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Ramli John:
Well, what I'm excited to talk to you about this is that for ProductLed companies, referral is, in virality, such a huge component of their growth. Would you say that you're... I'm hearing you nod, can you... Yeah, you're already agreeing to, but can you talk a little bit more about that? I mean, how referrals important for ProductLed?
Louis Nicholls:
Yeah, I mean, I would say, just on a very fundamental level, you have that... Your virality factor, so your K factor defines whether your business is fundamentally growing or shrinking, right? So, if you take away all the other stuff that you're doing growth-wise, if you have even a weak viral component, that's going to work very well. If you don't and you don't have a lot of expansion revenue happening very quickly, then that means bad things are going to happen. So, it's such an important part. I think it really is at the core of everything else that you do should really be that viral component.
Ramli John:
So, important, really, how have you put this. I mean, for context, for people who are joining us, I believe you're founder of Spark, which is all about getting referrals for a newsletter, but you also, I believe, if I recall, you have a book around this or you're putting together a book around referral or something like that, can you introduce yourself a little bit to the people who are-
Louis Nicholls:
Yeah, of course. Yeah, sure. So, I built and sold two SAS companies, then I went and led Growth for just under a year at a series B, company in the B2B space. And after that, I branched out into growth consulting, mainly for software as I service companies and my real area of... Originally, you start off doing quite broad growth stuff, as most consultants start, and then you specialize a bit more and I specialized into conversion rate optimization.
Louis Nicholls:
And then, from there, I ended up with what I call like a social proof framework. I call it social proof framework because people understand what social proof is. But actually, the first part of that framework is saying, social proof doesn't exist, we should call it social context instead. And that is where all that virality and referrals and just that the social context that your product is in becomes important. And I was doing that for a couple of years. The book hasn't been published yet, it should come out in September. I've rewritten it a couple of times based on the experience and somehow, in the meantime, I ended up co-founding another SAS company called SparkLoop, which is a referral tool mainly for newsletters, for media companies, for email lists.
Ramli John:
Yeah, interesting. Well, thank you for sharing that. I mean, let's talk about referral. I mean, when is the best time to ask for, "Hey, can you introduce us to somebody?" Or to jump in? Because I imagine if you asked you as soon it just rubs you the wrong way, just it's like that sales person, but at the same time, if you miss the opportunity when it's not the... You have to wait until another opportunity to really ask that. So, I mean, you have this book, SparkLoop is all around this referral engine. I mean, the question you probably get this asked a lot is like, "When is it best time to ask a referral?" First of all, and then later how?
Louis Nicholls:
Yes, totally. So, there is no one right time, I don't think, to ask for referrals. I think there are a couple of magic moments throughout the customer journey, throughout the product life cycle, through the onboarding into actually using the product and to being successful with the product and so on. There are touch points where it makes sense to ask for referral in different ways. So, it depends on exactly what the customer or the user's experiencing in that moment. So, there will be points in your product journey, if you're lucky, if you have one of those products, where there's what we call an intrinsic incentive and intrinsic motivation for the customer or the user to share with somebody. It's at that point, it makes sense for them, it would be valuable for them, to share with someone else.
Louis Nicholls:
So, that is obviously a moment that you absolutely want to capitalize on. That might be, for example, I don't know, if you have an Airbnb, for example, they're business facing product. It makes sense for them, at some point, if you're booking your business stay at a conference, it makes sense for there to be a very strong nudge at a particular point once you've booked to say, "Share this with your team. Share this particular location or whatever it is with your team, so that they can book through Airbnb as well now that you've found this good price." That kind of thing. So, that's why there's the intrinsic inheritance incentive, or, "If you're using this project management tool, go and invite your colleagues or your coworkers who are going to use this as well." [inaudible 00:05:20] intrinsic incentive.
Louis Nicholls:
So, at the moment where they would want to do that, is obviously the right time to nudge them to do it. On the other hand, you also have the extrinsic incentives. Where there's not really anything in it for them necessarily to make a referral other than maybe motivating them in some way, with a reward, with money, with a free month, whatever it is. We can talk about the extrinsic incentives in a bit, but if it's something like that or if there's nothing at all and you're just asking face-to-face, directly, then that's really... The right time to do that is normally when they've just experienced some aha moments. When they've just experienced something very good that they're happy about or they've just achieved something they feel good about themselves is the right time.
