Community and referral marketing that survives scrutiny
Quick answer
Referral schemes, community building and word of mouth. What makes them work, and the disclosure and data rules that apply when you reward people.
Referral and community marketing are attractive because they produce the kind of
growth that looks organic. They are also the two channels where the rules are
most often broken by people who did not realise a rule applied.
Referral schemes: the three things that decide whether they work
The reward has to be worth the social cost. Asking someone to
recommend a product puts their credibility at stake. A reward that is trivial
relative to that risk produces no referrals, however well designed the scheme.
The referred person has to be able to act immediately. A referral
that requires a conversation before the recipient can do anything loses most of its
value. The link or code should work without you.
The scheme has to be legible. If a person cannot explain the rules
in one sentence, they will not try. Complexity is where referral schemes go to die,
and simplicity is worth more than a clever tiering.
The disclosure question, which is the compliance one
When you reward someone for recommending you, the recommendation becomes an
advertisement. That means the disclosure rules apply to the person making it, and
the advertiser shares responsibility for how it is made.
The practical requirement: the person recommending must make the reward clear, in
plain words, where the audience will see it. A referral link embedded in a review
with no mention of the reward is an undisclosed material connection, regardless of
whether money changed hands.
If the reward is a discount on a future purchase, that is still a benefit with
value, and the reasoning is in
influencer and
sponsored disclosure.
What a community is, and is not
A community is a group of people who talk to each other. A channel where you talk
to an audience is not a community, and treating one as the other is the most
common mistake in this area — it produces a broadcast list that expects to be
entertained and does nothing for anyone.
The test: if you stopped posting for a month, would the members still be in
contact with each other? If not, you have an audience.
Building one without gimmicks
Communities form around a shared problem or a shared practice, not around a brand.
So the useful question is not “how do I build a community” but “what do these
people have in common that they cannot discuss anywhere else”.
Then the structural requirements are modest: somewhere they can talk to each other
rather than only to you, a reason to return, and moderation that is present but not
heavy. Everything else is decoration.
The data rules that apply to community spaces
A community generates personal data — member lists, posts, direct messages,
behavioural records. If you operate the space, you are usually the controller of
that data and the obligations follow.
The ones that catch small operators: consent to be in a directory is not consent
to be marketed to; a member’s request to be deleted includes their posts in most
regimes; and moderation records about individuals are personal data too. The
general position is in
data privacy for
marketers.
Incentives that do not scale
The schemes that last are usually the simple ones, and the reason is arithmetic
rather than taste. A two-sided reward where both parties gain is easy to explain
and hard to abuse. A tiered scheme with multipliers and bonus periods is easy to
abuse and hard to explain, and the people most motivated to understand it are the
ones running it as a side income.
Where abuse appears, the cause is usually that the reward can be captured without
the referred person becoming a real customer. Make the reward contingent on
something only a genuine user does, and most of it disappears.
There is also an obligation to the person doing the recommending: that the product
does what you say, and that the commitment is proportionate. A scheme that pushes
people to recommend to everyone they know spends their credibility for your benefit
and produces recommendations nobody believes.
When a community becomes a liability
A community you host is a space you are responsible for: moderating abuse, removing
unlawful content, handling complaints, and doing so consistently, because a space
moderated by mood is worse than one not moderated at all.
The minimum is a stated rule set, a way to report, and a named person who decides.
State the rules where members see them when they join, so removal is enforcement
rather than surprise.
Decide in advance what you would do if the community became hostile to you.
Communities form around shared interests, not around agreement with the operator,
and the moment they disagree with a decision is when you find out which of the two
you built.
Measuring it honestly
Referral schemes are measurable in a way most marketing is not. Measure referrals
that resulted in a purchase, not referrals issued, over the same window for every
cohort.
Community is harder: the honest measures are retention and member-to-member
activity, not member count. See
measuring marketing
without fooling yourself.
Questions students ask
Do I have to disclose a referral reward?
Yes. Rewarding a recommendation makes it an advertisement, so the reward must be disclosed in plain words where the audience sees it. A referral link with no mention of the reward is an undisclosed material connection.
What is the difference between a community and an audience?
In a community the members talk to each other. If you stopped posting for a month and nobody was in contact any more, you have an audience rather than a community.
What makes a referral scheme fail?
A reward too small relative to the social cost of recommending, a recipient who cannot act immediately, and rules too complex for a member to explain in one sentence.
Common questions
Do I have to disclose a referral reward?
Yes. Rewarding a recommendation makes it an advertisement, so the reward must be disclosed in plain words where the audience sees it. A referral link with no mention of the reward is an undisclosed material connection.
What is the difference between a community and an audience?
In a community the members talk to each other. If you stopped posting for a month and nobody was in contact any more, you have an audience rather than a community.
What makes a referral scheme fail?
A reward too small relative to the social cost of recommending, a recipient who cannot act immediately, and rules too complex for a member to explain in one sentence.