Introduction

According to Elena Verna referral programs work for only a few B2B SaaS companies. A common mistake is applying B2C referral playbooks to B2B SaaS. In B2C, referrers are incentivized with in-product rewards that benefit them directly.

In B2B, however, these rewards often benefit the company rather than the individual referrer. From a psychological perspective, this type of reward lacks personal motivation and fails to resonate with the individual making the referral.

This is just one of many observations we’ve made over the last three years about why setting the right incentive scheme is crucial to the success of user referrals in B2B SaaS.

This chapter will highlight what drives people to share B2B SaaS products and accelerate the word-of-mouth flywheel.

The questions we'll answer:

• What are the psychological drivers of referral behaviors?
• Why do some B2B user referral programs perform and others don’t?
• Which incentive scheme works best for you?
• What insights can we get from Cello’s proprietary data + dedicated user research?
• What are incentive best practices & pitfalls?

Before discussing theoretical and empirical details, let’s examine the different incentive schemes used in referral programs.

Different incentive types and schemes in referral programs

We see two different incentive types in referral programs for B2B SaaS. Monetary incentives and non-monetary incentives, even though the latter are more widespread.

Monetary vs. non-monetary incentive types

Monetary incentives offer direct financial rewards, like Typeform’s referral cash payouts. Non-monetary incentives, such as exclusive access, recognition, or special privileges, provide value without direct financial compensation. For example, HubSpot gives referrers early access to courses, or community recognition through its "HubSpot Academy,". Different non-monetary incentives could be donations, in-product rewards, or badges, to name a few.

Tiered, on-time, recurring incentive schemes

The structure and distribution of incentives, whether monetary or non-monetary, can vary. Currently, three incentive schemes dominate the market.

Tiered incentives provide progressively greater rewards based on the number of referrals. Trello offers free premium months that increase with more referrals, while Pipedrive offers tiered benefits like swag, in-product credits, and vouchers. This aims to motivate users to make multiple referrals to unlock higher rewards.

One-time incentives, like Zoom's $20 Amazon gift card for each new paid sign-up, provide immediate rewards in full. Recurring incentives, such as Typeform’s reward, are based on a monthly % of the referred-in users' subscriptions. This encourages sustained engagement by rewarding users as long as referred customers remain subscribed.

Hybrid models combine monetary and non-monetary rewards to appeal to diverse users. Dropbox offered extra storage (non-monetary) and discounts (monetary) for referrals, maximizing engagement across different segments. Evernote blends one-time rewards with tiered benefits, offering immediate gratification and long-term incentives to encourage continuous referrals.

Okay, now we know more about incentive types and schemes, but do they all work? Let’s step back and try to understand the underlying psychological concepts.

Psychological drivers of referral behaviors

“The most credible advertising comes straight from the people we know and trust. More than eight-in-ten global respondents (88%) say they completely or somewhat trust the recommendations of friends and family. - Nielsen Global Trust in Advertising report, 2021”

Referrals have two important qualities that advertising does not possess: trustworthiness and relevancy.

But why do people recommend a product? What are the physiological and social motivations for getting people to invest their precious time and social capital in making these recommendations?

We have identified three fundamental psychological drivers behind incentives: extrinsic, intrinsic, and social. At their core, incentives promise a future reward in exchange for a specific action. In the context of software products, these incentives typically fall into three categories:

The 3 incentive cycles

• Extrinsic incentives are external rewards like Wise's "Give $ and Get $" or Dropbox's discounts. Based on B.F. Skinner's (1953) operant conditioning, these incentives influence behavior by offering clear and immediate benefits for actions.
• Intrinsic incentives come from internal motivations, such as learning new skills or achieving personal goals. For instance, Ledgy plants a tree for each referral, appealing to users' desire to make a positive impact. This aligns with Deci and Ryan's (1985) Self-Determination Theory which emphasizes autonomy, competence, and relatedness as intrinsic motivators.
• Social incentives rely on recognition from others, like LinkedIn's "Top Voice" badge. Based on Festinger's (1954) Social Comparison Theory, people value social approval and compare their success to that of others.

These three incentives highlight why people might engage in certain behaviors, such as making referrals. Yet, any referral comes with an effort, which we symbolized in the graphic below: the blue team represents the benefits, and the red team represents the efforts and downsides. The more you can increase the strength of the blue team, the more likely your users are to refer your product or brand.

The blue team consists of two kinds of referrers: The transactional and the social referrer (in which we also include the intrinsically driven referrer).

To learn more about these two types of referrers and understand what reward and incentive schemes work best in B2B SaaS, we conducted empirical research and analyzed proprietary Cello data (4m B2B SaaS referral users) to develop best practices and pitfalls.

Best practices & pitfalls

We’ve conducted three different types of user research:

#1 Rewards should be relevant (and monetary)

In B2B, personalizing incentives is key. In-product rewards, like Dropbox's extra storage, work well in B2C because the referrer benefits directly. However, in B2B, where referrers lack budget control, these rewards hold less appeal.

Monetary incentives or personally beneficial rewards are typically more effective because the individual user benefits from them, not the company. For example, Airtable’s account credits may not entice B2B users as much as direct cash rewards. In contrast, tl;dv combines a social incentive (discount for friends) with an extrinsic incentive (cash reward), creating a more compelling offer for the individual user.

Our research (Research I) highlights these psychological drivers, and while user bases vary, B2B SaaS users are primarily transactional rather than social referrers.