Louis Nicholls:
And what I would say is, in a lot of cases, it's less about the right time to ask people, that's very important, but it's almost more about making it as easy as possible for them. So, what you'll often see, especially with early companies, is that you will go into a sales call or you'll go into a customer support call, they'll say they're happy, and then you'll say, "Oh, okay. Who else would like this product? Who should we be talking to?" You're not doing the work for them, you're making them then go and think, "Okay, well, who would maybe want this product? Who could be a good fit for this product? Who do I know?" And you make them go and do all that work. Where, really, what you want to be doing, is doing all of that work for them in advance and saying, "Hey, we saw, for example, these five people, they would be a great fit for this. Do you know them well enough to introduce us?" For example.
Ramli John:
I really love that you're looking for that moment of delight. That's the best time to ask for referral because they're happy. Well, usually when people are happy is when, "Yeah, sure. I mean, I like you, you helped me with something." Even friends, when somebody just helped you out, you're more likely to help them back out essentially.
Louis Nicholls:
Totally. And you can explore further there. There's when they're happy, when they've just experienced success with the product, when they've just managed to do something that makes them look good is the second one, right? Don't underestimate that. If you're a marketer and you've just managed to achieve some great success for the product, well, you're going to want to tell people about that, because it makes you look good as well for making that decision. So, don't underestimate just... You can make people look good by using your products and that's a really... Letting them go and promote themselves is a great way of promoting you and their own success. And also, just in nearly every product, there is a moment in which it makes sense for them to share the product with other people who could use it and just work out what those moments are. When would they want to be inviting someone?
Ramli John:
Really interesting. I mean, I'm seeing now, just map out your whole customer journey and maybe mark out where in that journey is the best time. Where is moments of delight that could be opportunity to not just ask for a referral, but ask for a review. Like a five star on G2 on Shopify or something like that.
Louis Nicholls:
Exactly. Yeah. First thing I do when I go in with a consulting client, is I go through and I ask them to do this and most of them haven't. There are one or two consultants who people work with who do this and I love working with that client once they've already worked with that consultant, because they know they'll have this. But first thing I do is I just go through and say, "Right, from the very beginning to the very end, we're going to look through and mark out every single action the customer takes, every single magic aha moment that they can achieve." And then we're going to figure out what we should be doing with that moment.
Ramli John:
I want to jump into... Before I get to extrinsic, because that's interesting about offering rewards, but intrinsic-wise, what's the best way to ask that or phrase that? I mean, I guess it depends also on like who you're asking for. For example, asking an employee to refer their manager, like, "Hey, can we talk to your manager?" Might be a different conversation than like a CEO trying to tell their employee to do something, because that's probably an easier ask. If you're the CEO, you're going to be like, "Hey, you got to talk to this person." They're going to obviously say yes, but there's that power dynamic on who you refer us. I mean, the question is around how you ask and how you face that for different types of referral.
Louis Nicholls:
Yeah, totally. So, I think there's a fundamental dynamic there, which is true in asking for referrals, it's true in cold email, it's true in advertising, it's true in marketing. It's true everywhere in marketing, really, right? Which is, for every action you want someone to take, there is a fundamental balance of risk or perceived risk versus expected reward. And if someone is going to take the action, what do you want to do as a marketer or someone working in growth is to make the expected reward of taking that action seem as large and as exciting as possible. And you want to make the perceived risk as small as possible, right?
Louis Nicholls:
So, that means making the step as easy to take as you can. Instead of asking someone to go refer your friend and get them to sign up, well, go ask them to go refer your friend and give them this free ebook they can put their email address in to download. Much easier to get them to do that, and something of value that they're going to be giving to that other person as well. So, that's one big thing, the risk versus the reward, and then the rest of it is about making it very easy for them. So, really removing all of the objections and saying, "Okay, this is exactly the person you should be sharing it with. This is how you should be sharing it with them. This is how you can do it in as close to one click as possible. This is why it's going to be great for them. This is why it's going to be great for you to do it." And then, the more times you can nudge them to do that, especially at the right moment, the better.
