Rewards

The rewards you choose are arguably the most important thing of your referral program so it's worth spending some extra time thinking about it.

Though the best rewards for your specific use case may vary, there are some "best practices" that we have identified by helping hundreds of newsletters.

  1. Be generous. When it comes to referral programs it's better to be generous than to be reasonable. Your referral program is much more likely to succeed if you offer people rewards that are proportionate to the amount of effort required. For example, if you’re asking somebody to refer 10 friends, which is a substantial investment in terms of time and energy, make sure your reward is well worth the effort.

  2. Start small. You don't need many rewards and you almost certainly don't need to have multiple swag, like The Morning Brew or TheHustle. In fact, the majority of our most successful customers have only one or two, highly attractive, rewards.

  3. Attract the right people. No one is going to go out of their way to recommend you for a mediocre reward. It defeats the purpose of having a referral program at all, and may actually cause you to lose customers if they think they’re being undervalued..

Before we start, let's set expectations.

In this article, you’ll learn a simple formula to choosing the right rewards, a simple framework to brainstorm ideas and some off-the-shelf strategies for your reward structure. But choosing the right rewards is not a 5 minute process. Most people take between 30 and 60 minutes to brainstorm a few solid reward ideas. But while this process will take some time, you will be rewarded with a much more successful referral program.

With that in mind, let's get started.

The formula to choosing the right rewards

All successful ambassador programs have one thing in common: they offer rewards that are both considered valuable/exclusive by their subscribers AND are cheap and easy to distribute.

Surely, you can decide to offer $10 per referral, but unless you have the capital to sustain this strategy (and investors happy to burn a lot of money) you will have to figure out rewards that you can actually give away without going bankrupt.

A better way to approach this process is to split it in two parts:

  • what you can offer

  • what your subscribers find valuable

What you can offer

Most people already have a general idea of what they are going to offer when they create their ambassador program. This is great but it usually limits their creativity and results in a copy-paste of other people's ambassador programs. Our advice is to write these ideas down and broaden your perspective with some creative brainstorming.

Reward categories

Broadly speaking, almost all rewards fall into 5 categories:

  • Swag

  • Financial (cash incentives, discounts, coupons, etc)

  • Extra content

  • Exclusives

  • Personal

Swags

Swags is the most common type of rewards. This category includes all the “traditional” rewards of ambassador programs, like branded stickers, socks, t-shirts, mugs, etc.

While this category of rewards is quite popular, many newsletters don't actually "qualify" for it. Swags only really work when your newsletter is a "lifestyle brand", meaning something people would be genuinely proud to display in public. The Morning Brew can offer swags because they have spent years building a brand many people admire and identify with.

Even if your newsletter's brand is "not quite there yet" you might still be able to use swags. Let's say you run a newsletter about climbing. Maybe your newsletter doesn't have a strong brand and people wouldn't wear a t-shirt with your brand on it but who said swags must use YOUR brand? Most climbing aficionados would happily wear a Patagonia hoodie.

If you choose to offer swag, at least make sure that whatever you offer is aligned with your audience's interest. For example, SparkLoop's customer Madison Mellish offers wine stoppers which her audience (people interested in wine) love.

Lastly, remember that there is a cost involved in producing and distributing these rewards. Whether or not this category of rewards is suitable for you depends on the lifetime value (LTV) of your subscribers. How much is a subscriber, on average, worth to you?

Financial

Cash incentives, discounts and coupons are very popular types of rewards and, in specific markets, can be extremely effective. However, the problem with this category of rewards is that it often creates the wrong type of incentive, attracting people who are likely to take advantage of the discount or coupons in order to save some cash and then unsubscribe quickly.

Even when offering financial rewards makes sense to you, it’s usually complicated to set up a system to send people money or coupon codes. The exception here is if you are selling anything, like a course, a book or even your services as a consultant, and the main purpose of your newsletter is to funnel people to a purchase.

For these reasons, we believe that financial rewards are the worst type of reward and should be used as a reward of last resort.

Extra content

People subscribe to your newsletter because they like what you say. It seems logical, then, that they’d like to get more of it. Extra content in the form of PDFs, white papers, secret chapters, songs, private podcast episodes, cut scenes from a movie or act all belong to this category. Bloggers, podcasters, authors, musicians and content creators in general should start here with their brainstorm.

