Word of mouth is one of the most powerful, timeless and effective marketing tactics around. Customers who spread the word about your business and become ambassadors for your brand are potent tools that companies have utilized for decades.
This tried-and-true customer acquisition method is a proven and efficient way to get new consumers as your existing clients introduce your products to their network of friends and family. Referral marketing harnesses the power of word of mouth by encouraging and rewarding those that refer their products.
SaaS entrepreneur Manuel Frigerio has taken this concept and developed a specialized referral marketing tool for email newsletters called SparkLoop.
An experienced referral marketer, Frigerio had previously created ReferralHero, a B2B SaaS business in the marketing platform niche that he divested through FE International. On his personal blog, he shares in more detail about the sale of his business, how the process went and why he decided to divest.
Today, he’s narrowed his focus to solely referral marketing in the email newsletter niche.
“From late 2019 to mid-2020, we spent thousands of hours making sure that SparkLoop is both the most powerful and effective email referral tool and also the easiest to set up and use. We officially launched on August 6th, 2020,” Frigerio says.
SparkLoop’s offerings include acquiring subscribers and boosting engagement and revenue.
Read more about the 13 Email Marketing Best Practices to Embrace
Why Referral Marketing
For Frigerio, referral marketing was not an intentional choice. It was more of an accidental discovery that led him to build his first referral marketing SaaS tool.
According to Frigerio, “a referral program is the best way to grow an engaged audience in a scalable, affordable and low-effort way, as proved by thousands of successful newsletters, from Morning Brew and TheHustle to James Clear, Lifespan and Influence Weekly.”
Years ago, after a late-night out with friends in London, Frigerio woke up with the solution he’d been mulling over for months.
At the time, he was working on a startup aimed at events and analytics for events. His client and friend approached him about how they could sell more tickets. His friend shared the idea of incentivizing people who went to these events to refer friends by offering free tickets if they referred someone.
Frigerio didn’t think a solution like that had anything to do with him. But his problem-solving nature drove him to seek an answer anyway.
“I spent months just thinking about how that would work. How would we build something that works?”
After that late night with friends, he had a eureka moment, and the idea suddenly dawned on him. “The next morning, I remember waking up and thinking, I know it, I know how to do it,” Frigerio says.
He built the MVP (minimum valuable product) in four days and had about 70% of what would later become ReferralHero done. He gave the prototype to his friend, who loved it.
“Before I knew it, people would ask me, ‘How do I sign up? Where do I send you money?'” For a long while, ReferralHero was a side project for Frigerio, but eventually, it became clear that it should be front and center of his focus.
Building Referral Marketing Software
Although he wouldn’t call himself a coder, Frigerio built ReferralHero and as a self-proclaimed jack of all trades, he’s done a lot of work on the development side. Again, accidentally.
However, he does have an affinity for newsletters. This is why he shifted his focus solely to referral programs for newsletters after selling ReferralHero.
“I’ve had a personal newsletter, with around 10,000 subscribers for some time. And I know lots of people who have newsletters. A lot of people have reached out to me saying they want to replicate what Morning Brew or The Skimm has, which are top-rated newsletter with referral programs.”
Example of Morning Brew’s referral program:
As for SparkLoop, Frigerio wanted to create a funnel program and whole platform. He addressed many marketers’ common questions, like what makes an excellent reward for a referral program? What is the ideal frequency of emails? When people join your referral program, what are they motivated by? What are the best channels for referral links?
The answer, of course; it depends.
It depends on the newsletter and its audience.
Frigerio says the key to their success with their platform is not about SparkLoop as a product itself but about making sure the customers who use it are successful and have everything they need to succeed.
“Something that I’ve noticed with marketing tools repeatedly is that people and companies pay for marketing tools because ultimately they get a return on investment. It’s a straightforward calculation,” Frigerio says.
“I pay a certain amount, and I get X plus Y, right? And ultimately, if you don’t deliver results, it wouldn’t be a great marketing tool. It’s very black and white. I like to think that we do an okay job at it. I know what has to do to deliver results in this industry.”
Over the years, he’s seen competitors come and go in the referral marketing space. “The tool itself is not that difficult to build. But then, as competitors pop up, they go away because it’s not about building the actual tool. It’s about ensuring you are offering something of real value, and you are giving your customers the knowledge they need and the insight to say, ‘this is what works, this is what doesn’t work,’ with email marketing. And that’s what everyone wants,” Frigerio says.