Ramli John:
That's so good. I think you're... I just want to reiterate what you said because it's like, wow, that makes sense. It's there, but when you said it, it's like, "Ah. It makes sense." You said you want the expected reward to be greater than the perceived risk, especially for referrals. Like, I mean, if it bombs, your neck is on the line. You're like literally, "Hey, I referred this thing to my manager and the perceived risk is they hate it and now, my job is on the line."
Ramli John:
On the other side, if you're a manager, you're trying to refer the employee, there is no... You're the manager. There's probably less risk there and the reward is a lot higher. I see you're nodding, yes. Makes sense. Thank you for sharing that. I mean, in terms of this extrinsic reward right now... I know this is a sticky point, because there's some people who said, "Hey, don't give a reward." Putting a carrot in front of the stick just... It works for the meantime, but it doesn't work... Do you encourage that behavior going forward, once the reward is taken away, thoughts around that? When is the right time to offer a reward or would you say it's not suggested at all?
Louis Nicholls:
Yeah. So, I mean... Right. The extrinsic reward is something that you layer on top, right? I would say, if you're going to do referrals for the first time, or ask for referrals, ask for sharing basically, get everything else right first to a place where at least some people are happy to refer because of the intrinsic incentive. Even if you only have a really weak intrinsic incentive, you've got to have all those components right first, because otherwise you're just going to be wasting money or wasting your time on the extrinsic thing and it's going to be super ineffective, super inefficient. So, always get what should they be sharing? What should they be referring that person to? What's the most effective thing? All that stuff we've just discussed about the risk and the reward and everything.
Louis Nicholls:
Get that right first and then add in the extrinsic incentive on top. So, try and find some intrinsic incentive first. "This is going to make you look great to your boss when you share. You've discovered this tool before anyone else, so I'm going to give you..." It's a funny thing where you can say, "Go and share this new tool that you've discovered, that you like with your friends." Maybe they'll go and do that. If you say, "You've discovered this new tool, and we're going to let you invite three friends, up to three, which of the three do you want to get those invites?" Well, all of a sudden, those invites are burning a hole in your pocket. You have access to this thing, other people can't get access to it. You can do three of your friends a favor. So, you can create intrinsic incentives in that way.
Louis Nicholls:
But putting that aside, and you can use both at the same time, intrinsic and extrinsic. But putting the intrinsic aside, I think the big problem with extrinsic rewards that happen in most cases, is that the value is too low and that it's lazy. So, the classic is, everyone, when they start a new software business, we'll do, "Give a free month, get a free month." And the thing is, for most software products, the cost of a month doesn't really mean anything in the grand scheme of things. Firstly, it's not that person's money, it's their company's money. They don't care about whatever it is, the $99 or $200, whatever it is a month. They just don't care, it's not their money that they've budgeted to spend it or not. They really don't care about that. So, you're not giving them anything personally for doing it, their boss isn't going to be happy at them for saving $99. It has no value to them whatsoever, really, unless you're in like a super price sensitive consumer market.
Louis Nicholls:
So, I'd say that's the first thing, is just people just always get the... They don't understand the value through their customers or through their users eyes, and the second thing is that they just don't choose things that people would like pay attention to and find interesting. And I think if you look at examples of referral programs that do tend to work well in that B2B space, it's something that makes you sit up and say, "Wow, there's a really good one." I can't remember who used to do it but basically, if you refer them a new hire, they would basically craft a handmade ax or sword or something for you and send you that as a favor. That kind of thing is just, it makes you sit up, it's fun and it's something... It has that frivolous quality, where you'd never buy it yourself, but you really want it and I think that's important, that kind of character.
Ramli John:
An ax. A homemade ax for referring somebody. I hope it's something related to the company, like their company name is Battle Ax or something like that or it's like a tech software. That would be super, super-
Louis Nicholls:
Yeah, I think it was for referring developers, basically. I think it was a team of nerds basically, and they lived up to their nerd image by saying, "Refer us someone, you're to like this ax that you can mount on the wall or whatever it is."