#2 Ensure the reward is meaningful but achievable

In B2B, larger Annual Contract Values (ACVs) allow for higher rewards, but incentives must be tailored to your product specifics.

Start by calculating a "reward cap" based on your ACV—for example, setting a percentage of Monthly Recurring Revenue (MRR) you pay out with a cap of $2,000 (see Research II, elaboration in #3).

The key takeaway from research II: Higher ACV products are associated with higher reward expectations from referrers.

The table below outlines expected reward ranges based on product ACV.

Now let’s take one step further and analyze different set-ups to find the best one for you.

#3 Rewards should foster a habit of sharing

B2B products typically have smaller user bases than B2C products, making it harder for referral programs to go viral. To overcome this, focus on strategies that encourage repeated engagement. One effective method is offering ongoing revenue sharing from referred subscriptions, which aligns rewards with generated revenue (see #3).

B2B products have higher contract values, enabling extended reward distribution. Offering rewards as a percentage of monthly subscriptions over time creates recurring payouts, serving as ongoing reminders and motivating users to refer more frequently. This approach helps build a steady revenue stream.

#4 Rewards should primarily be tied to referred revenue

Linking rewards directly to revenue is ideal; it reduces fraud risk and eliminates payback periods. However, taking a recurring rewarding approach, as described above, is not always the ideal scenario.

Even before revenue is generated, rewarding intermediate milestones can boost engagement and accelerate referral activity.

The right reward model depends on two key factors:

1. Annual Contract Value (ACV): A recurring reward model with small monthly rewards (e.g., under €5) may feel insignificant when ACVs are low. In these cases, one-time rewards create lasting impact and motivate referrers more effectively.
2. Time to Revenue: Maintaining referrer motivation can be challenging for companies with long sales cycles. Offering one-time rewards upfront helps sustain engagement until revenue is realized.

The table below highlights these dimensions. High-ACV products with short sales cycles suit recurring rewards (e.g., a percentage of MRR). For longer sales cycles, intermediate one-time rewards are recommended to keep referrers engaged.

Below are potential reward setups for companies across different ACV ranges.

For referee discounts (new users), ensure the discount is substantial enough to stand out from other campaigns.

#5 Rewards should be multisided

A common pitfall in referral programs is focusing solely on rewards for referrers while neglecting incentives for new users. It's equally important to provide tangible benefits for new users to drive sharing and conversions.

Research I and III, along with insights from @Andrew Chen, emphasize the importance of appealing incentives to attract new users. Discounts are simple, appealing, and work well - especially for products with fast value delivery and free trials.

“I’ve also seen B2B contexts where, in a professional setting, people are more likely to invite others if they are perceived as altruistic, such as giving out a large discount to new users.” — Andrew Chen

Our user research shows symmetric rewards (e.g., €500 for both referrer and referee as a discount) deliver the best results.

#6 The way you communicate and visualize your reward matters

Keep the message clear and focus on the key details of the referral program. Users should quickly grasp how much they can earn and understand the benefits for their peers, leveraging the program's social incentives.

Uber demonstrated this well by combining two metrics: initial signup conversion and first-month earnings (for completing a set number of trips). This approach allowed them to advertise a headline reward of over $3,000, significantly outperforming the earlier $200 figures in A/B tests. Larger numbers consistently drive better results as confirmed by Research I.

Highlight the maximum reward cap in the headline

Numbers and presentation play a crucial role in influencing user behavior. Take inspiration from Amazon by crafting a compelling, attention-grabbing message that motivates users to share.

In Research I, we tested different referral screens with randomized orders to reduce 'Primary Bias.' One group saw a high-cap reward headline first (Prototype 2), while the other saw a standard "Share and Earn" heading (Prototype 3). The results underscore the importance of prominently showcasing maximum rewards.

Provide metrics on rewards earned throughout the referral funnel.

We also tested various screens highlighting different metrics (e.g., referrals made, rewards earned, savings for referees):

• Soical referrers responded positively to information about the benefits for others.
• Transactional referrers found this feature appealing as it displayed their earnings.

Break information into smaller, digestible chunks to make it easier to understand.

Chunking breaks information into smaller, digestible sections (e.g., "You Get" and "Your Friends Get"). This approach makes reading and understanding faster and easier.

Our research showed that many users skimmed for numbers and headings rather than reading the full text. Chunking caters to these users by helping them quickly grasp key details and complete tasks efficiently.

#7 A/B test incentive types and reward communication

This is the most important advice. As suggested throughout this piece, there is no one-size-fits-all solution; instead, there are general guidelines and recommendations.

Our internal research and data indicate that you should follow these best practices to identify the most suitable reward setup. However, the final choice largely depends on understanding your product and users.

Conclusion

Creating a successful referral program for B2B SaaS companies requires understanding the psychological drivers behind user behavior. Effective programs cater to "transactional referrers" motivated by tangible rewards. Also, take their social capital into account and offer valuable discounts they can share with their friends.

It is equally important to communicate the incentives. Meaningful rewards and thoughtful design reduce social risk and increase participation. Cello's research highlights best practices that align your referral program with your audience's motivations -ensuring sustainable growth and engagement.

Designing the right referral program is just the beginning. In the next chapter, we dive into the essential go-to-market strategies that amplify the impact of your referral program and set it on the path to success. Stay tuned to learn how to effectively launch and promote your referral initiatives to maximize their reach and effectiveness.