We love these rewards because they are inexpensive (the cost of sending a PDF or song is practically zero) and very easy to distribute.

Exclusives

“Exclusives” refers to all those rewards that subscribers can ONLY get by referring their friends and in no other way, not even by paying. Examples are access to an invitation-only Facebook group, Slack community or exclusive in-person event. The Morning Brew’s ambassador program famously has an exclusive Sunday newsletter that you can only get by referring 3 friends. You can’t sign up to it, you can only be invited.

These rewards are highly effective because they leverage the innate human desire to feel part of something exclusive. Of course, this reward makes a lot of sense if you have already created an exclusive community, but don’t be dispirited if you haven’t. Many creators already have something highly valuable that could be made exclusive. For example, you could record interviews or webinars with experts in your field and make them accessible only to subscribers who invite a certain amount of friends.

Personal

If the most valuable thing you can offer is your experience, offer that. A classic example is a 20 minutes 1-to-1 call with the author of the newsletter. If you are a personality or an expert in your field, this reward is probably the best thing you can offer. Other examples include signed copies of books, being mentioned in a tweet and anything that can blow your subscribers’ mind. TheHustle famously flies you over to their offices when you refer 1,000 friends.

One thing to bear in mind when considering this type of rewards is that they are typically not scalable so you must make sure people have to work really hard to get this reward (a.k.a refer a lot of friends).

Brainstorm ideas

For each category come up with at least 3 to 5 ideas, the more the better. Don’t worry about how realistic they are. In this first phase, just be creative.

Next, rank your ideas using a scoring system with three factors, each one from 1 to 5.

It actually doesn’t matter which one you use but we normally recommend the “CED” one:

  • Cost: How expensive is this reward to you? (from 1 ”Very expensive” to 5 “Very cheap”)

  • Exclusivity: How exclusive is this reward? (from 1 ”Very common” to 5 “Very cheap”)

  • Distribution: How easy is it to distribute this reward? (from 1 ”Very difficult” to 5 “Very easy”)

For example, a coupon code might be cheap to product (score 5), but not very exclusive (score 3) and difficult to distribute (your website needs to sync with a CRM, score 2).

On the other hand, the invite to an exclusive, private newsletter is almost free (score 5), quite exclusive (score 4) and very easy to distribute (score 5).

The scores will be specific to your business and personal situation. The same reward could be cheap for one person but expensive for another, very easy to distribute for one business but very difficult for another.

Sum up the scores for each idea so that you have a total score for each idea. Now rank them in descending order (from the highest to the lowest). You should prioritise ideas with the highest score.

Reciprocity rule

Regardless of which rewards you come up with, remember to not be greedy. Humans have a very deep sense of fairness and will push back at something that feels unfair. In other words, choose a reward proportionate to the amount of effort required.

For example, if you’re asking somebody to refer 20 friends, which is a substantial investment in terms of time and energy, make sure to compensate them fairly.

What your subscribers find valuable

What you are able to offer as a reward is only half of the equation. The other half is to find out what your subscribers perceive as valuable.

Unless you’re completely out of touch which your audience, you should have a broad idea of what your subscribers might be interested in. Simply ask yourself: “If I were one of my subscribers, what would I want?”, then make a list of all the answers you come up with.

Even if you know your subscribers very well, the best way to figure out what they ACTUALLY want is to do some old, boring, custom research. In other words: ask them.

Nothing will ever beat talking to your subscribers and asking them directly. Even if you’re shy, the good news is that you don’t need to talk to many people. Five to ten will usually give you directionally correct results.

Simply get in touch with a group of subscribers (ideally people you know and who are not afraid to give you negative feedback), tell them about the rewards you intend to offer and listen to their feedback (PS: don’t forget the golden rule (which works in life as in business): listen 80% of the time, talk 20% of the time).

Reward ideas

Let's take a look at some reward ideas. Hopefully these will get your juices flowing...

