Newsletter Referral Program: Step-by-Step Guide | 2024

Welcome to the ultimate guide on mastering newsletter referral programs! We know that growing your newsletter audience can be challenging, but it doesn't have to be. Our goal is to help you make the process of expanding your reach enjoyable and efficient. Whether you're a seasoned pro or just starting out, you'll find valuable insights and tips here to help you maximize your referral program's potential. So, grab a cup of coffee, get comfortable, and let's dive into the exciting world of newsletter growth together!

What’s a Newsletter Referral Program?

A newsletter referral program is a fantastic way to encourage your current subscribers to spread the word about your newsletter to their friends and colleagues. By offering enticing rewards for referrals, you can harness the power of word-of-mouth marketing, which is both more effective and cost-efficient than traditional paid ads.

How Does a Newsletter Referral Program Work?

Newsletter companies give their subscribers a unique referral code or link to share. When someone uses this link or code to subscribe, the referring subscriber gets rewarded. These rewards can include:

• Merchandise

• Gifts

• Free access to exclusive or paid content

• Discounts

• Gift cards

• Event tickets

• Memberships

• Redeemable points

• Other exciting benefits

5 Popular Types of Newsletter Referral Strategies

1. Tiered Reward System

One of the most popular strategies, used by top newsletters like MorningBrew and The Hustle, is the tiered reward system. Here, subscribers earn increasingly valuable rewards as they refer more people. For example, a subscriber might get a t-shirt for 5 referrals, a mug for 15, and a hoodie for 25. Each new referral level unlocks a better prize, motivating subscribers to keep promoting the newsletter.

2. Contests with a Leaderboard

In this strategy, companies run contests where the top referrers win big prizes. A leaderboard shows participants their rankings, encouraging competition. This motivates subscribers to refer more people in hopes of climbing the leaderboard and winning the contest.

An example of a referral leaderboard.

Image source: Sparkloop

3. Referral Point System

Similar to frequent flyer programs, this system awards points for each referral. These points can be redeemed for various rewards like products, discounts, and perks. For example, a user might earn 3 points for each referral and an extra 15 points if the referred person makes a purchase or subscribes to a paid service.

4. Two-Way Referral Reward Program

In this mutual benefit system, both the referrer and the referred friend receive rewards. For instance, if you refer a friend, you both might get 30% off a newsletter subscription for three months or one month free. Major companies like Uber and Clinique use this strategy, which is especially effective for paid newsletters.

An image from Clinique’s two-way referral reward program.

5. Cross-Referrals

This involves partnering with other newsletter owners to promote each other's newsletters. Each party refers new subscribers to the other, often for a fixed fee per subscriber. This strategy helps both parties grow their audiences at a lower cost. For example, if newsletters X and Y refer five new subscribers to each other, they can do so without any financial exchange, gaining new subscribers for free.

Let’s Talk Numbers

As we've mentioned, referral programs thrive on word-of-mouth publicity. People naturally trust recommendations from their peers more than any paid advertisement. The best part about these programs? You only pay for results!

That means you spend money on rewards only after you gain new subscribers. In contrast, traditional advertising methods like LinkedIn ads and Google ads charge you per click, with no guarantee of results.

Paid Advertisements vs. Referral Programs: CAC Comparison

With paid advertising, your customer acquisition cost (CAC) can range from $3 to $5 per subscriber, but it can soar as high as $25 per subscriber.

In referral programs, you have the advantage of guaranteed results at a lower CAC. Here's how you can calculate it.

CAC = (Cost per merchandise + shipping cost)/number of referrals 

Example: Suppose you offer a high-quality branded t-shirt as a reward for referring 10 new subscribers. If the custom tee costs $15 and shipping is $6 per tee, you’re spending $21 to get 10 new subscribers. This makes the CAC only $2.1 per subscriber.

Below, we have provided a sample newsletter referral program with an average cost of the customized reward product, shipping cost, and customer acquisition cost (CAC). Here, we have considered Stitchi’s product pricing and MorningBrew’s referral program structure. 

Template: Tiered Referral Program Custom Acquisition Cost Calculation Template

How Much Should You Spend Per Newsletter Subscriber?

