Promoting a new small business on a tight budget is hard.
Marketing costs can eat your budget up like a hungry kid in a candy store!
You’re stuck between wanting to get your brand name out there and needing to keep the lights on.
Well, Dropbox can teach you a thing or two about how to gain new customers organically.
At first, they tried experimenting with paid search ads.
But ads can be expensive— they were shelling out $200 to $300 just to get one customer!
They switched gears by developing their own referral program.
And it changed everything.
Within 15 months, Dropbox had gained about 4 million users!
In this blog, we’re diving into how Dropbox pulled off this viral growth and how you can use the same strategy to grow your small business without spending a fortune.
What Is Dropbox and Who Is Drew Houston?
Dropbox is a file hosting service that lets you store and share files in the cloud.
It was founded in 2007 by Drew Houston.
He was a young MIT grad who got fed up with always forgetting his USB flash drive for file transfers.
Drew noticed that he wasn’t the only one having this problem.
People were constantly losing USB drives or struggling to share files online.
This lightbulb moment led him to create a service that would sync files across devices automatically.
His solution: Dropbox.
It quickly became one of the fastest-growing tech companies of its time.
But it wasn’t just a great product that led to its success.
It was their viral growth strategy.
The Dropbox Referral Program: How It Worked and Why It Succeeded
The Dropbox referral program launched in 2009, two years after the company’s founding.
The program was pretty simple. Here’s how it worked:
- Users got 250MB of free space for each friend they invited (up to 16GB).
- The friend also got 250MB when they signed up.
- Later on, they increased the incentive to 500 MB.
In short, both the referrer and the referred would receive extra free storage space.
It was a win-win situation.
This Referral Program was incredibly effective in that it gave Dropbox a 3900% increase in registered users.
In September 2008, they initially had 100,000 registered users.
But after the referral program? They reached their first 1 million users in just 10 months!
Their growth kept increasing, 5 months later, they reached 4 million users.
Drew later shared that their referral program was responsible for bringing in around 60% of new signups.
By September 2017, Dropbox had an estimated 33.9 million registered users and had $1 billion in annual revenue.
Why Do Referral Programs Work?
Referral programs tap into one key element of human psychology: trust.
People are more likely to try something new if it’s recommended by someone they know.
According to a Nielsen report, about 92% of consumers trust referrals from friends and family over all forms of advertising.
It’s a great form of word-of-mouth marketing.
Unlike ads, referrals come from a trusted source and the best part is that both parties get a reward in return.
Another study by the Wharton School of Business showed that referred customers are not only more likely to sign up but are also more loyal!
The study tracked 10,000 accounts over a period of three years.
It found that referred customers had a 16% higher retention rate and spent 25% more than non-referred customers.
Referral programs work because they take the guesswork out of marketing.
It does an excellent job of tapping into the power of personal connections.
How to Set Up Your Own Referral Program
1. Choose the Right Incentive
The incentive should be something valuable to your customers but not costly for you.
It could be a discount, free product, or exclusive access to features.
For a service-based business, consider offering an additional month of service or a premium feature.
2. Make it Easy
Make sure users can refer friends with minimal effort.
Dropbox’s program was dead simple.
New users simply put in their friends’ email addresses and click Send.
Dropbox even gave them an easier way by giving them the option to simply copy and share their referral link.
The easier it is, the more likely people will share.
3. Create a Win-Win Situation
Like Dropbox, make sure both the referrer and the referee benefit.
If both parties get something out of it, you’re more likely to create a viral loop where people continuously refer others!
4. Gamify your Referral Program
Dropbox made their referrals like a game.
The more people you invite, the more storage space you can get.
They also gave people a way to track their progress of how many of their friends accepted the invite.
5. Include it in Your Sign-Up Process
Integrate your referral program into your sign-up page.
When new users register on your website, prompt them to refer friends immediately.
You can offer a bonus just for signing up and encourage them to share the program.
Plus, don’t forget to send them a “Thank You” email!
Get a Constant Flow of New Customers by Implementing an Irresistible Referral Program
Setting up a referral program is a smart organic growth strategy— an affordable one too!
When you reward your customers by bringing in new ones, you can expand your reach without spending a fortune on ads.
Start small, keep it simple, and always focus on providing value.
A well-executed referral program can turn your customers into your biggest marketers.
And every referral program needs a well-written landing page.
It should be able to express the value of your offer to new customers in just 4 seconds.
Freebies mean nothing if the customer doesn’t see any benefit it can bring in their lives.
Writing a good landing page can be tough.
This is why we created our free guide Evoke 5.
You’ll learn the best copywriting practices refined from 10 years of real-world marketing experience in just 5 simple steps.
In fact, our guide even provides a few successful landing pages you can draw inspiration from for your own business.