Referral rewards to help build an audience

If your business model includes a traditional newsletter and a form of direct audience monetization (e.g., sponsorships), then prosperity lies in building your mailing list. You can try the following reward ideas, encouraging subscribers to bring new members into your tribe:

  • Access to a “secret,” exclusive newsletter containing bonus content

  • Access to special webinars or presentations with need-to-know insights

  • Access to members-only Slack or Facebook groups, offering an opportunity to become part of an inner circle

  • A signed copy of a book (which you or a member of your team has authored)

  • Promise shoutouts on upcoming newsletters to help subscribers gain recognition and feel valued

  • Swag designed to promote the brand and keep users aware—but only if it’s genuinely useful, engaging, and high-quality enough for regular use (such as a flash drive)

  • Giveaways with prizes provided by sponsors for a quick, cost-effective incentive

For example, author James Clear offers ambassadors making at least three referrals access to a private newsletter. This works because he’s a proven thought leader and he’s giving his audience exactly what they want: more of this writing. Author David Sinclair (author of Lifespan: Why We Age and Why We Don’t Have To) gives ambassadors access to his private Facebook group and a signed edition of his book.

Incentives for newsletters with upsells

If your product or service is designed to help educate subscribers (perhaps you’re a freelance marketer, offering packaged-up bootcamp sessions), then upselling is an effective option. This strategy involves using newsletters to funnel prospects along the buyer journey, while providing subscribers with real value, even if they choose not to purchase. In this case, in-depth, more insightful content can be extremely enticing. You can try the following rewards:

  • Access to gated content, such as videos, presentations, eBooks, or podcasts

  • An invitation to an exclusive webinar, roundtable discussion, or presentation

  • A free or discounted consultation with you or a member of your team

  • A small coupon to spend on a service you sell

Rayner Teo, an independent trading expert and founder of TradingwithRayner, combines freebies with insider knowledge by offering access to members-only roundtables and an eBook worth $29. Corey Haynes, a marketing expert, provides ambassadors with 50% off his annual plan in exchange for referrals. That’s a substantial saving, giving subscribers all the motivation they need to spread the word.

Incentives for newsletters with paid memberships

For businesses offering newsletters with gated membership (such as research giants like McKinsey) or incorporating paid memberships into their model (like Succulents and Sunshine), the following reward ideas can encourage readers to participate in your referral program:

  • Discounts on membership

  • Free access for a month, a year, or a lifetime

  • Access to members-only events or groups

For newsletters with an optional paid membership, being able to offer a “free trial” of their paid newsletter in exchange for a referral works incredibly well for lead generation. Andrew Kamphey’s Influence Weekly provides ambassadors with free paid membership for one month, as well as an exclusive document packed with high-value bonus content.

Exciting ideas for course creators

Online courses and workshops can be very lucrative for a business; you create the content once, and then roll it out as many times as you’d like. Newsletters are a great way of delivering access to this content and raising awareness at the same time. Brands offering course content can motivate ambassadors to recommend the service with:

  • Discounts on current or future courses

  • Access to a members-only group on Slack or Facebook, to take education further and network with like-minded people

  • Free access to a course for a limited period or a lifetime

  • Free preview lessons to give readers a closer look at other content or courses

  • One-to-one sessions with a teacher (this will be more time-consuming than other rewards, so it’s best offered as an occasional giveaway to one lucky winner)

Louis Nicholls, author of the Social Proof Handbook and a popular weekly newsletter, uses this technique well. He incentivizes referrals with his “Sales for Founders” project, offering a $100 coupon code with access to an exclusive webinar video.

Reward structure

Once you have decided what you rewards will be, it’s time to design a reward structure:

  • One large reward?

  • Two or three smaller rewards?

  • Many rewards, in increasingly difficult steps?

The good news is that the rewards you have shortlisted from the previous two steps will largely determine that reward structure of your ambassador program.

Obviously, reward structures come in many shapes and forms but here we’ll focus on the three most popular ones.

The “low bar” strategy

The most basic reward structure is to have only 1 reward which can be won by referring only 1 or 2 (usually a low number) friends. This model has been popularised by Intercom when they published some e-books a few years ago. Subscribers to their newsletter could get these sought-after e-books by inviting a friend. As soon as their friend signed up to Intercom newsletter, they’d get the ebook delivered to their inbox. This simply strategy was responsible for tens of thousands of signups to their newsletter in a few weeks time.

This reward structure is useful when you have a tiny number (only 1 or 2) of small and easily distributable rewards and want to set the bar, in terms of referrals needed to get the reward, very low so that a high number of people can get it.

