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Why the worst users come from referral programs, free trials, coupons, and gamification at andrewchen

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Incentive programs often don’t perform The people you attract with referral programs, free trials, coupons, and gamification — folks who are “incentivized” as a broad umbrella category — are usually MUCH WORSE than organic ones. Worse LTVs, worse conversion, less engaged, and so on. In a previous life, I headed up Uber’s $300m+/year referral program (“give $5 and get $5”) and learned a ton. Much of the learnings apply to the next wave of gamified consumer apps, web3 games, etc. So why are these users worse? Let’s discuss. When CAC/LTV spreadsheets fail When a new product comes to market, usually the team will measure a baseline set of metrics around lifetime value, etc. if the numbers look good, they might say OK let’s roll out some incentives and get more users like this. Spreadsheets are built, budgets are planned, growth is forecasted, and the new growth project kicks off. The problem is, all of these forms of incentives usually end up attracting a different type of marginal user th

Why the worst users come from referral programs, free trials, coupons, and gamification at andrewchen andrewchen --> Andrew Chen Archives Subscribe · Featured · Recent · The Cold Start Problem 📘 Dear readers, I have moved to Substack and I will be writing here from now on: 👉 andrewchen.substack.com In the meantime, I will leave andrewchen.com up for posterity. Enjoy! Why the worst users come from referral programs, free trials, coupons, and gamification 0 comments --> Above: Many small business figured out the hard way why coupon sites generate worse users Incentive prog

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