How To Develop The Right Loyalty Program For Your SaaS

Sep 10th, 2018. Posted in: News

How does your SaaS develop loyalty and effective referral pipelines?

In the competitive SaaS market, your business needs every advantage it can possibly use to get ahead. Developing rewards and loyalty schemes can both help you to grow your customer base and keep the ones you already have. They are also great for increasing your visibility, as we’ve discussed previously.

Many successful SaaS are turning to loyalty and rewards programs throughout different stages of the customer lifecycle. How do you decide what is right for your SaaS? We’ve got a few ideas…

Rewards For Loyalty

Outside of incentivizing current customers to refer others, rewards for loyalty to your SaaS can have good results. The caveat here is that you need to know what you’re doing—certainly not every loyalty scheme is effective, so let’s look at how you can create one to get better results…

Make it Meaningful

For a subscription-based SaaS customer, a loyalty program is not going to be quite the same as getting their coffee card stamped every time they purchase at their local café. What makes those coffee cards great? The reward is meaningful—it’s something that the customer already likes and can use.

SaaS could choose to reward loyalty over time, for example offering some kind of extra feature, free month, discounted pricing or other rewards that aligns with the type of people who use your product for every year the customer sticks with you. The idea is that by offering them something closely related to the product (rather than say, sending them chocolates), you already know that the reward is useful to them.

Make it Attainable (and Simple!)

Ever seen one of those airline miles programs where the awards are so elusive, or so steeped in conditions for what you can redeem them for that they’re not really worth doing? This is just frustrating to any customer and will probably lead to them giving up.

Loyalty and rewards schemes are much more effective if awards are clearly attainable and simple to cash in. If you set too many complicated rules around your program, you may as well not bother.

Consider Tiers

It’s often a matter of ego to think that we’re privy to a more elite reward class. This is one of the airlines use all the time and it has the effect of encouraging more purchases. Could this work for SaaS? Well, you probably have different tiers of subscription already, so why not tie in your rewards?

Amazon Prime is a good example of how offering something extra to a more elite tier can encourage purchases. While they are estimated to make a significant loss on their free two-day shipping offer for Prime members, they make up for it by the significant increase in spending of Prime members over non-members.

Set Goals & Monitor

How will you know if your loyalty scheme is a success? Set specific goals for what you want it to achieve and monitor how it works over time. You want to remain relevant to the customer and ensure that your loyalty scheme actually does provide them with some incentive. If you’re not sure, ask. Send out a quick survey or call a few clients and ask them whether the loyalty scheme is a motivator for them.

Rewards For Referrals

Know Your Referral Stats First

As Tommy Walker points out for Conversion XL, before you implement any kind of reward or referral program, your best course of action is to understand your current referral data. How many of your customers came to you because another existing customer referred them?

As he explains, ideally you will have something set up in your analytics which allows you to track customers who are coming in from shared links. Alternatively, you can always simply ask customers how they found you to at least get a rough idea.

It’s important to know your current referral stats first because you want a baseline for any program you put in place. Most SaaS will already have some referrals coming in, whether you’ve officially asked for them or not, so it’s worth knowing about.

Find The Right Incentive

What makes people refer friends to your SaaS? Dropbox is well-known for its rapid growth over a short period of time, largely attributed to referrals, but funny enough, they found that their “free space” giveaway was what made people share, rather than what made people sign up.

Source: ConversionXL

As Marketo show, referral programs could be:

  • One-way (the referrer receives a reward for successful referrals).
  • Two-way (both the referrer and the referee are rewarded).
  • Third party (a referral offer is made when you purchase something from a partner company).

What’s going to work for your SaaS? It’s worth testing to find out, but we would start with knowing your customer profiles very well and taking your best idea of what would be a good motivator for them. Again, you can always ask them! “What motivates you to refer friends to (our SaaS)?”yesware-referrals
Yesware is a good example of a one-way referral program. Referrers earn redeemable points for successful referrals. Image source: Referral SaaSquatch on Slideshare.

Make it Easy

When you think about designing the flow for how your referral program will work, consider how easy it is for both the customer to refer and their friends to accept the referral and join up. Generally, the less clicking about and different screens involved, the better to ensure people follow through.

How can you make it easy? The Yesware example above is a good one, with fields pre-populated to make the process faster. Simple social share buttons is another good way, such as shown by Free Agent below…


Again… Meaningful Rewards

If you’ve got an excellent product, you’re probably finding that happy customers want to refer others who could benefit too anyway, but still ensure that any rewards are meaningful.

Some companies have used incentives such as drawing entries for electronic prizes, gift vouchers or vacations but beware that these won’t always have the desired effect. If you use a reward that everyone wants (hello ca$h!), you could end up with a bunch of “freebie seekers” signing up who don’t really fit your ideal customer profile.

A solution to avoid this could be to reserve those juicy prizes for existing customers and use incentives such as a free month for new sign-ups.

Invest In Retention First…

There is no sense in initiating a referral scheme if you don’t have good retention strategies in place first. This quote from Robbie Kellman-Baxter sums it up well:

“Don’t invest in acquisition until you know you can retain them. If you do, you’ll end up with a sieve, not a funnel.

Final Thoughts

Rewards and loyalty schemes can be a great boost to both your acquisition and retention, as long as you have set them up well.

Any rewards offered need to be meaningful to the customer and you need to have a simple system for them to cash-in.

Be very clear on your goals and what your baseline measures are to start with, so that you can clearly see whether or not your program is successful or needs work. That includes understanding whether or not you are drawing in appropriate customers with your reward scheme.

Finally, retention needs to be a priority before investing in any referral scheme for acquisition. You want to be able to keep those who come onboard…

Interesting link about cloud service models:


author: Richard