Learning Hub Product Management Week 4
Week 4 of 7 Completed

Building a Referral Program

In this assignment, you will develop a referral program strategy aimed at growth and reducing customer acquisition costs (CAC).

Week 3 Week 5
Day 1 — Monday

Company Background and Scenario

Done

Start by reading the full assignment. Understand the company, the problem, and what is being asked before anything else.

Assignment Overview

From the Notes — Verbatim
Status
Completed
Week
Week 4
Description

In this assignment, you will develop a referral program strategy aimed at growth and reducing customer acquisition costs (CAC).

Company Background

From the Notes — Verbatim

Disney+ is a popular over-the-top (OTT) streaming platform that offers a vast library of movies, TV shows, and original content.

Scenario

From the Notes — Verbatim

While Disney+ has a strong user base, they have recently noticed a slowdown in user acquisition rates and higher-than-expected customer acquisition costs.

The company recognises the potential of word-of-mouth marketing and the power of referrals in driving user acquisition, growth, and reducing customer acquisition costs.

They believe that by tapping into their existing user base and incentivising them to refer the platform to their social circles, they can effectively acquire new users at a lower cost compared to traditional marketing channels.

Problem Statement

From the Notes — Verbatim

How can Disney+ design and implement an effective referral program that incentivises existing users to invite others to join the platform?

What You Need to Produce

1
Referral Program Strategy Document

A comprehensive strategy covering incentive structure, mechanics, user segments, and success metrics.

2
4 Key Components

Incentive structure, program mechanics, user segment analysis, and key metrics — all addressed in your document.

Day 2 — Tuesday

Study: How to Design a Referral Program

Done
Resource Listed in Notes
Andrew Chen — How to Design a Referral Program

Why Referral Programs Work

Referral programs are one of the most cost-efficient growth mechanisms because they leverage trust. A recommendation from a friend carries more weight than any advertisement. When an existing user refers a new user, the new user arrives with higher intent to stay.

The core logic: your existing users do the acquisition work for you, and you reward them for it — while the cost of the reward is almost always less than the cost of acquiring the same user through paid channels.

The Anatomy of a Referral Program

The Referrer

The existing user who shares. They need a reason to share — a reward that feels worth the social effort. Incentives can be monetary (discounts, credits) or non-monetary (status, exclusive content).

The Referred

The new user who is invited. They need a reason to act on the invitation rather than ignore it. A join-incentive (like a free trial extension or discounted first month) reduces friction significantly.

The Mechanic

The sharing method — unique link, code, or direct invite. Must be frictionless. If sharing requires too many steps, most users will abandon before completing the referral.

The Trigger

When and how does the program surface to the user? After a positive interaction (just watched a great show) is far more effective than a cold prompt at signup.

Incentive Structures to Consider for Disney+

Free Month Credit
Referrer gets 1 free month when referred user subscribes. Classic, easy to understand, high perceived value.
Dual-Sided
Both referrer and referred get a reward. Increases the referred user's motivation to sign up. Higher cost but better conversion.
Exclusive Access
Early access to new shows or exclusive content for top referrers. Non-monetary but high perceived value for Disney fans.
Tiered Rewards
More referrals = bigger rewards. Creates ongoing motivation to keep sharing rather than stopping after the first referral.

Today: Read the Andrew Chen article in full. Pay close attention to the sections on double-sided incentives, viral loops, and referral program mechanics. Tomorrow you will study the Lenny's Newsletter resource on building referrals alongside growth loop theory.

Day 3 — Wednesday

Study: Product Growth and User Segments

Done
Resource Listed in Notes
Lenny's Newsletter — Building a Referrals Program

Product Growth: The Big Picture

Product growth is about sustainable, compounding acquisition. Paid ads scale linearly — spend more, get more users, but stop spending and growth stops. Referral-driven growth is different: each new user can bring in more users, creating a compounding loop.

The Referral Growth Loop

The Referral Growth Loop
Existing User
Sends Referral
New User Joins
Gets Value
Becomes Referrer

User Segment Analysis for Disney+

Not all Disney+ users are equally likely to refer. Understanding segments helps you target the referral program where it will have the greatest impact.

