Design a referral system for a grocery app.

4. Just to be on the same page, by the referral system, you mean a system comprising of a referrer, a referee, a milestone for the referee and the reward? Yes.

Structure:

1. Why referral program?

2. Milestone

3. User persona

4. Reward

5. Referring mechanism

7. Risks + Mitigation

8. Measuring success

Before diving deep into solving the problem, I'd like to discuss why does the comapany would want a referral program in the first place? If the goal is acquisition, then there are other channels like advertisements as well. I believe that the company has a good product and believes that if the users try the whole product once, they will be able to unlock its value proposition and hence start using the product regularly.

This means, the mission of this referral program is to make the users realize the core value proposition i.e. fast deliveries and quality.

This brings me to the next point in our structure i.e. the Milestone. A good milestone should be an activity that would help us in fulfilling the mission of the referral program.

For a user to experience the value proposition of our grocery delivery app, they should experience the entire user journey from placing an order to receiving it. This means a logical milestone here can be - placing the first order. This is going to be the action that the referee will have to do in order to receive the reward.

User persona:

1. Middle class office going person with low time to spare on grocery shopping. Wants to spend time on things that matter.

2. Middle class old age people or differently abled people who don't have the physical strength / ability to visit the grocery stores.

Wants:

One of the needs that can drive the above personas to our product is the need for better pricing, discounts and offers. Grocerries are something that a person purchases very frequently, and if they are able to find a better pricing on a alternative product, then there are high chances that they use the other product. This implies a reward in our referral system can be a discount coupon upto a certain value. Participation of both the referrer and the referee is very crucial for the success of our program. Hence, both participants need to be movtivated to participate in the referral program. Therefore, we the reward will be given to both the parties. The value of the discount coupon needs to be decided based on the CAC and the LTV of our current product.

Now let's move on to the referring and sharing mechanism.

The general mechanics can be same as other common referral programs i.e. we have a referral code which people can use while signing up on the platform to receive a coupon. Then they can complete the milestone and redeem the coupon for future purchases.

One prominet communication channel that our persona would use is WhatsApp (both old age and working proffessional). This can be a good channel for sharing our referrals. We can provide the users an option to share their referral code on WhatsApp along with the pre-written invite text.

Now, combining all the peices, here's how a typical user journey would look like:

Referrer Shares their coupon code via DMs or WhatsApp stories > Referee downloads the app > Referee signs up using our referral code > Referee places their first order > Both the referrer and the referee get a discount coupon for their future purchases.

The two things that we need to figure out now are the value of the discount coupon and the maximum number of referees who can sign up using a particular referral code.

Value of the discount: "a discount of X% upto INR (Indian Rupees) Y." For such a discount, we again need two variables: the discount % X and the limit Y.

X and Y both should not be very low because they need to be enticing for the customers to join the platform. On the other hand, they can't be higher than the current CAC at max. Another thing we need to keep in mind is what kind of order size would be ideal for us? Let's assume the current CAC is INR 200 and we'd like the users to place an order above INR 500. In this case, a discount coupon of 10% upto INR 50 should work.

The maximum number of referees that can sign up using a particular referral code can be around 5 in this case, to keep the total CAC around the same as the current one.

Now I would like to talk about how we can measure the success of our program.

1. #new signups within the first few weeks of the launch

2. #referees joining from a particular referral code

3. #clicks on the referral code sharing button

4. W1 retention of the new sign ups.

5. CAC (new)

Risks + Mitigation:

1. Exploitation of the program: One can exploit the program by creating multiple accounts from the same device. Mitigation: Track the device ID for each account and block the referral programs for the ones who are repeatedly creating large number of accounts from the same device ID.

2. Adoption: People are not motivated enough to join the program with the rewards we offered. Mitigation: Study the behaviour and tweak the rewards to maintain the balance between the CAC and the amount of motivation it brings for new people to join.

PM Team · Answer 2 · 2018-08-29T19:22:15+0000

Clarification questions

1. How many cities is the app located in? 5

2. Do we want to design the referral for all cities? We want to start by experimenting in 1 city

3. How many users does the app have? 30,000

Okay, I am assuming the goal of the referral program is to increase the user base of the app. Is there any other goal that you have in mind? No, go ahead.

