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In 2007 a young man named Drew Houston decided that enough was enough. No more crappy file sharing sites and losing portable USB drives. His solution was to build a product that would become the staple of online file sharing and file storage that is now worth $10 Billion. If you haven’t guessed yet the company is Dropbox and chances are it’s on your desktop right now.
Now there are lots of reasons why Dropbox is great but great products do not always translate into great success. VHS vs Beta is a prime example (my first movie on VHS was Rambo Part 2!)
The Greatest Distribution Plan EVER!
Dropbox is the most successful example of what we call a “dual sided incentivized referral program”. In layman’s terms, that means that the person referring and the person getting the referral are both rewarded simultaneously. Of course, Dropbox didn’t invent referral programs but they were the first company to execute it to this scale. At least the first to turn it into a $10 Billion dollar business.
Picture of dropbox
According to founder Drew Houston, the referral program was the key to the company success. They doubled users every 3 months, basically turning 100,000 users to 4,000,000 in 15 months. At the height of the program, over 3 million direct referral invite emails were sent out in one month. Now that’s how you build a 10 Billion dollar company!
So where did Drew get this inspiration? Apparently the program was inspired by PayPal. While PayPal rewarded users with cash, Dropbox rewarded users with extra storage space to both the person referring and the person getting the referral. The point here is that an incentive does not need to be cash, in fact, referrals can sometimes work better if the incentive is intrinsic. A simple thank you or a small gift can have a powerful effect.
No Ad Spends
So this is where the question gets asked, “Did Dropbox spend advertising dollars to get this engine moving?” The word is that they didn’t spend a dime to get this engine moving on traditional advertising such as adwords or facebook. Now I find this a little hard to believe, I’m sure a buck or two was spent testing adwords, but the point is that they built the company without a paid advertising strategy. My suspicion is that the cost of acquisition would have been at least 3X the value of the product. In other words, this is the only way Dropbox could have reach this level of success.
Bah Humbug – This won’t work for me!
Foolishness!! Of course it’ll work for you. It’s the oldest and most battle tested marketing trick in the book. Word of mouth marketing has been used for Millennia! How do you make it work for you? Alright let’s start with some tips and tricks.
Some Tips & Tricks
1) Ask, ask and ask again: Studies show that most people respond after the 4th request. We’re all human and we’re all busy. I may just forget or I may be busy the first time you ask so ask persistently.
2) Learn to speak their language: Dropbox campaign wasn’t marketed as “invite your friends” it was marketed as “Get more free space”. Just a small twist in the call to action can make a big difference
3) When you ask is just as important as what you ask: There are certain times within the sales and consumption process that a consumer is most likely to respond, let’s say right after a great customer service call? When he/she just received your product in the mail? Figure out those opportune times and ask at those times.
4) Test the message: Chances are you won’t hit the nail on the head the first time around, so make sure to bake in a testing process. Change, measure, analyze and test again.
5) Be Patient: It’s going to take time: Referral marketing by nature is a program that gets more powerful as you move forward in time. Don’t give up too easily, give it time to work.
The post How Word Of Mouth Referrals Built a $10 Billion Company appeared first on Build a Better eCommerce Business | Forewards.