4 Reasons Referral Software Is Getting SaaS-y

If you haven’t noticed yet, referral software has been getting a little SaaS-y lately. To clarify—over the past couple of years, SaaS companies have begun implementing referral programs into their social media marketing efforts. And wow, have they been doing well as a result!

It might come as a surprise, but SaaS businesses may be the best candidates for a referral program. Think about it: They’re reliant on maintaining a low churn rate, keeping the costs of customer acquisition down, and being able to track metrics easily.

While we know we don’t need to tell you that referral software works wonders for a SaaS company, we’re pretty SaaS-y … so we’ll do it anyway.

1. Referral Programs Help Decrease Churn Rate

Churn rate is arguably the most effective metric for measuring the health of a SaaS provider. Without a low churn rate, the number of new sign-ups is irrelevant because their likely departure keeps your business from collecting a recurring source of revenue.

On the other hand, customers referred by trusted sources have a 37 percent higher retention rate than the average buyer. Meaning, when a referred customer signs up, they’re in it for the long haul. And for a SaaS company that’s dependent on a long-term commitment from sign-ups, that can really make or break the business.

2. Referral Programs Keep the Cost of Acquiring Customers (CAC) Down

Again, referred customers are more valuable for your business than customers who arrive at your site by chance. Consider the implications for your CAC: With more referrals, marketing costs are reduced because you’re attracting new business via existing customers, not paid outbound advertising. Also keep in mind that customer referrals are inherently viral. In other words, when a SaaS loops in a customer referral, they’re not getting just one customer. They’re actually getting that customer and the potential business of said customer’s entire social network. As your loyal customers refer others to your brand, a SaaS can easily build publicity and a stronger brand name—both of which are critical to retaining a user’s trust and support.

3. You Can Easily Track Actionable Metrics

Metrics are an extremely important component of any successful online business, but especially so for a SaaS provider. After all, a SaaS company operates entirely online and thus requires an intimate understanding of their online customer base. Setting up a referral program on your own can be tricky, as well as time intensive. Plus, without referral software you won’t have access to the comprehensive suite of metrics that it provides.

4. More Than a Free Trial

Most SaaS businesses that utilize a referral or affiliate program offer a free trial as an incentive to refer. It’s quick and easy—but is it the best option? With referral software, your business will have the opportunity to reward customers in more creative ways. Perhaps you can try a tiered rewards system where customers are rewarded for referring five friends, or maybe you’ll offer one month of service to customers at no cost.

Sometimes a free trial simply isn’t enough. With comprehensive referral software in place, a SaaS provider has the ability to optimize the incentive structure to accommodate for their niche target base.

Referral marketing has gotten a little SaaS-y lately. But like Grandma always said, you can never have too much SaaS in your life … right?

Share your experience—what types of SaaS companies would you recommend to your friends?