Okay, I will start off by breaking down the components of a referral program, then look at the persona of our referrer and their needs. I am then going to list out some solutions that might fulfill our goals and address user needs. At the end we can evaluate these solutions.

So, a referral program has 4 primary components –

1. Referral channels

2. Referral incentives

3. Budget

4. Users

Let’s talk about our target Users first:

1. For a grocery app, I am assuming that the age range of our users is between 25-40 and that they are working professionals who don’t want to spend time grocery shopping physically.

2. They are tech savvy and are active on multiple online platforms and share things with their peers on these platforms.

3. For the referral program, we should aim to target users who are cost-sensitive as well.

Some of the needs of our users are –

1. They want to easily discover people they want to refer to

2. The cost-sensitive user might want to avoid delivery fee

3. Get free samples of things they have never tried

4. Are fond of convenience and want faster delivery

5. Want items to be delivered in fixed time slots

Now let’s explore some solutions that address these needs –

Referral channel

1. Sync app with Facebook that shows friends living nearby and who are not using the app

2. Apart from above, provide multiple referral channels like Whatsapp, Instagram, messaging etc. for e.g. provide option to share promotional image as a story.

3. Include 1-click signup link in the referral message.

4. To ensure that new users are actually ordering, make the referral applicable after the new user’s first order.

Referral Incentive

5. The most straightforward incentive is to provide a referral bonus. This might be a huge money sink though. Instead, we could promise 1-hour delivery for the next order for every referral. Or we can send a sample gift bag for each referral.

Referral Budget

6. We can run the program for a fixed number of days during which we expect to meet our target # of users or reach our budget limit.

7. We can extend the program for 20% more time if our targets are not met or evaluate what went wrong.

Evaluate

We can create an A/B test to analyse what referral incentive and channel works best for our users.

[email protected] · Answer 3 · 2023-10-11T19:35:42+0000

Let me just comprehend the scenario to make sure I am clear before we dive deeper into the case.

Build referral system for existing grocery app. Is that correct?

Problem - Current grocery shopping app does not support referral programs which reduces app stickiness and diminishes extending the capability to expand user base through organic flow.

Clarifying questions

What is the main business objective to build this app? - Growth?Acquisition?Increase market share?
What is the primary goal for the referral system for grocery app?- Increase user base?Market leader? Better user experience
Any specific region we plan to expand through referral?

Interviewer - We want to increase our user base through organic channels and one of them is our referral program. Our main objective is to increase the user base and help our shoppers by eliminating all the grocery shopping hassle and in turn increase revenue. We want to start with 5 cities.

Okay let me just comprehend the scenario so it is clear before we dive into further analysis:-

We want to build a referral system into our current grocery shopping app

That allows our app users to refer to other people so they can also experience the benefit of online shopping.
Increase the user base
Drive growth.
Start with 5 cities and then expand to other cities.

I would like to further understand who our target person’s. There are few different persona’s that I can think of who would be doing grocery shopping online

Working busy professional - between age of 25 - 50 years who are tech savvy
Money conscious and looks for ways to help and save money
Enjoys fast and quick doorstep delivery

Kids shopping for their senior parents

For this exercise is it ok to focus on targeting user persona who are money conscious and look for ways to help and save money. I think they will be the promoter of our app if we solve their pain points.

As I put myself in that customer segment bucket my major pain points are

Lack of discount, sale and coupon
Difficulty to compare the prices between items

Hidden fees and charges
Missed referral rewards

There are other use cases. Here, I’ve highlighted some of the most important things that I have experienced myself.

After looking at all the pain points I think “missed referral rewards” will be a big problem to solve as it will help our money conscious shopper to earn rewards and save money. This will help increase user base and drive growth while improving efficiency which was our main objective.