The amount you should spend to acquire each newsletter subscriber depends on the revenue you expect to generate from them. Here are some benchmarks to consider:

1. Paid Newsletter Model

If your subscription rate is $5 per month and a reader typically stays subscribed for six months, you’ll earn $30 per subscriber. Ignoring customer lifetime value (CLV) for simplicity, a customer acquisition cost (CAC) between $7 and $12 is a worthwhile investment for such a subscriber.

2. Free Newsletter Model

For free newsletters, the revenue is generated through paid advertising. This includes earning money when ads are clicked or receiving commissions from product sales promoted in the newsletter.

For example, Brennan Dunn, owner of Create And Sell, reported earning $100,000 from promotions to his email list via 200 unique subscribers. With 10,000 subscribers and a 2% purchase rate, each subscriber is worth $10.

While results can vary depending on your audience and product promotions, generally, 2% to 5% of subscribers may click on ads and make purchases. If you’re starting out, you’ll need to build a sizable subscriber list to gauge the value of each subscriber. On average, spending between $1 and $4 per free subscriber is a sound financial decision.

Why to Build a Newsletter Referral Programs

Newsletter referral programs offer numerous advantages for both publishers and subscribers. Here are some key benefits:

1. Cost-Effective Customer Acquisition

Referral programs are a cost-efficient way to gain new subscribers. Instead of spending large sums on traditional advertising methods, you only reward subscribers when they successfully bring in new members. This performance-based approach ensures you are paying for actual results, reducing wasted spend.

2. Enhanced Credibility and Trust

Word-of-mouth referrals are incredibly powerful because they come from trusted sources. When existing subscribers recommend your newsletter to their friends and colleagues, it adds a layer of credibility that paid advertisements cannot achieve. This trust can significantly improve conversion rates.

3. Increased Engagement and Loyalty

Offering rewards for referrals can boost engagement and loyalty among your current subscribers. By participating in the referral program, subscribers feel more connected to your brand and motivated to stay involved. This active participation can lead to higher retention rates and a more dedicated audience.

4. Scalable Growth

Referral programs can drive scalable growth. As more subscribers join and refer others, the program can expand organically. This network effect allows you to reach a wider audience without a proportional increase in marketing costs.

5. Valuable Data and Insights

Referral programs provide valuable data on subscriber behavior and preferences. By tracking which rewards are most effective and how subscribers interact with the program, you can gain insights to refine your marketing strategies and improve overall engagement.

6. Community Building

Referral programs foster a sense of community among subscribers. As they share your newsletter and participate in the program, they become part of a network of engaged readers. This sense of belonging can enhance their connection to your brand and encourage ongoing participation.

7. Increased Revenue Opportunities

For free newsletters that generate revenue through advertising, a larger subscriber base translates to more ad impressions and potential clicks. This can significantly increase your advertising revenue. Similarly, for paid newsletters, more subscribers directly boost subscription revenue.

8. Enhanced Brand Awareness

When subscribers share your newsletter with their networks, it increases your brand’s visibility. This organic promotion helps spread awareness and can attract new subscribers who might not have discovered your newsletter through traditional channels.

9. Competitive Advantage

Implementing an effective referral program can give you a competitive edge. As your subscriber base grows through trusted recommendations, you build a stronger, more loyal audience compared to competitors relying solely on paid advertising.

How to Build a Successful Newsletter Referral Program

Building a successful newsletter referral program involves several crucial steps, that if implemented incorrectly, can negatively impact your referral program. Here’s a professional and structured guide to help you implement an effective program.

Step 1: Strategize Rewards and Costs

First, you need to decide on the rewards for referrals. Consider these three pillars:

1. Cost Efficiency: Determine your ideal and affordable CAC (Customer Acquisition Cost) per subscriber.

2. Motivation: Offer attractive rewards that motivate users to refer others.

3. Achievability: Set achievable referral milestones. A tiered program with easy initial stages and progressively challenging later stages works well.

Types of Rewards:

1. Merchandise with Brand Logo (Recommended)

People love free, branded swag, which also acts as a walking billboard.

