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I'm thinking of implementing the following referral code scheme to sell my software:

  • Anybody can obtain a referral code. They just provide an email and I send them the code.
  • With that they can recommend the software to their friend, etc.
  • Each time someone buy a license using a referral code, I give 10% of this license to the referrer
  • They can do that as many times as they want

What do you think? Can you see any potential problem with this scheme? Do you think it will work?

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"Each time someone buy a license using a referral code, I give 10% to the referrer" - 10% of what? The price of the original license bought by the referrer, or that of the new one(s)? –  Péter Török Aug 12 '11 at 9:42
    
That of the new one (I'm going to update my question). –  this.lau_ Aug 12 '11 at 9:43
    
like a pyramid scheme? –  oenone Aug 12 '11 at 11:05
    
@oenone, I'm not sure if it's a joke or not, but no it's not a pyramid scheme. –  this.lau_ Aug 13 '11 at 6:16
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closed as off topic by Mark Trapp Jan 21 '12 at 2:15

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2 Answers

up vote 1 down vote accepted

Assuming you have a system to email the codes, and you have the ability to terminate a codes activity I think it will work fine.

Potential problems: At what point would you pay out? If your product is only $20, you don't want to send $2 payments.

There probably are legal issues beyond this, however if its a fairly small potential audience I think you'd be ok.

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I see two problems, both manageable.

First, people may spam for the referral fees.

Second, it may make reviews of your product meaningless. If I see a positive view of the product, and the reviewer pushes me to use their referral code when I buy the product, I won't trust the review. Presumably, the reason you're doing the referral scheme is to get referrals, but if people develop a negative bias to referrals of your product (because the referrer expects a financial benefit) then more referrals may not be a good thing.

The first problem is much less of a problem if this is a niche product. There's no point in spamming ads for a program that analyzes crosstalk on printed circuit boards. The second problem is much less of a problem if your program really is a solid, useful product.

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Thanks for these considerations. As suggested by Jonno, I'll make sure I can terminate a code in case something suspicious happens, but I don't think it would be spammed because it's a software that a user either needs or doesn't need (indeed it's probably a niche product). On the other hand, I wouldn't want an idiot to do it anyway and associate my app with spamming, so I'll make sure I can act if it happens. I'd be less worried about the second point, if a blogger or journalist do that, they are probably not very trusted in the first place so I guess it won't really matter to me. –  this.lau_ Aug 13 '11 at 6:22
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