Airbnb, a company that began as a 3-person start up in 2008, is now a household name. In the last decade, Airbnb has achieved incredible growth, increasing their presence to 191 countries. In August 2017, they reached 4 million listings, a number greater than the number of rooms available in the top 5 major hotel brands combined. In 2017, Business Insider ranked Airbnb as the second most valuable startup, with a valuation at $31 billion.
To what can they attribute their explosive growth? They used the strategy of referral marketing, and leveraged the power of referrals to boost their numbers of users.
Airbnb Referrals 1.0
In 2011, Airbnb launched Referrals 1.0, the first of their double-sided rewards from their referral program. Referrals 1.0 did well in the first year, but it dwindled in the years following. From the surface level it seemed as though referrals did not work to generate explosive growth.
However, the data told a different story. The data showed that there was millions and millions of dollars in potential revenue that could be harnessed with the use of referrals.
The numbers didn’t lie. The issue with Referrals 1.0 was that it was not promoted enough. The data proved that with proper promotion of their referral program, they could leverage the power of referrals to generate a positive effect on growth.
KEY TAKEAWAY: Promote your referral program as much as you can! Link to it from every webpage on your website, and create an email campaign that continues to remind your customers about your referral program.
Airbnb Referrals 2.0
Airbnb redesigned their referral program and launched Referrals 2.0. The trends showed that mobile was growing quickly. Half of their emails were being read on mobile devices (their previous referral program was only available on web). So they added the referral program on iOS and Android, and they revamped the referral program for web.
Referrals 2.0 allowed users to import Gmail contacts and send customized invitations to them. Airbnb found that the altruistic invitation of “give your friends $25 to travel” motivated people to refer their friends more than “invite your friends, get $25.” The former did not make the referees feel like they were taking advantage of their friends.
Referrals 2.0 drove 900% year-on-year growth for first time bookings. Airbnb reported that their daily bookings and signups increased by 300% when they implemented Referrals 2.0.
KEY TAKEAWAY: When promoting your referral program, be sure to spend time on the copy. Instead of using words that sound like they take advantage of your friends, use copy that empowers your customers in feeling like they are helping their friends.
Referrals are a Powerful Tool
Referrals are more effective than people realize, and are pivotal to a company’s growth because they reach outside your user base. Most things you build do not touch non-users.
“Outside of US, Airbnb is not as well known a brand. Invites are one of the ways that the product can touch new potential customers who don’t already know about us.”
-Gustaf Alstromer, prev. Product Manager of Growth @ Airbnb
Airbnb found that referred users even performed better than non-referred users. Referred users don’t just use their referral credit for one night. They stay more engaged, meaning they book trips more often and are more likely to send referrals to their friends, contributing to the compounding effect. So contrary to popular belief, referred customers do not have low value. To put it simply, customer referrals breed more referrals, and referred customers remain loyal.
A Nielsen study found that 92% of customers trusted a recommendation from people they know. Users are able to tell the story better than the company can do alone. New users may be weary of trusting everything a company says they offer. Referrals capitalize on the established trust that already exists between friends. Trust is transferred from from the referer to the referred user.
KEY TAKEAWAY: Empower your customers to be your brand ambassadors and let them advocate for why your product/service is amazing. Leverage the power of trust to really grow your business.
The Final Takeaway
Today, Airbnb boasts a referral program that has set the gold standard for referral programs around the globe. Instead of just a directory of properties, Airbnb built a brand that places importance on finding creative properties and good hosts. Not only has Airbnb created a service they are proud to promote, they have mastered referral marketing to gain real and tremendous results.
The great thing about referral marketing is that any business can get started today and see instant results. Check out our referral software, GrowSurf, that lets you run a referral program like Airbnb.
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