Widely used custom merchandise for referral programs are tees, hoodies, mugs, totes, duffle bags, joggers, and stickers.

2. No-Cost Rewards

Best for newsletters with a paid subscription.

Includes free months of subscription, access to guides, photo albums, premium content, discounts, or membership access.

3. Cash-Based Rewards

Fixed amounts credited to user accounts or popular gift cards (Amazon, Mastercard, Starbucks). Discount coupons for popular products and services.

Step 2: Choose a Referral Management Tool

Now, it is time to select software that can generate unique referral codes or links, track referrals, and integrate seamlessly with your fulfillment system (we have covered fulfillment in the next step). You have two options:

Option 1: Use Your Newsletter Platform’s Referral Technology

Check if your newsletter platform supports referral programs. Here are some popular platforms and their referral features:

Option 2: Use a Third-Party Platform

After testing twelve different referral software options, we’ve shortlisted three that are affordable and equipped with essential features for various types of newsletter referral programs:

Step 3: Set Up a Reward Fulfillment System

Now, the next step is to decide how to distribute the rewards. 

Almost all referral software has provisions for managing and distributing cash rewards, discounts, coupons, gated-content access, and gift cards online. These rewards are generally sent to the winner’s email address with the access information. 

The tricky part is the fulfillment of the physical products. It requires consideration for storage, packing, and shipping. We have bifurcated the merch fulfillment process into two phases. 

1. Data collection

2. Merchandise fulfillment

Let’s dive into both of them. 

Phase 1: Data Collection

To provide the merchandise, first, you need to gather essential information, including each recipient's address, apparel sizes, and preferences for colors and styles (if applicable). There are three popular methods to collect this data.

1. E-commerce Website (Recommended)

Using a platform like Shopify, WooCommerce, or a similar service allows users to select products, apply discount coupons (for free swag, provide a coupon code equivalent to the product price), choose their sizes, and provide their shipping address and other necessary information.

Pros:

• Efficiency: Fulfillment becomes faster and easier.

• Integration: Most e-commerce platforms integrate seamlessly with both referral program software and fulfillment partners.

• Automation: Integration with merchandise partners like Stitchi, Printful, or CustomInk ensures hassle-free dispatch from the warehouse to the customer's doorstep.

Cons:

• Cost: These platforms typically cost between $30 and $500 per month.

• Domain Requirements: You’ll need a custom domain or subdomain to host your store. For instance, Shopify offers a free subdomain (yourstore.shopify.com).

• Technical Expertise: WooCommerce requires WordPress expertise for setup and maintenance.

2. Forms

Utilize tools like Google Forms, Typeform, or similar services to collect winners' information such as size, shipping address, name, phone number, etc.

Pros:

• Cost: These tools are generally free.

• Data Integration: The collected data can be easily integrated into MS Excel or Google Sheets for further processing.

Cons:

• Integration Requirements: Your swag fulfillment partner must be able to integrate the collected data into their system to manage distribution.

• Manual Processing: If you’re handling merchandise distribution manually, dedicated staff will be required to verify coupons and manage the shipping process based on the collected data.

3. Custom-built Solution

Hire in-house programmers or a third-party agency to build a custom e-commerce store tailored to your program’s needs, integrating with your referral software and fulfillment partner.

Pros:

• Customization: You can design the platform to meet specific requirements, avoiding unnecessary features and complications.

• Cost Efficiency for Large Programs: For larger and more frequent newsletter referral programs, an in-house solution can be more cost-effective in the long run.

• Data Control: There is no need to store your data on third-party platforms, enhancing data security.

Cons:

• Expense and Time: Developing a custom solution is highly expensive and time-consuming, making it suitable only for larger newsletter companies.

• Compliance and Security: You must ensure that the custom-built platform includes all necessary security features to comply with state and nationwide data protection laws.

Phase 2: Fulfillment System

After collecting the winners' data, the next step is merchandise fulfillment, which encompasses everything from ordering custom merchandise to delivering it to the winners' doorsteps. This process can be handled manually or through a partnership with a third-party provider to automate it.

