TL;DR Morning Brew offers young professionals entertaining business news via daily newsletter. By implementing a milestone-based referral system, users are incentivized to share Morning Brew with their friends and colleagues. ~25% of their 1.5 million active readers have subscribed through direct referral.

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In August 2017, Morning Brew’s referral process was just the bare bones. A University of Michigan intern had cobbled together a way for subscribers to get a unique referral code, but readers had no real incentive to share the newsletter.

Fast forward to today: Morning Brew gets over 1,000 new subs via referral every day.  (All the while, we’re all trying to figure out how to get our first 1K email subscribers!)

How’d they do it?

Let’s dive in with Tyler Denk, Senior Product Lead @ Morning Brew. 

How the Referral Engine Works

Morning Brew uses a milestone-based referral program. Readers can share a unique code with friends and colleagues, which automatically tracks new subscriptions and then rewards the referrer with cool swag or extra content. 

It’s the ultimate word-of-mouth marketing engine.

The program itself isn’t hard to design. Morning Brew’s system was built in-house on Ruby on Rails with a few integrations — mainly from their email service provider Sailthru. They built a central hub that serves users personalized messages using email-based conditional logic (an if-this-then-that style system). 

When a referrer hits a certain milestone, they receive an updated message or reward.

Here’s an overview of their process:

1. When someone subscribes, a referral code + link is automatically generated (*cough* my link is morningbrew.com/daily/r/?kid=5753202c) 
2. When I use my link to refer someone (perhaps you?) they get linked to my account. I will always get credit as the “referrer.”
3. When you click the link and subscribe, the link triggers an action on Sailthru to send an API request to the Morning Brew database confirming your email. 
4. If you enter a legit email, I’ll receive credit for that referral (score!) 
5. Mon-Sat you’ll receive top business news in the most engaging and digestible way possible. 
6. As I refer more subscribers, the program automatically updates me about upcoming — or recently-achieved — milestones. (“Only one more referral until you get the official Morning Brew mug!” for example.)

But how do you actually get it up and running? 

“I prefer building a referral engine in-house over third party software. Mainly because you can tinker with things. I think a lot of people with a small newsletter, especially those who are not technical, may look for some third-party solution that’s $50/month when they could just pay a developer $200 to build the solution in-house. But it may be worth it to look into what’s out there to see if there’s an easy third party plugin.”

Double opt-in and safeguards

“Providing free rewards and incentives always invites nefarious actors,” Tyler warns. 

That’s why Morning Brew has implemented safeguards to ensure their referral program is attracting real people (as opposed to fake email addresses). One of the most well-known safeguards they employ is a double opt-in sequence for new subscribers.

At first their team didn’t force referred subscribers to double opt-in. It seemed like an unnecessary additional barrier of entry. But “to appease the email gods” as Tyler puts it — they eventually made the switch. 

Additional defense mechanisms:

• Third party email validation with Neverbounce 
• Sending an automatic email at each milestone with a list of all the referred emails (because it’s very easy to spot fake and/or disposable emails like the classic poop@gmail.com)
• Keeping the receipts: blacklisting emails, people, or even specific IP addresses that try to game the system

Customizing referral messaging

As a 100% email-based company, selecting the right email service provider has been a huge question for the Morning Brew team. They started on MailChimp and tried Campaign Monitor, but recently started running everything on Sailthru.

Sailthru has been a significant step up in terms of affordability, API, and in-email functionalities. They also have a weekly call with their ESP account manager which really helps with accountability. This was a deciding factor in making the switch.   

“I think the big thing we wanted was dynamic content,” said Tyler. “Sailthru allows us to add logic into the emails. So if you have two referrals, it will show you something different than someone who has ten. Before we moved to Sailthru, everyone got the same messaging — we sent out one email template. You can obviously drop in those meta-fields like ‘You have X referrals’ and it will fill in whatever’s in the database from the email provider.” 

But now Brew HQ can customize the text blocks in each email so every message is unique to the referral status of the subscriber. Morning Brew can test what type of messaging moves the needle at different points in the referral funnel. 

Bonus benefit: This dynamic messaging has been equally helpful for Morning Brew’s advertising. “If we know that you’re male vs. female, we can double our revenue just by sending male-centric ads to males and vice versa.” 

Sailthru also allows multivariate testing: A/B/C/D testing emails. “Other ESPs allow A/B testing on subject lines. But with Sailthru we can do up to four tests at a time, which actually makes a massive difference. We usually see the winner has at least a 1% open rate over the others. At our size, 1% is at least 15,000 additional opens. We’re charging on a per 1,000 open rate, so this makes a huge difference over the course of a year.”

The Rewards

Here’s the referral milestones that Brew HQ has established:

3 — Access to Light Roast, the Morning Brew Sunday edition 

5 — Brew die cut stickers

10 — Invite to the exclusive “Insider” Morning Brew Facebook community

15 — Silicon phone wallet

25 — Morning Brew tri-blend t-shirt

50 — Morning Brew mug (the real crowd-pleaser!)