Is it Ok if we consider this scenario and take it further on how we can solve missed referral reward pain points

Quick referral method through different platforms - this will give app users a quick way to share referral code or link to people. This will help increase user base
Promote referral program in app - this will nudge users to take advantage of referral program benefits and earn rewards.
Tier category with special rewards - This will get referee excited about the rewards that different tiers offer in terms of gold, silver and bronze and enjoy special benefits
Online contest tied to reward - this will help drive more user engagement

As I further evaluate the solutions and determine the impact vs priority

Quick referral method through different platforms - High impact, low complexity. Medium complexity because we can integrate the bitly link or QR referral code through different channels as we share the image and link (text, whatsapp, social media etc)
Promote referral program in app - High impact, low complexity. We already have platform built we just have to nudge the user to take advantage of the program
Tier referral benefits - medium impact, low complexity. We just need way for system to track the referral tied to user and categorize into target bucket
Online contest - medium impact, medium complexity. Contest will be run aggregately through all supported cities and the leader board will be very fluid which might diminish the goal.

We looked at the problem of designing a referral system for a grocery app. We further narrowed down the scope of the project and our user personas we want to focus on. After this I went through the customer journey in terms of their challenges and prioritized the main user pain point based on the impact and frequency.

After that I went into solution mode and identified solutions and classified them into impact vs complexity and what are the solutions we want to focus on for our initial release and what can we work on in future.

Based on all those analyses my recommendation for MVP will be to build a Quick referral feature. This is high impact with low complexity as it will help users to quickly share the referral link or code through different channels and enjoy the benefit. This will help increase user base and adoption which will help drive revenue growth.

Some key metrics that I would monitor for success would be

Engagement - Referral link or code sent by user, which platform used most for sharing the link or code
Monetization - shopping cart value
Adoption - # of users downloaded app, DAU, MAU

stashbag · Answer 4 · 2021-03-31T23:39:48+0000

Clarification

What is our goal for the app ? —> Increase the number of users on the grocery app
Is this a part of an existing grocery store or is it an app that works across different grocery stores? —> Works across the same grocery store chain
Do we own the grocery store chain or are we only the app that aggregates across different grocery stores —> You can decide
How is success measured - success is measured when new member signs and uses the grocery app

Goals

We want to increase the number of users using our app via referrals
Success is measured based on new signups + first time purchase

User types

Family shoppers: Shop for the family. Relatively big basket size and weekly purchases
Singles: Shop for self, lot of eating out and ordering in
Young couples: Shop for self, small basket size. Frequent visits to restaurants and other places
Old couples: Live by themselves. Basic shopping needs, Not very tech savvy

From the above user segments, I would choose the young couples segments. The main reason being that this segment is typically has higher disposable income and have a higher willingness to try out new things. Families and old couples aren’t likely to change their behavior as they will already have an existing store / grocery buying pattern.

User needs

As we are designing a referral system lets us look at some of the areas that would incentivize referrals for the grocery app

Discounts: Get discounts for successful referral on your next order or delivery
Exclusivity: Get access to exclusive club and preferred checkout lanes (if inperson) or faster delivery times when you refer a certain number of users
Fame: Feature top referrers in the leaderboard to other users on the app. Recognition sent via newsletter to all subscribers or available to the user to share on social media.

From the above needs I am going to focus on the exclusivity need.

Solutions

Lets look at how we can surface this in the app and make users drive referrals

Referral tiers: Create tiers for users based on the number of referrals. For each of the tiers user will get access to certain privileges. For example the top tier users would get higher discounts for certain purchases or faster delivery times
Subscription access: Give referrals access to the premium (subscription) service and let them enjoy the perks which are not available in the free service (this assumes there is a subscription service). This would incentivize referrals to use the app and test it out as they would have access to the perks for a short time. For the referrer we could give them a discoung on their next order for each referral they make

I would pick subscription tier access to incentivze referals because they will allow the new users to try out the full platform and hopefully lock them in into using it (assuming our product provides value).