1. Manual Fulfillment

As the name indicates, this system requires your internal team and resources to handle the entire fulfillment. 

Storage: Get your merchandise supplier to deliver the merchandise to your preferred location. This could be a warehouse, an office, or even a designated area within your home. Manage your own inventory in a dedicated space. 

Packing: Handle the packing process yourself or hire staff to do it. Ensure that you have the necessary materials (boxes, bubble wrap, tape, etc.).

Shipping: Partner with shipping carriers (e.g., USPS, FedEx, UPS) and manage the logistics of sending out merchandise to thousands of winners manually.

Manual fulfillment is challenging, time-consuming, and prone to errors. Your staff must manage Excel sheets, pack merchandise according to each winner's size and preferences, and generate individual shipping labels for each package.

2. Automated Fulfillment:

Most referral programs use 3PL (third-party logistics) partners for merchandise fulfillment to ease the entire process. 

The automated system alleviates the operational burden on the newsletter team, offering a hands-free solution.

The automated fulfillment includes these main features.

Storage: Your merchandise provider manages product storage and inventory at their warehouses.

Integration: They utilize technology to integrate seamlessly with your referral program software and data collection system, creating a dispatch list based on winners' milestones.

Dispatch: They generate shipping labels, coordinate dispatch with their delivery partners, and ensure the products are delivered directly to the winners' doorsteps.

This option is cost-effective, eliminating the need for additional staff to manage inventory and dispatches, and incurs no storage (warehousing) costs. Automated fulfillment partners like Stitchi charge only $0.99 per order. Additionally, it ensures high efficiency through the use of advanced technology.

Automatic fulfillment Case study

In 2021, Morning Brew’s referral program experienced rapid growth, creating significant challenges in its management. They partnered with Stitchi, experts in high-quality custom merchandise, to streamline their reward distribution process. 

The collaboration involved developing custom merchandise for Morning Brew’s referral programs that aligned with Morning Brew's brand. Stitchi integrated the program with Shopify, managing inventory, order processing, and shipping, providing Morning Brew with a hands-free experience. 

Stitchi handled production, warehousing, and shipping, ensuring prompt and error-free delivery. This partnership successfully increased engagement, and brand awareness for Morning Brew, generating 75,000 new subscribers in a span of less than 10 days. 

Case Studies: Newsletter Referral Programs

In this section, we explore three leading newsletter referral programs that have successfully harnessed the power of word-of-mouth marketing to build substantial subscriber bases. By incentivizing existing subscribers to share newsletters with their networks, these newsletters have grown their audiences organically. Let’s dive into the case studies of two of the most successful newsletter referral programs. 

1. Morning Brew

Morning Brew is a daily newsletter that covers the latest in business, technology, and finance. It has gained widespread popularity, partly due to its highly effective referral program, acquiring 1,000 new subscribers per day. Tyler Denk, former Head of Product for Morning Brew and CEO of Beehiiv, attributed nearly 35% of Morning Brew’s subscriber growth to their referral program. 

How It Works: The Morning Brew referral program is straightforward: subscribers receive unique referral links to share with their networks. As individuals sign up using these links, the original subscriber earns various rewards.

Morning Brew’s Tiered Referral Program Structure:

2. The Hustle

The Hustle sends daily business and tech news in a conversational tone, aimed at informing and entertaining entrepreneurs and professionals. Their referral program, known as The Hustle Ambassador Program, plays a significant role in their subscriber growth strategy, contributing to 300,000 subscribers.

How It Works: Similar to Morning Brew, The Hustle uses a tiered incentive system for its referral program. Subscribers earn points for each person they refer, which can be exchanged for reward items.

The Hustle’s Referral Program Structure:

Conclusion on Newsletter Referral Programs

Newsletter referral programs are an excellent growth strategy, creating a win-win situation for both publishers and their audiences. These programs are easy to implement with the right tools and technology. By rewarding subscribers for referrals, newsletters like Morning Brew, The Hustle, and others not only increase their reach but also foster a community of engaged readers. These programs highlight the power of personal recommendations, which are often more effective than traditional advertising in today’s digital landscape.