Tips for Growing an Email Newsletter
Provide Opt-outs for your Subscribers
According to SparkLoop’s 21 ways to grow your newsletter faster in 2021, there are several ways to reduce unsubscribes. One of the essential tactics being not losing subscribers unnecessarily. “Most people who unsubscribe from your list don’t want to unsubscribe. They want to unsubscribe from some bits of it.”
Louis Nicholls, the co-founder of SparkLoop, says the key is to give your subscribers more control over how, when, and what emails they want to receive from you.
This is an example from one of their clients offering his subscribers the opportunity to opt out of a specific email sequence. This way, he’s ensuring the subscriber is genuinely interested in the content they’re getting in their inbox.
Make Sure You’re Posting Frequently Enough
Frequently emailing your subscribers have can increase the success of referral programs.
“It’s no coincidence that daily newsletters — like Morning Brew, The Hustle, The Flipside and PunchBowl News — all see great referral results,” writes Nicholls.
Be realistic regarding your schedule and how often you’re able to post. It’s key to remember that quantity of posting should not negatively affect the quality of your posts.
Questions to Ask Yourself About your Email Newsletter
How many subscribers you have makes a big difference to how well your referral program will perform.
You can expect 5-20% of your subscribers to try and make referrals, according to Frigerio. The 5-20% of one million subscribers is many more people sharing referral links than 5-20% of one hundred subscribers.
It’s essential to have the basics down before you start engaging in a referral program. Ask yourself the following questions to determine if you’re ready for a referral program:
- Do I publish regularly?
- Do people enjoy my content?
- Do I know exactly what kind of person should be subscribing (and why)?
- Is my newsletter growing without referrals?
If the answer to all those questions is “yes,” — then you’re probably ready for a newsletter referral program.
Not Everyone Should Have a Newsletter
Even though you have a newsletter, you might not be ready for a referral program just yet. Frigerio even suggests examining if you should even have a newsletter in the first place.
“I don’t think that most companies should have a newsletter, to be honest,” Frigerio says.
“These days, there is this myth that most companies are also media companies. And in many ways, that’s true. I don’t think that means every company has to have a newsletter, though. What I mean by that is that every company should own their communication. That means across all channels like social media and such. It may or may not include a newsletter.”
Frigerio suggests developers and entrepreneurs should take a 50/50 approach when it comes to product and marketing. As a company, ultimately, you’re selling something.
According to Frigerio, not focusing on marketing and sales early enough in the development process is a big mistake.
“Many first-time entrepreneurs admit the mistake they make where they focus too much on the building aspect and not so much on the selling aspect. You can’t forget that you’re going to have to sell your product or tool eventually.”
When to Not Use Referral Marketing Software
Right now, newsletters are really “hot,” according to Frigerio. That doesn’t mean everybody should be doing them. He also doesn’t take on any client wanting to grow their newsletter subscription list.
He does, however, advocate for other growth tactics and believes you can do many things to grow your newsletter to the point where a referral marketing tool makes sense.
“For referral marketing to succeed, you should preferably have a list of 10,000 subscribers at the bare minimum, but what we mean is at least 20,000, when you’re going to do really well is when you hit 50,000 plus. There are plenty of exceptions, of course, but that is a rule of thumb. We get lots of people who have just started, and they might have 500-1,000 subscribers and want to have a referral program.”
From Frigerio’s perspective educating marketers on the things they can implement before adding a referral program is also part of his mission.
“We say, ‘Look, we’re not the right thing for you at this point,’ but we have created resources for them, we don’t want just to tell them to go away, but we want to help them grow to a point where they will be successful with implementing a referral program, and that might take some time.”
The Bottom Line
Frigerio advises people with newsletters in the beginning stages to ensure they are implementing SEO, cross-promotions sponsorships, and posting regularly.
Check out this deep dive into the importance of SEO and the 8 best practices.
“Either a referral program doesn’t work, or it works exceptionally well. We have plenty of testimonials of customers doubling their email subscriber lists in six months, so when someone is at the point where a referral program makes sense, it can be incredibly powerful,” Frigerio says.