. Developing rewards and loyalty schemes can both help you to grow your customer base and keep the clients you already have (fighting the churn). Both referral and loyalty schemes can be beneficial for SaaS, like for any service-based business.

We do not want to mislead you – not every loyalty or referral scheme is efficient. You need to know your users and what motivates them to design a working loyalty or referral program. Don’t worry – we have some tips to get you started!

Here you can read more on how to create a referral program that works.

Here you can check out 11 easy rules for efficient referral programs.

A rule of thumb – before you implement any kind of reward or referral program, you should understand your current referral data. How many of your customers came to you because another existing customer referred them? You can either set up analytics to track that data or, if that is too complicated with your current technology stack, you can simply ask your customers about it (surveys) to get a rough estimate.

The best loyalty and referral program for SaaS – examples:

To prove that a SaaS business can also benefit from loyalty or referral programs, we have collected the best examples.

Best loyalty scheme:

AMAZON PRIME:

You can’t talk about loyalty programs without mentioning Amazon Prime. When the program began, the membership fee paid to Amazon provided Prime members with free shipping. Nowadays, for $99 a year, the program offers not only free shipping but also other benefits such as live streaming music, movies and TV shows, storage for digital photos, and more. For a person who takes full advantage of the Amazon Prime membership (a different type of “loyalty” program), the benefits can far exceed the annual fee. And as a result of paying for the membership, the customer will buy more often from Amazon. Amazon also offers apps for its website, music, TV and movies, and more.

We also recommend various innovative (without points!) loyalty programs - read more here.

Referral programs of SaaS worth your attention:

DROPBOX:

Dropbox is well known for its rapid growth over a short period of time, largely attributed to referrals (their “free space”, referral-based giveaway made people spread the word about their service). The current rules of the program can be found on the Dropbox website.

Why Dropbox’s referral program was so effective:

• Before the referral program, Dropbox was using SEM and affiliate marketing, with a CPA of $288-$388;
• But the math didn’t work; their product was $99/year;
• Inspired by PayPal, they added a double-sided referral program, where both the referrers and their friends get rewarded;
• The referral rewards were extra storage space, something that was key to the usage and enjoyment of their product.

Results:

• Permanently increased sign-ups by 60%;
• In Sept 2008 the service had 100,000 registered users;
• In Jan 2010 (15 mos.) the service had 4,000,000;
• 35% of daily sign-ups are via the referral program.
  

TRELLO:

Trello is offering a free upgrade to premium for a month for every referred person who joined Trello thanks to your referral. The reward does not expire!

EVERNOTE:

Evernote used to offer a scheme similar to Trello’s a couple of years ago (2013?), when it still needed the word to be spread. Nowadays, it offers a much less attractive (from the customer’s point of view) loyalty program, point-based and effective only if the referred friend purchases premium services. As the needs of Evernote evolved (they already have a huge “basic” user base and now need to work on conversions), they have changed their referral program. Rules of the current program can be found here.

TWITCH:

Twitch is a platform for game video streaming. It adapts a lot of gamification techniques, and there are several reward systems.

An example is Drops – awards you get for just watching shows and thus increasing the engagement of the user.

Users can become premium members and make money in the game. So they can get and change vehicles, skins, characters, and virtual currencies.

Loyal users are rewarded by custom loyalty badges, like Base Badge, 3-Month Badge, 6-Month Badge, 1-Year Badge, and 2-Year Badge.

PAYPAL:

They literally gave away free money, and it worked out great for them. And this was before social media!

Referrals helped PayPal achieve 7 to 10% daily growth, catapulting their user base to over 100 million members.

According to David Sacks, original COO of Paypal, Paypal used to literally pay people to invite their friends.

It turned out to yield better marketing ROI than traditional marketing channels.

Once they achieved a critical mass of early adopters they dropped the Refer-A-Friend bonus, but they kept it for Merchants. Then they dropped the Merchant bonus, once they reached their target numbers.

TRANSFERWISE:

TransferWise is a UK-based money transfer service launched in January 2011 by Kristo Käärmann and Taavet Hinrikus with headquarters in London and offices in a number of cities. A new company in the “banking” sector, following the success of Paypal, has adopted a pretty extensive referral program. As Transferwise states:

“Inviting friends is key to the TransferWise revolution. The more people send money with TransferWise, the better it is for everyone.”

More about Transferwise's referral program here.

SUMMARY:

We’ve shown you where to start with your customer loyalty strategy and we’ve covered some great examples of working strategies for other SaaS companies. If you are wondering how to set up such a program, Voucherify is API-based customer retention software that can handle your loyalty and referral personalized schemes. Contact us to get your strategy up and running in no time!