What Dropbox Taught Me About How To Acquire Customers for Just $1.25

Let’s face it…

Growing a business is hard work.

It’s not always sunshine and rainbows and first getting your business to even “become a business” is the hardest part.

Believe it or not, but Dropbox just a few years ago, before they became the world’s love child, was on their way to the dog-house, the dead-zone, the huge pit of killed businesses because of one thing…

The Cost of Customer Acquisition

As the story goes, when Dropbox first launched they tried every strategy under the sun to acquire users and customers for their brand new app.

They tried PPC, SEO, buying banners, and all of the “traditional” ways to grow their business.

Turns out, that their customer acquisition cost were sky high and running as high as $400 per customer.

Not bad if you’re selling a high ticket product or service, but when product is $9/mo ($97/year), reality quickly sets in that you’ll go broke in no time.

So Plan B was in full effect.

And after sitting down with Sean Ellis, they came up with a plan.

And then their Refer-a-Friend strategy… was born!

Well, not really born (it’s been around forever), just implemented in a very clever way so that Dropbox could acquire users and customers for literally pennies.

The scheme was simple.

“For every friend you introduce to Dropbox, we’ll give you both 250 MB of bonus space up to a limit of 3 GB!”

dropbox referral

“Sounds like a deal to me!” said millions and millions of people from around the entire planet.

And from that moment forward, Dropbox grew faster than Mark McGwire on steroids.

But, they weren’t the only one’s to implement this strategy.

“They Generated 10K New Signups By Doing WHAT?!”

Chances are, you’ve probably never heard of this company.

A few years ago they were the Silicon Valley rage and “Hipsters” from all over the land flocked to the site.

And in just 48 hours (like 2 days) they generated 10,000 brand spanking new users with a boring page like this…

hipster referral

Yes, seriously.

Ten Thousand Leads.

Nothing fancy.
Nothing complicated.
Nothing that cost them 50% equity in their business either.

A simple “curiosity” driven landing page sprinkled with the right PR and BOOM!

The puppy goes viral.

Here’s their process…

After you opted in with your email, they gave you the option to share on Facebook, Twitter, Linkedin, and created your own unique URL for you to share.

And the hook was…

Refer 3 friends to get EARLY ACCESS.

Yes, folks. “Early Access.”

No download, no free money, no whiz bang free prize inside.

Just the ability to get in before the rest of the world does.

That hook worked pretty well and netted them over 10K+ LEADS in two days.

Back then it was new.

Today it’s everywhere.

And it’s everywhere because…

IT STILL WORKS.

Here’s another company that used the same strategy to go on and generate…

315,239 (and growing) Beta Signups

RobinHood.com used this same “Dropbox Effect” strategy to build a pre-launch list of over 250,000 humans. WHOA!

robinhood landing page

Then after you optin you get this…

robinhood referral program

Share along and get early access.

Sound familiar?

How about this one…

“It Converts 50% Faster Than Paid Advertising”

What does?

The CMO of Gilt Groupe said this…

gilt groupe growth

So what the heck are they doing!

Well, as it turns out… they’re using… whatdya know…

The Dropbox Effect

Anyhow, are you starting to see how freaking powerful this is?

I thought so too when I first did.

So I though to myself, “Heck! I want to do that!”

So after some ninja campaign building inside Infusionsoft and a few hours of testing – we had it working. We had built our own “Dropbox” referral system that’s completely self managed for our business.

Like Dropbox, ours is simple too.

call loop referral

Refer a friend and for each verified referral, you’ll get 25 free messages.

This simple “been done a million times” strategy drives us fresh-hot (sounds like a donut shop) traffic and leads to our site each and every day.

Now before you copy Dropbox, Call Loop, Gilt Groupe, or the others guys strategy, you have to decide on which type of referral program will work best for YOUR business.

Types of Referral Programs

Before I dive in, I first want to clarify the difference between a “Referral Program” and an “Affiliate Program.”

A Referral Program is based on rewards or gifts. (i.e. get a report, pdf, video, mb’s for sharing)

An Affiliate Program is based on cash money. The affiliate receives a commission for leads, sales, or other actions they drive.

As in the examples above, they are all focused on giving a “reward,” not cash, for incentivizing their users to share.

Setting up an affiliate program is a whole other beast, but for now we’re solely focused on how to create a powerful referral program.

And the first type of Referral Program is…

1. Rewards For New Users (ie: Leads)

This is what we do for Call Loop. While Dropbox gives free space, we give free messages.

When someone refers a friend and they sign up, they get 25 free messages. The “retail cost” for us (if they actually use them) is $1.25 per user. (ie: 5¢/msg x 25 = $1.25)

In actuality, our “real cost” is much less since we pay a wholesale rate for messages (it’s more like pennies per user).