The “hook & punch” strategy

One of the oldest strategies is the so called “hook & punch”. It works like this: you set up an "easy" reward, the hook, that almost everyone can get for just 1 or 2 referrals. Obviously, you want to make sure you choose a reward you can distribute easily and cheaply.

A great example is a highly valuable report, a PDF, discounts, access to a private community. Anything that costs very little (or nothing) to you but that your audience perceives as very valuable.

The purpose of this reward is to "hook" them. Getting a reward, as small as it is, creates positive reinforcement and our natural tendency to act consistently with the way we see ourselves will do the rest. In this case, after they get their first reward they are officially an "ambassador" and what do ambassadors do? That's right: they refer their friends and share the good word.

This is when the second part of this strategy, the "punch", kicks in. The second reward should be slightly challenging but still perceived as achievable. Depending on the industry and the type of audience, 5 to 10 referrals should hit the sweet spot.

Most “hook & punch” reward structures use two rewards but feel free to add a third if you have something extremely exclusive or personal that you can offer. For example, you could have something like this:

  • 2 referrals: high-quality ebook about a topic

  • 10 referrals: access to invite-only Slack community

  • 50 referrals: 20 minutes 1-to-1 call with you

For the majority of people, especially the ones who are just getting started, the “hook & punch” is the recommended reward structure.

The “ladder” strategy

The “ladder” reward structure has been popularised by the hugely successful ambassador programs of TheHustle and The Morning Brew. The idea here is to have many (usually around 6 to 10) rewards, in ascending order of value and difficulty. People start with “easy” milestones and get “small” rewards and work their way up to more “exclusive” rewards as they invite more people.

As you can see from the example below (that’s The Morning Brew’s reward structure at the time of writing, October 2019), ambassador programs that use a “ladder” strategy use a mix of different categories of rewards, including extra content (Premium Sunday Newsletter), free products (stickers, t-shirt, mug, etc), exclusives (exclusive community) and personal (they fly you over to their HQ!).

This reward structure usually requires A LOT of work to plan and implement and tends to work well when:

  • you have different segments of subscribers who want different things

  • you can offer a wide variety of rewards

  • you can handle the distribution of physical rewards

Start small

Even for the most successful ambassador programs, the majority of people doesn’t refer anybody. The biggest challenge for any ambassador program is to get people from zero to one. There are several things that you can do to nudge people to make their first referral but the reality is that nothing will work if they think it will be worthless because your rewards requires way too many referrals to win.

So whatever you decide, the first reward should feel “achievable” by most people and should not require more than 3 referrals (and ideally only 1 or 2).

Another reason for having an “achievable” reward is psychological. As said above, getting a reward, as small as it is, gives immediate gratification and creates positive reinforcement. It also changes the way we see ourselves. After getting a reward we are officially an “ambassador” and we’ll act consistently with our new persona.

Zero to one

It's worth hammering down on this concept: getting people to win their first reward should be your main concern and the most important metric you focus on.

We call this metric “first-reward rate” and it tells you how many people have won the first reward, over the total number of subscribers. This metric is an indicator of how difficult or easy it is for your subscribers to participate in your ambassador program.

There is no “perfect” number here as it depends on many variables. However, if your first-reward rate is below 2% it’s probably a sign that your first reward is too difficult to get (requires too many referrals) or something else is wrong with your referral program.

Conclusion

By following our framework you will hopefully find many reward ideas and you’ll be able to design the perfect reward structure for your ambassador program.

However, the truth is that most people don’t get their rewards exactly right the first time around. On the contrary, the best referral programs keep refining, polishing and tweaking by listening to their subscribers’ feedback and by paying attention to what the data says.

Figuring out the right rewards for your ambassador programs is not a 5 minute exercise but hopefully our framework will make it easier. Here’s a quick recap:

  • The perfect rewards are at the intersection of what you can offer AND what your subscribers find valuable.

  • When brainstorming what you can offer, try to be as creative as possible and come up with some ideas for each of the 5 reward categories.

  • Talk to your audience to figure out what they find valuable.

  • Score each idea using the “CED” scoring system to find the best ones.

  • The rewards you have will dictate your rewards structure. In general, the “hook & punch” strategy is the recommended one for most people.

  • Your biggest focus should be to get people from zero to one.

  • Keep testing, refining and tweaking your ambassador program using feedback and data.

  • Have fun!