5. Referrals  >  Design Your Referral Funnel

Design your referral funnel to reduce SaaS churn

A referral funnel is used to define lifecycle journey stages of the new referrals. Defining stages in the funnel help with churn reduction and improve the engagement of existing customers as they get the reward right on time.



Airbnb created a beta referral program for 2161 customers and it added 2107 new users.


Dropbox has one of the best referral funnels out there that increases signups by 60%.


Evernote has over a billion users and 13% of them are referred by their existing users.

How to use the technique

  • Select an appropriate reward. Selecting an attractive reward for your customer and referral is essential. It is the driving force that motivates your customers to take the referral program seriously and actually try to get the reward. Use personas and customer feedback to find a compelling reward. Read our free churn optimization framework for details. 
  • Make it convenient for customers to invite referrals. Allow social sharing, social invitation, and email invitation features. Also, make it easier for referrals to enter the funnel. Reduce form fields. Give them instant access to your app to reduce churn.
  • Referral conversion is an essential stage of the funnel where you decide when a referral as converted and is now eligible for the reward. It could be achieving Aha moment, conversion to a paid plan, or completing a set number of achievements.
  • Let customers track their referral’s progress so they can push them for conversion. This is the best approach to reduce churn. Your customers will do all the onboarding.
  • Send relevant emails for conversion. Send informative and benefit-focused emails throughout the funnel. Send tutorials and help guides based on referral behavior analysis.
  • Reduce friction. Make referral funnel short. Remove distractions. Focus on helping referral to get as fast as possible to the reward. This will help you retain existing customers who are actively involved in the referral program.
  • Minimize the number of actions for successful conversion. Ensure both referral and customer get their due reward quickly. Test different funnel models with different stages and actions for conversion optimization. We have an amazing free guide for you here for further help.

Mistakes to avoid

  • Making funnel too complicated is a big mistake. Your customers have already done the hard part of pre-selling your app, you just have to make onboarding and conversion simple. Don’t make it complex as it will make new referrals churn and the old customers will lose their interest in the program.
  • The reward isn’t attractive. It’s all about the underlying benefit. Though your most loyal customers won’t refer your app for reward, most other customers are interested in reward so as referrals. It should be compelling enough for users.


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Research evidence

According to HubSpot, companies having 800+ sales opportunities in their funnel are more likely to exceed expected revenue. While companies with 50 or fewer sales opportunities don’t achieve their revenue goals. This clearly indicates the importance of having a referral funnel so your sales team have a decent number of opportunities anytime in the pipeline to boost revenue.


Magic number of a sales opportunities in the funnel that literally pulls the sales team into achieving their revenue goals.

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