Create a Viral Growth Engine

The Lean Startup’s Secret Weapon: The Viral Engine of Growth

Both at PayPal and at Tesla Elon has leveraged referrals and bonuses to create viral growth.

PayPal was able to achieve 100,000 users in their first month through the success of their referral program.  They offered $20 credit to both referring parties.  

Elon: Well, we started off first by offering people $20 if they opened an account. And $20 if they referred anyone. And then we dropped it to $10. And we dropped it to $5. As the network got bigger and bigger, the value of the network itself exceeded any sort of carrot that we could offer.

At the TESLIVE 2013 Tesla Motors Club event Elon discussed PayPal’s referral program at greater length.

Elon: From my PayPal days we spent a lot of time thinking about how to create a viral growth engine. The keys to that are of course reducing the friction of buying and reducing the friction of referral – so making it really easy to buy and refer – and then creating an incentive both for the person doing the referral as well as the buyer.  And that way if by referring someone both parties actually benefit then it works well.

Referrals have also been a great source of growth for Tesla.

In 2015 they launched a $2,000 referral program for the Model S lineup of cars and it was a success.  Both parties would benefit from this.  The referring agent would get a prize and the buyer would get a discount.

Additionally there was a contest for referrals where free cars could be won and in 2016 YouTuber Bjorn Nyland actually won two Teslas during this time.

In 2017 the first person to refer 20 Tesla’s per region would get a free P100D Model S or Model X once their 20 friends have taken delivery of their car.

In July of 2017 the next gen Roadster was announced as part of the referral program secret level.  How it works is after five referrals you entered the program and each Model S or X referral thereafter gave you 2% off the price of a founders series roadster.  So people who achieved 55 referrals will be getting the $250,000 roadster free.

YouTuber Ben Sullins crunched the numbers on this in a video where he determined the ROI for Tesla on their referral program was 550X, assuming a 20% profit margin on the car.

That is compared with a 45X ROI that GM earns from their 3.24 Billion dollar ad spend during the same year.

Despite the awesome success of Tesla’s referral program in 2017, Elon and Tesla decided to scale it back, likely due to the fact that their demand is significantly outpacing their supply.

The reason Elon explained on Twitter is because it was adding too much to the cost of the cars.

At the time of writing the referral program has been brought back, but not to the generous extent of 2017 when free new roadsters were possible.

There are the details of the new program in 2021:

You and anyone using your referral link can each earn 1,500 kilometers of free Supercharging with the purchase of a new Tesla car — designed to be some of the safest cars on the road. Each car referral also gives you a chance to win a Model Y monthly or Roadster supercar quarterly. Owners who already have free Supercharging get two chances to win.

So clearly this is quite scaled back from before but nonetheless it is very cool that Tesla still has a referral program and does give away some free cars.

In the past few years Tesla has used creative referral rewards as well such as: 

Launching your photo into deep space orbit, Tesla unveiling invitations, and amazing adventures.

The amazing adventures they offered included: 

• Drive an Electric Boring Machine
• Watch a SpaceX Rocket Launch
• Race the Tesla Semi Truck around the test track

Clearly referrals done right can work wonders for your business, and they don’t have to cost an arm and a leg.  

Take Elon’s advice and make it as easy and frictionless as possible for people to sign up as an affiliate and promote.

For best results offer referral rewards for your most profitable products and services.