Tradeoffs

Giving users benefits for referrals might not make sense if the referrals churn and don’t continue to use the grocery app
Groceries have razor thin margins so we need to look at the detailed numbers of LTV to make sure we are staying in the positive based on referrals and offering all these perks

Metrics

To measure success of this product I would focus on

North Star

Avg. purchase value from referrals

Others

Referral purchase frequency
30 Retention for referrals / Churn

hjc · Answer 5 · 2020-09-25T05:49:12+0000

Clarification:

Is this grocery app an app that user can use it to browse avaible goods, place an order, pay online, and can either pickup the order instore or get it deliveried to home? [Yes]
Is the delivery free? [No]
A referral system consists of the front end design, backend design, and incentive offer design, which part you would like me to focus on?
Is there any limitations I should know about, such as budget or acquisition cost?[No]

Goal

What's the design goal of this referral system? [minimize acquisition cost per user]

User

There are 3 types of users for this product:

[referrer] Users of the grocery app
[referree] Users friends
[Op] Marketing manager of the app

I would like to focus on the op mgr, as he is the key person to optimize the user acquisition cost

Use cases

[offer]Op Mgr would like to be able to configure/modify referral offers
[ui]Op Mgr would like to be able to change referral UI/Message/Channel.
[targetting]Op Mgr would like to be able to target different user segment, based on their shopping behavior, location, account age etc.
[AB testing]Op Mgr would like to experiment new referral offers or UI on fraction of users and compare metrics between experiments.

#1, #2 and #4 are always required, but

I would like to discuss more about 3#, as it's critical to target users whose friend are most inclined to join the app, so that we can acquire with the least incentative.

Solutions

I can think of several ways of segmenting the user:

Home location: as people living in the same area typically have similar shopping behavior
Monthly spending: which implies their income level
Engagement, like # of orders per month
Account Age: how long they have been on the app
Age
Gender

Prioritization

I will probably implement all of them and run A/B testing on them

Metrics

I will monitor the user acquisition cost as North star metrics, and

% of offer accepted, # of new user that accepted offer, # of invitations sent as secondary metrics.

Summary

Here I propose to design a referral system which in additional to normal features, features the ability to target different user segment and minimize user acquisition cost.

scrambledboiled · Answer 6 · 2019-02-25T00:32:15+0000

Clarifying questions

User group: Are we referring consumers or other grocers?
Limitations: Are monetary rewards allowed? Or will I need to decide that?
External factors: Where is the product in its lifecycle? Will most users have heard of it already?

Based on my knowledge of grocery apps I'm going to assume we are dealing with consumers referring consumers, where monetary rewards are allowed and adoption is low.

Solution and metrics

Measuring success: I assume we're going to try to increase the number of users on the platform who make a purchase
Types of solution: We need to consider the whole funnel: (1) which users we target (2) what we target them with (3) how the referral is sent and redeemed
Other factors: We want to consider what's been tried before, ensure we don't annoy users reducing overall usage and that the system can't be exploited

Implementation and success tracking

The lowest hanging fruit would be to (1) target power users (2) with a simple message (3) that asks them to tell their friends about the grocery system with a social media URL. Traffic, downloads and subsequent purchases are measured as well as possible. This is attractive because the team would be able to work out what the dynamics of this system are and tweak the different stages in the funnel. A downside is that it potentially displaces existing, more authentic referrals by word of mouth.
A more advanced solution (1) target activated users (2) with functionality to invite friends with a specific message (3) monetary incentives based on existing CPA. This is attractive because it has a much bigger potential impact. A downside is that it's open to fraud and costly to implement.

Conclusion

Assuming the need is for the first consumer referral system in a grocery app, the initial proposed solution would be a simple social sharing link shown in-app or emailed manually to a proportion of power users. This would maximise learning early.
Data from the initial test could then be applied to building more advanced solutions.

cptnds · Answer 7 · 2018-09-04T05:22:43+0000

what does the grocery app do?

users can order groceries and have it delivered to home

what is a referral system and why do we need it?

need a way to grow new users in a inexpensive way

who are our users?

busy professionals, kids at home, don't have too much time to shop grocery store after work and cook
College students, buy groceries occisionally
care about saving some money, save on delivery and service fees

user pain points

Want to save money on fees
Want to sample new items on display at the store
Want to get latest sale flyer

prioritize #1 based on user need

Design: Referral Program that will help busy professionals save money on grocery delivery fees

Goal: increase new users activation (account creation), new user orders

Use cases

My referral and I will get my delivery fees taken off, if my referral buys something
I can share my contacts on phone and see who are not already using the app
I can see how much delivery fees are being credited back to me
I can see referral entry point at the end of my purchase so i don't get distracted

Prioritize 4, 1, 3, 2 based on impact to goal