100 — The “Brewneck” crewneck sweatshirt

To grow awareness and educate subscribers, the rewards are shown in a dynamic central hub that was built to make it easy and intuitive for users to send referrals.

When a user clicks “Add From Contacts” users can easily access their email contacts. For importing email contacts, Brew HQ uses Cloudsponge.

Administrative & fulfillment

How does Morning Brew keep up with all the referral reward fulfillments and customer service? 

Morning Brew hires college interns to mail referral rewards and handle customer service. Tyler used an integration with Forest Admin to build a custom admin panel with some basic functionality so interns can respond to any customer service issues that users have. 

Referral programs vs. paid acquisition

Morning Brew, like many bootstrapped companies, didn’t initially have the capital to advertise their newsletter. They instead had to resort to creativity and free tools to get their newsletter off the ground. 

But once Morning Brew gained some traction, they could eventually budget for advertising. Now they use one acquisition method to feed the other. “Since referrals were our only growth driver for a while, they were probably 80% of our growth before paid acquisition.

“Once the referral engine got to a point where it was very reliable, then we started to do the viral coefficient calculations: if we could get 10,000 subscribers a week through paid, knowing that 500 of them will start referring people, and of those, 25 will start referring people — [we knew we’d start seeing] network effects.”

How they developed their milestones

Before Tyler came on, Brew HQ already had Light Roast as an additional Sunday morning publication. “It just made sense for that to be the first reward. It directly aligns with the interests of our target demographic: if you want more news and content delivered in a short, digestible manner — that’s why you come to Morning Brew. So if you’re sticking around, clearly enjoying reading our content, can we give you more of that? It was also no cost to us. So that was the low-hanging fruit.”

From there, stickers are pretty common in terms of an easy brand-awareness reward. Because their referral engine is so consistent, they can get a steep discount by buying in bulk. 10,000 die cut stickers from StickerMule cost just $0.20/sticker. Pre-stamped envelopes cost roughly $0.65/envelope. So for 5 new Brew subscribers, that’s a $0.25 cost per acquisition. Not too shabby.

At 10 referrals, their Facebook insider group adds the community aspect. “In the group, people ask for career or college advice. We post podcast or book recommendations. We also try to gauge feedback on some new initiatives that we’re working on. Sometimes our team has an internal debate that we can’t decide, so we open it up to the entire group. It’s a value-add to us, but it also gives top users a sneak peek and ability to impact our business. We’re still kinda working out the kinks of possibly moving over to a Slack group so that we can discuss different topics by channel. We’re still working on it.

“Retrospectively, I can see that these rewards really hit on the core aspects of who we are as a media company,” said Tyler. “Creating content is very native to us. It makes a lot of sense. Then there’s swag and community. There’s something for everyone in our core demographic. So that works out really well. 

“For me, my goal is to get as many people to 10 referrals as possible. Sure, I’d love everyone to get to 100, but I think 10 is really attainable. I think everyone has ten friends, coworkers, etc.” 

The numbers

“Right now, 225,000 people have at least 1 referral. Out of 1.5 million active readers, that’s 15%. Sure, some have unsubscribed, but the correlation between referring someone and staying active is pretty high. 

“Our Light Roast list (3+ referrals) is close to 80,000. Our Facebook group is approaching 8,000. Not everyone has Facebook and not everyone joins, so that’s probably closer to 10,000 that have 10 referrals. From there, there’s probably a couple hundred with over 100 referrals. 

“The wallet is a newer item. We realized there was a huge drop-off between 10 and 25, so we added it. The coffee mug at 50 referrals is by far our most popular item. But it’s hard to get to 50. 100 is the super-soft crewneck sweatshirt.” 

Until recently, 100 was the max reward. But Morning Brew decided to up the ante with a number so high that only a few people have achieved it. 

*Drumroll, please*

If you refer 1,000 users, Morning Brew will fly you out to visit BrewHQ. “We definitely have some power users. There are a few teachers or professors who actually require students to read Morning Brew. We’ve flown out one superfan who has 3,000 referrals and there’s another in the queue.” 

Conclusion: It’s all about product

But Tyler doesn’t want early-stage entrepreneurs to see this as a growth hack for new products that just aren’t ready yet. “You can’t have a super shitty product and mask it with a growth engine. If it’s not actually solving a problem, if people don’t actually find it valuable and want to share it intrinsically, you can’t just slap a referral engine on top of it and hope it grows.” 

“The most valuable thing we have is brand… It definitely starts with the product. I think solving a problem and providing value is the foundation of everything. If it’s not something you don’t look forward to or enjoy using — or if it’s not solving a problem — it’s hard to vouch for that product in the first place. Building a positive brand experience anywhere along the product roadmap or user experience is definitely the first place to start.”

We want to give a huge shoutout to Tyler from Morning Brew for giving us the data and stories for this article. Go subscribe to Morning Brew for informative daily business news. (Yes, that’s my referral code again. Sneaky!)

Before you hire a developer to build you a referral engine, what other newsletter marketing techniques are you using today to add subscribers? Tell us in the comments!