Ramli John:
So cool. I mean, talking about... I don't know if it's lazy or not, but I'm getting a lot of ads lately for banks to sign me up and, "If you sign up, we'll give you an iPad." I mean, that's... I don't know. Like, you're saying that that's... It feels lazy to me, right? Like, that's your, "Hey, sign up for a bank, we'll give you an iPad." I'm sure it works for some people, because they'd want that iPad, but... Yeah, I mean, there's got to be a better way than that, is what I'm hearing you say. It's like, you want to make sure that it's aligned to your brand or something like that. Correct?
Louis Nicholls:
I think in most cases, yeah, I think it's very rare that you have the capital or you're just so sure of the long-term payoff that you can do things like that. You see that sometimes in sales-led teams, that they are very willing to give away something large just to even get the meeting, and I think that's fine. I personally, I don't do it myself really, but I don't have a problem with that, with saying, "Look, it's going to cost us this amount of money to acquire a customer. We'd rather just give you the money directly or something of value rather than giving it to Google or Facebook or wherever we're going to spend it." So, I don't think that really comes down to referrals so much. On the face of it, why is it worse to give someone an iPad than it is to give Facebook whatever an iPad costs? $299 or whatever it costs.
Ramli John:
Interesting. That makes a ton of sense. I mean, in terms of... So, we've talked about referral, the best way to put referrals and ask for it. When it's the right time, how to do it. Can you talk a little bit about channels? Obviously, there's email. Ask for referral by email. Would you do retargeting ads to ask for a referral? I'm curious now, what are different channels to approach to ask for that referral? I mean, obviously there's also direct mail, where you just send them a letter or something like that. Obviously, for SparkLoop it's email and there's that classic Hotmail with like, "Hey," at the very bottom of the email. It's like, "This is created by Hotmail." But what are some channels that you've seen that works really well for asking for referrals?
Louis Nicholls:
Yeah, I think... So, what tends to happen for most products, for newsletters this is... It's actually the same for newsletters as well. So, people won't, in very rare cases, they won't be working towards trying to refer multiple times, especially if they're using a business-facing product, they're getting paid quite well. They're busy people, they're professionals, they don't have time to go around selling your product for you in return for free months of this or whatever it is, unless the reward is really amazing, which in most cases it isn't. So, really what you're looking for is not for them to necessarily forward it to one specific person, you're looking for two things.
Louis Nicholls:
You're looking for, firstly, that happenstance where if someone does ask them, "What tools do you use for this?" Or, "How do I do X?" Or if they see it on Twitter or LinkedIn, someone saying, "How can I do this thing that your product does?" They will go and fish out their referral link and it will be worth it for them to go and post it and recommend it. So, you're looking to sure up that kind of referral. But importantly, you're just looking for that one thing that will get them to just click that share button once. Onto Twitter, onto LinkedIn, to copy and paste a link into a Slack group or into the company Slack channel, or onto a Facebook group, into a WhatsApp chat, something like that really.
Louis Nicholls:
You're looking for that one thing that's going to get them to try it once. It's difficult to say what the right channel is to ask for that, because, I mean, you want to be including people's referral links, like a Hotmail or something like that. You want to be including it by default in any messages that they would be sharing with people, obviously. That goes without saying. I think most people would get there without needing to be told that. But it's more about what is happening when that magic moment that we talked about, when those aha moments happen. Are they in the product itself when that happens or is that something that happens outside the product that they will get a notification about? Revolut is pretty persistent at this.
Louis Nicholls:
They will send an email and a push notification to your phone pretty much at the same time. They're very aggressive and I think at the moment they're giving out like $50 per person you refer, but that they're asking for a lot in return. Whereas, I think, really, you would normally try and couple this again to a good news, like magic moment. So, for example, one thing we were setting up in SparkLoop internally is that we will ask people for a referral when their newsletter hits a certain growth milestone or when they make a certain number of referrals with our tool, we will send them an email saying, "Congratulations, you've made a thousand referrals. Share your success with your link." And you're always positioning them to go and talk about themselves. They're the hero of the journey, your product isn't necessarily the hero. It doesn't have to be even to get referrals.