We also don’t offer an unlimited amount of referrals and cap it at 500 free credits (or 20 referrals).

SIDENOTE: What do you think? Should we open up a larger cap?

HelloFax gives away free Faxes for each referral.

So what about you? Can you give away some for each referral?

If you can’t give something of value for EACH user, then then next one may fit your business model.

I call it…

2. The Unlock Method

This is what Frank Kern did a few years ago with his “Good Karma Machine.”

It was a simple bribe.

“Refer 3 friends and get Access to My Secret List-Getting Video” ($97 Value)

So when you referred 3 people with your link you’d get an email to that video.

The results?

Oh, only 476 double optin leads… per day.

frank kern optin

Once they reach the 3 referrals, you then UNLOCK access to that video, training series, webinar, PDF, product, or access to a new feature.

Or if you don’t have anything to give, you can always use the “Early Access” bribe.

This is exactly what Robinhood and Hipster did and it worked for them.

3. Cash For Customers (AKA: Bills for Buyers)

Now, this isn’t about turning every user into an affiliate (that can get really expensive) it’s about rewarding each user with cash for their referral.

This is exactly what Gilt Groupe has done to grow from 15,000 users to well over 10M in less than a few years.

The best part?

It’s all performance based!

Here’s their “Share Page”.

gilt groupe order

What’s pretty wild about Gilt’s strategy is that they’ll give you $25 for each referral when their first order ships.

Did you read that?

“… $25 for each referral when their first order ships.”

So in other words, the person will only receive the $25 when the order is placed, out the door, and when they become a REAL PAYING customer, not just a user, but a CUSTOMER.

That’s really important!

This means that their customer acquisition cost to acquire a warm, referred, high converting customer is quite literally, $25 bucks.

Not to mention, you can’t redeem the $25 for cash, but only for $25 Gilt dollars. Which is basically, money at a discount for Gilt because they just count it into the shipping cost.

So in actuality their acquisition costs are much lower.

Like Gilt Groupe they only issued the $25 to you when your referrals order shipped. You can do something similar.

Instead of building out of using a fancy piece of software, you could just sent out Amazon gift cards for each referral.

We don’t do this now with Call Loop, but we easily could give each referred “buyer” $100 in Call Loop credits. It’s really the same thing that Gilt does.

Ok, so you may be wondering, “Boy Chris, this all sounds great, but how the heck can you do this?”

We use Infusionsoft combined with some custom campaigns I created to make all of this happen automatically, but there are some other “off the shelf” referral program softwares out there.

I haven’t tested them, but hear some great things about ReferralCandy.com

You may want to check them out.

The Wrap Up

Alright, I hope you gained some great insight into WHY and HOW you can create your own viral incentivized referral program.

If you liked this post, I have 5 other posts in the works just like this.

In my next post, you’ll learn how Amazon’s Billion Dollar Patent Made Me $27,847 in 45 Days. To receive a Front of the Line email when this next post launches, go ahead and drop a comment.

Until next time.

Be bold.

Chris

Chris Brisson

Chris is the co-founder and CEO at Call Loop. He is focused on marketing automation, growth hacker strategies, and creating duplicatable systems for growing a remote and bootstrapped company. Chat with him on Twitter at @chrisbrisson

  • Mike Cooch

    Awesome post, Chris!

  • Mike Hardenbrook

    Chris, great post, easy to follow for guys who are new to dissecting this type of strategy. We’ve done similar referral programs, some with success and others without enough to talk about.

    It’s my impression it could be the incentive OR what is offered OR product used, i.e. if it’s not interesting or something you want you friends necessarily getting notified about, why share.

    I’m just curious how things shook out for CallLoop

  • Great post Chris.

    It seems to me the key to getting a user to refer a business comes down to; i) a favorable engagement with the company already, ii) the reward having a high enough perceived value that it’s worth going through the motions to share AND iii) the offer being made to the referee is one that makes the referrer feel good for sharing it.

    Be great so you are referable and adding a well crafted user referral program can be the ticket to fast growth.

  • Great post because you are sharing something that most small business owners can implement with very little money or tech ability

  • Very interesting and timely.. We’ve been working on something similar to push out this week.

    We’re currently getting good results with a social sharing app we built also, offering customers a discount at checkout for sharing on Facebook.

    But I always wondered how these other promos have performed, so thanks for shedding light on that. Now we know it’s a good idea, we’ll push harder on it!

  • Krazee kool post on referral systems. Thanks.

  • Great article Chris.

  • Another great tool for referral marketing is OSI Affiliate Software http://www.osiaffiliate.com