Tiered rewards motivate the referrers to refer more than just one friend. If the rewards are growing in value, it makes it significantly more worthwhile for the advocates to invite more friends. It also adds a little bit of gamification to the program, which is more appealing to the participants.
- Decide how much you are willing to spend on the successful referrals and stick to your budget. Remember, that if you increase the prize for 2, 3, or more referrals, maybe it would have been cheaper to offer a slightly higher price for the first referral and more people would recommend your business to one person, making the overall number of referrals higher. In short, calculate, test it and do not overpay the following referrals if it is not good for your business model.
- Do not offer very high discounts for a very high number of referrals because you may be a victim of a fraud. Keep the prizes value growing but not to unrealistic or hurting your margin prices.
- Consider setting a cap on the maximum number of referrals to prevent dishonest users from gaming the system.