Ramli John:
I love that. One thing I wish I see more often is just congratulating. Like, I call it the success state, where, "Congratulations, you did X." I'm surprised I don't see it as often in onboarding experience, I've been doing a lot of onboarding care downs. And there's obviously the empty state where things are blank, but when somebody completes something just like, "Hey, congratulations." And then leading them to the next step, because once again, that's usually the best time to lead them to the next step. And whether there's a referral or doing something else in that customer journey, it makes a ton of sense.
Louis Nicholls:
Yeah, for sure. The one thing that's interesting there when it comes to referrals, we haven't touched on it, but I think is more and more important, I think we're seeing... You have these other channels like you have pay channels, you have social, you have direct outbound sales, all that stuff, becoming more difficult, becoming much more expensive to do a lot of these things. And what we're seeing is that this word of mouth is almost being commoditized and professionalized by partnerships, by channel sales, by affiliates, by influencers, quote unquote, and thought leaders and advocates and whatever you want to call them.
Louis Nicholls:
And it's difficult that you have a challenge there where, how do you find these people? That is a challenge in itself. But if you have a good referral program set up, then you'll start to notice when people share and the ones who are sharing more often and you've created your own pipeline, your own sales funnel or flywheel for finding partners in a way. You can just look through your referral program and say, "Oh, well, this person shared once and made four referrals, they must have a pretty good list or pretty good reach. Let's reach out to them and see if they want to become a proper partner as well." I think that's an underrated aspect of having a referral program, is knowing exactly who your most engaged and highest potential advocates are.
Ramli John:
Really fascinating. I mean, working with other companies, do you have any tools that would shed light on those ones that are more likely to... I mean, with SparkLoop, I'm guessing it's already built in there, but for other companies that you work with, I'm curious, because that's a big part around a product qualified lead. Is like, "Hey, if there's X number of people within the organization, they've already ready to tip over to even get..." When five people in the same company are saying, "This is great." It's a lot easier conversation than if you're trying to get one person to refer within the organization.
Louis Nicholls:
Yeah, totally. I think that's... And that's a really important part of... I was talking to someone, to Kristen Habacht, who grew... She was very early at Trello and she basically grew the sales team for Trello, which I think a lot of people don't really even know that Trello necessarily had to add a sales team. But that was one of the key learnings for them, is that you have people signing up for these individual accounts, right? Often it's developers or employees at the big company. And you can see from the email addresses they're signing up with that they're signing up for the product.
Louis Nicholls:
And if you can see that they're sharing this internally with each other and with teams, all it takes then is to have someone on your team who can go through and say, "Okay, we have 20 people with the same company domain email address, they're sharing with each other, this person seems to have shared with these other four. Their role is the manager or the organizer or whatever it is, we should reach out to them and say, "Hey, you're already at 20. It's not much more expensive, but it's way better for you if you just give everyone on your team access to this. Here's how to do that, here's some material to make that very easy. Let me know if you need a call as well to set things up." I think that inside sales is super valuable.
Ramli John:
I love that. Thank you for sharing. I mean, for everybody else who are here, feel free to drop any questions in the comments. One question I love asking is around any advice that you have for people, particularly for ProductLed leaders who are either trying to bring ProductLed into the sales org or they're trying to run a ProductLed company like you are with SparkLoop. Like, if you had one or two pieces of advice you'd like to give, and it could be anything... For people who don't know, you also run Sales For Founders, right? So, you have a pretty strong sales background and we've talked about referral here, but if you can give one or two piece of advice you'd like to give to ProductLed leaders, what kind of advice would you give to them?
Louis Nicholls:
I think something that's interesting is, if you're going to do... If you do ProductLed very well, it enables your sales team, right? It makes things much easier for them, if you have people who are still doing sales and customer success and everything. And I think you often, when you're doing this, well, you end up with the same learnings, but coming from very different directions.
