A slew of start-ups are using a time-tested technique for signing up new customers: give them cold, hard cash for referring their friends.
Yes, you could spend exorbitant amounts of money on marketing to launch a company. Or you could use the time-tested, much more affordable approach: referrals. In other words, make your customers do the work for you.
A number of newer tech start-ups are taking this tack. Today, when customers sign up for a service like Solavei, a new pay-as-you-go mobile carrier, or share links through a service like Snip.ps, which pays you for clicks, they turn into marketing reps.
The interesting twist? These "reps" are raking in the cash.
How It Works
When a new customer signs up for Solavei's cell service, which works on a Samsung Galaxy or iPhone 5, he or she receives a custom "outreach" link to share online. For every three friends who sign-up, the customer gets paid $20 per month for as long as those customers stay members. It's sort of like a 21st century Tupperware meeting.
A few customers are making several hundred dollars per month, according to Solavei.
"In just nine months since launch, Solavei has more than 100,000 active monthly mobile service members and paid over $11 million to its members for sharing with their friends," says Ryan Wuerch, the Solavei founder and CEO.
"Solavei is attacking that issue with a social networking approach, an industry first. It provides its members who are recruiting new members discounts, which acts as their marketing and customer acquisition arm," adds Roger Entner of Recon Analytics.
Snip.ps has a similar business model. When you sign up, you can generate a custom link to share on Facebook and Twitter (or even by email if you want). You get paid about two cents for every click, and your "customers" have to watch an ad before they see the content. That might not seem like great pay, but it adds up if people flock to the link.
Solavei and Snip.ps aren't the only companies banking on referrals. MoviePass, a start-up that provides a reloadable credit card for all-you-can-watch movies in theaters for about $30 per month, gives you a free month if you get three friends to sign-up. EVoice.com has a program where you earn a $15 gift card to major retailers when you sign-up a friend (who also gets a free gift card).
"One aspect of social computing is the shift in trust from figures of authority (e.g., large brands) to peers and peer networks," says Charles Golvin, a Forrester analyst. "These services tap into that dynamic by turning individuals into brand advocates and convert their enthusiasm into cold hard cash. It's an adaptation of the Amway model to today's digital and social networking world."
I tested Solavei and Snip.ps myself to see what all of the fuss is about. In one day, about 90 people clicked on my Solavei link, a few signed my guestbook, and one person signed up. With Snip.ps, I tested a handful of links in an hour and found about 25 people clicked. (Any profit will be donated to charity.)
I can imagine how, working hard at sharing my links on a daily basis, I could generate a small amount of income. From a brand's perspective, these tactics borrowed from Amway and Tupperware could add up to a fair amount of exposure. I plan to keep using Solavei and Snip.ps and see how they fare over a few weeks.