Family Households

High LTV, emotionally connected to Disney content. Likely to refer to other families with children. Best referral incentive: extra screen / profile access or bundled subscription discount.

Young Adults (18–30)

Engaged with Marvel and Star Wars content. High social media activity — more likely to share via social channels. Motivated by status and exclusive content access.

Sports Fans (Disney+ Bundle)

Subscribed for ESPN access alongside Disney+. Referral potential around sports season openers. Price-sensitive — monetary incentives work best.

International Markets

High growth markets (India, Southeast Asia) with strong word-of-mouth culture. Referral programs can be especially effective where paid marketing is expensive or less trusted.

Key Metrics for a Referral Program

  • Referral Rate — percentage of existing users who send at least one referral
  • Conversion Rate — percentage of referred users who actually subscribe
  • CAC via Referral — total referral cost ÷ new subscribers acquired via referrals
  • K-factor — average number of new users each existing user generates (viral coefficient)
  • LTV of Referred Users — do referred users retain longer than non-referred users?

Today: Read the Lenny's Newsletter article. Take note of real examples and what made those referral programs work or fail. Day 4 is full assignment work.

Day 4 — Thursday

Assignment Work — Build the Strategy Document

Done

Assignment work day. Apply everything you studied on Days 2 and 3. Work through all 4 key components of the referral strategy today.

Your Task — From the Notes

From the Notes — Verbatim

Develop a comprehensive referral program strategy for Disney+, addressing the following key components:

  1. Propose an incentive structure for the referral program that motivates existing users to participate and refer new users. Consider different types of incentives and their potential impact on user behaviour and cost-effectiveness.
  2. Outline the mechanics of the referral program, including the referral process, tracking mechanisms, and the user experience for both the referrer and the referred user.
  3. Identify and analyse different user segments within Disney+'s existing user base. Discuss how the referral program can be tailored or targeted to specific segments for maximum effectiveness.
  4. Define key metrics to measure the success of the referral program.

Guidance for Each Section

Component 1 — Incentive Structure

Compare at least two incentive models (e.g., one-sided vs two-sided, monetary vs non-monetary). Justify your choice based on Disney+'s user base and business model. Consider cost per acquisition and what the reward is worth relative to a standard subscription price.

Component 2 — Mechanics

Map the full referral journey: How does a user get a referral link? How do they share it? What does the referred user see? How is the reward tracked and delivered? Think about edge cases: what if the link expires, or the referred user cancels before the trial period ends?

Component 3 — User Segments

Do not treat all Disney+ users as one group. Identify at least 2–3 distinct segments (families, young adults, sports fans, international markets) and explain which segment will be the primary target for the referral program and why.

Component 4 — Key Metrics

Define the metrics that will tell you whether the referral program is working. Include both leading indicators (referral rate, click-through rate on referral links) and lagging indicators (CAC reduction, K-factor, LTV of referred users).

Day 5 — Friday

Finalise Strategy and Submit

Submitted

Full Task — From the Notes

From the Notes — Verbatim

Develop a comprehensive referral program strategy for Disney+, addressing the following key components:

  1. Propose an incentive structure for the referral program that motivates existing users to participate and refer new users. Consider different types of incentives and their potential impact on user behaviour and cost-effectiveness.
  2. Outline the mechanics of the referral program, including the referral process, tracking mechanisms, and the user experience for both the referrer and the referred user.
  3. Identify and analyse different user segments within Disney+'s existing user base. Discuss how the referral program can be tailored or targeted to specific segments for maximum effectiveness.
  4. Define key metrics to measure the success of the referral program.

Submission Guidelines — From the Notes

From the Notes — Verbatim

You can submit the assignment as a link to a document outlining your referral program strategy. Feel free to choose any platform like Notion or Google Docs to create the document.

If you use external data from any source, please mention the source in the assignment.

Please remember that it's more important to attempt and get feedback on the assignment than to strive for perfection and not submit it.

Final Checklist Before Submitting

Incentive structure proposed with rationale for the choice
Program mechanics fully described — referral flow for both referrer and referred
At least 2–3 user segments identified and analysed
Key metrics defined including both leading and lagging indicators
External data sources cited if used
Document shared as a public link
Next: Week 5