Louis Nicholls:
So, being able to build that in and say, "Look, this ProductLed approach is going to make your life a lot easier and it's going to let you, as a sales person, focus on the most important high value places to be." I think that's really useful, and I think you will get a surprising amount of buy-in quite easily from salespeople if you're doing it well. Because to do sales well or to do ProductLed well, you have to really understand the world or the... You have to understand your customer's perspective, you have to got to see things through their eyes. So, I think that would be probably the most important thing for me, I guess.
Ramli John:
Awesome. Well, if people have any other questions, where can people find out more about... Where are you online, essentially? If they have follow up questions around referral or SAS or anything like that, where can they find you?
Louis Nicholls:
Yeah, you can find me on Twitter, is where I'm most active. Louie Nichols with an underscore at the end. And then I'm always happy to chat via email. Louis@sparkloop.app is the best email for me.
Ramli John:
Awesome. I mean, if anybody else has any other questions, like I said, feel free to drop in the comments. I mean, I have one other question around this, while I wait for people around this. The topic for this was referral, but I'm curious around sales, around getting people on. For people who don't know, you cold email me one time to get on my podcast.
Louis Nicholls:
Yeah, I remember that. Yeah.
Ramli John:
It was one of the best cold emails I've gotten to get on the show. I mean, I get a lot of pitch... For people who don't, I have another podcast called Quote Marketing Today, but it was so good. I mean, can you just break down... I just tweeted about it a few days ago, because it was top of [inaudible 00:30:35] two years ago, but it's still top of mind for me. I mean, you said you're great at sales as swell, but do you have any tips around that as well? What tips do you have around sending emails that get people to respond? Because I presume that's also a big part of getting users to sign up for something, is using emails as big channel for that. So, any tips around getting people to act based on email?
Louis Nicholls:
Yeah. Off the top of my head sure. So, I think it all boils down to the same skill set, right? It's understanding the world and whatever you want for someone to do through the person you're talking to your customer or the other person's eyes. And I think it also comes back to, funnily enough, when I teach this in the SAS founders course, it comes back to that idea of risk versus reward again. So, I think in that email, hopefully, what came across to you was there's very little risk of it being a complete waste of your time to do an interview, I made it very easy for you with several examples of exactly what we could talk about.
Louis Nicholls:
So, that the reward was there, right? And I think, potentially, the most useful sales skill that I think is transferable, is that when you're a marketer... Actually, when you're in any other role other than sales, especially you'll tend to be marketing, and with marketing, there is no cost to reaching 10,000 people when you are advertising or a thousand people, right? Yeah, there's a monetary cost, but it doesn't take you more time to send 10,000 emails to everyone or to send a thousand, it's all just one click of a button, right? But if you're doing sales, every phone call that you get on with someone who isn't a really good fit to buy your product, that's a wasted 20 minutes, half an hour for both of you.
Louis Nicholls:
So, it's going to annoy them, it's going to waste your time, you're not going to make any money off it. And it's just a waste of time, it's bad and you can't have many of those. So, what doing, or working as a salesperson and I've never really worked as a professional salesperson, it's always been leading sales teams or I'm just doing sales as the founder, as the first person, founder led sales. What that teaches you is you can't... You have respect for qualifying people, right? So, you will try and actively not spend time on someone who you're not pretty sure you can help, who is going to be a good fit for you. I think that comes across, if you do sales first and then go into marketing or go into product or go into hiring or really any other thing, any other parts of building a business, you will have a much healthier respect for not wasting anyone else's time and wasting your own time, I think.
Ramli John:
Mike is just saying, "Great call, thank you [inaudible 00:33:44]." So, I think that's it, if I don't have any other questions, Louis. I just want to thank you. Have a good vacation at Portugal. Thank you for joining us and just sharing about referral. I know it's a big component of growing a ProductLed business and Neil has just said thank you as well. Thank you, Louis. I really do appreciate it.
Louis Nicholls:
Yeah, of course. Thanks all, it was great to see you again, Ramli and great to take some time away from the beach. It's been fun.
Ramli John:
All right. I'll see you. See you later. See you all later.
