5. Referrals  >  Give A Discount On Premium

Give a discount on premium in your referral program to reduce SaaS churn

Nothing works better than offering a discount to your customers. Use your referral program to increase retention by giving an instant discount on the premium plan. This will reduce churn and you’ll be able to increase LTV.

● PERSUASION

Typeform

Typeform allows its users to save up to 100% on your PRO, PRO+1, PRO+3 or PRO+5 subscriptions by inviting referrals.

Todoist

Todoist offers a smart premium discount. The referred users get two free months on premium and once they pay for premium, the customer who referred gets two free months.

Shoeboxed

ShoeBoxed offers up to 100% discount on the premium plan with it’s refer a friend program.

How to use the technique

  • Choose discount that won’t hurt revenue and LTV. Do the math. Check the history and finalize a suitable discount that you can afford to give on premium without hurting cashflow. Our free churn optimization framework is your best bet to get more info. 
  • Percentage vs. fixed amount. Offer percentage discount for small amounts (e.g. $2.5, $5, etc.) and amount when it’s of high value (e.g. $50, $100, etc.). Make discount noticeable even if it’s negligible.
  • Set discount limits. How much discount to offer per customer per month? Setting a limit is essential to stop cashflow from ruining. Set an upper limit for the discount.
  • Set expiry for discount. For customers who aren’t on premium yet but they received a discount, discount expiry will persuade them to switch to premium to avail discount.
  • Explain discount terms and conditions clearly on the landing page. It’s best to keep it simple and clear. Share limits and caps with your customers to avoid hiccups.
  • Remind customers who are not on premium yet. Send emails. Convince them to avail discount by switching to premium. Share the benefits of upgrading their plan.
  • Analyze and improve your referral program. What type of bonus works best? Are limits irritating customers? Test and tweak your program’s features and variables for optimization. Don’t know how to do it? Read our free actionable guide

Mistakes to avoid

  • Not explaining the benefits of the premium plan. Don’t make this mistake. It’s not just about the discount rather it’s about customer retention and LTV. Use discount as a base to promote the premium plan.
  • Setting a limit on the number of invitations per customers. Don’t limit the number of invitations rather limit the discount percentage that can be availed per month. Let customers utilize the remaining discount next month. This works best.

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Research evidence

Jonathan Krieger conducted a study on referral marketing best practices. The findings revealed that non-cash incentives are as much as 24% better than cash incentives in terms of enhancing referral performance. Non-cash incentives work best at engaging, retaining, reducing churn, and increasing repeat purchases.

24%

Non-cash incentives are as much as 24% better than cash incentives in terms of enhancing referral performance.


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Implement with our proven SaaS Churn Optimization Framework

Download a PDF with an exact process we use with our SaaS clients to research, define optimization opportunities and test.