Why your Referral System Won't Work

I think that there are a couple of factors you are omitting from your analysis.<p>First, if you take a look at Dave McClure's AARRR model (and if you haven't, you really should [1]), you realize that Referral is something that you only want to attempt after you've got ridiculously satisfied customers. You can't expect people to spontaneously recommend your product on to others until it is absolutely friction-free, and serving that sweet spot so sweetly that they almost can't help it.<p>Second: not all niches are created equal. Are folks whose itch is scratched by your particular product significantly more likely to be in touch with others having the same itch? For some niches, yes. For others, no.<p>Finally, in the absence of a Freemium model, you definitely need to have a well-organized Activation process; some way for people to get engaged with the product prior to a commitment.<p>[1] <a href="http://500hats.typepad.com/500blogs/2007/09/startup-metrics.html" rel="nofollow">http://500hats.typepad.com/500blogs/2007/09/startup-metrics....</a>, for example.

My good friend recently made me signup w/dropbox so he can get more space, and I'll probably do the same with my friends.<p>The main reason why it works is because we're helping each other achieve something; we're making an existing process easier/more convenient. It's a MUTUALLY BENEFICIAL activity (ie, it's easy for us to share files with each other).<p>Dropbox is a platform product like Facebook (ie, join this site, and we can keep in touch together easier). This strategy would work for all platform products.<p>As for your startup, you have to ask why would I would recommend someone a product that eases remembering japanese/chinese chars, there's no process after that at all. There's nothing MUTUAL BENEFICIAL here at all. If my friend is using your tool, why do I care? It doesn't help me at all.

Just an FYI -- your page hung on loading "Waiting for dev.visualwebsiteoptimizer.com..." for at least a good 60-75 seconds.

Just to chime in, since I discussed referral systems with these guys and on my blog: mine has similarly been an utter failure, netting twenty trials and no sales. Five bucks in AdWords would work better. YMMobviouslyV

I think the analysis here is close but perhaps <i>slightly</i> off.<p>1. Your company has to have freemium pricing. - This is a factor that affects conversion rate. It's not so much about freemium as it is about friction. I think the idea here is that you have to have a more friction free offering for the referral, specifically the offer that the person being referred sees. If they get offered something a little extra than what they could get on their own it should be more appealing.<p>2. Your product has to have wide appeal. - I think what you really mean here is that your customers need to have people they can make referrals to. This is obviously a big factor in the number of referrals made. Who are your customers? A businessman learning Japanese on his own might just not know anyone that would use the product other than himself. Students might know lots of other students who might be interested - which are you dealing with?<p>I also like the idea tomjen3 mentioned about incentives for both parties. This helps encourage people to make the referral, do it through the system , and helps the person being referred feel some form of obligation to the referrer and see that they can get something out of it.<p>I'm not saying that "you're doing it wrong" or that if you make some changes it will work, just that maybe there are some deeper reasons as to why it won't work in your situation.

I definitely agree on #2, that your product needs wide appeal, but #1 (fremium) seems not to be the case.<p>You can find plenty of places out there that do a refer-a-friend in exchange for the referrer receiving something in return. My gym (24 hour fitness) does this and I have referred people to it before.<p>I suspect in this case the problem mostly lies in the product being too niche, not that it costs money.

I also think that your main page is a lil visually busy, which if we're contrasting against Dropbox, is a major difference that made me less inclined to proceed with the free tour. Also, at the bottom of the page you introduce the founders, which I think is better left til after you've proved the product worth the attention in the first place.

I think affiliate marketing that you mentioned can be really undervalued to. Sure the business has a shady underside but on the good side of affiliate marketing your paying for results only and hopefully attracting people who spend most of their time marketing to see if they can sell your product.

Also you forget point 3:<p>It has to have incentives for _both_ parties. I specifically didn't send my mother an invite to dropbox because I didn't want to seem to do it so I could gain something at her expense<i>.<p></i>Dropbox actually does give something to both sides, but if I miss that how many others do you think does too?

The reason Dropbox works is simple: it's a carrot on a stick. Most invites don't have that and provide no incentive, either for the inviter or the invitee.