Dropbox was paying up to $388 in ads per customer on a $99/year product. Breakdown of what they did instead (100K to 4M users in 15 months) and how a local service business can copy it

Ad costs keep increasing and most of us just accept it. In 2009, Dropbox was paying up to $388 in paid search to land one customer on a $99/year plan, so they quit and built two sided referral program that cost them pennies. Breakdown below, plus the version that works without millions of users.

What they did: "Invite a friend, and both of you get extra free storage."

From CEO Drew Houston's 2010 "Startup Lessons Learned" talk:

- Signups went up 60% and stayed there

- 35% of daily signups came straight from referrals

- 2.8 million referral invites went out in the 30 days ending April 2010

- Registered users went from 100,000 (Sept 2008) to 4,000,000 (Jan 2010)

Here's the version for a local service business (dentist, HVAC, salon, gym):

1. Pick one thing you already do that costs you little but is worth real money to the client. Dentist: whitening touch-up. HVAC: filter change. Gym: free class.

2. Give the same reward to the client who refers and the new client they bring.

3. Give each client a code. Write it on the receipt or text it.

4. Send it within one hour of their appointment, while they're still happy.

5. Put the offer on your receipt or invoice and say it out loud when you take payment.

6. Every Friday, count new bookings that used a code. Change nothing for 60 days.

Licensed profession? Check your board's rules on referral rewards first.

The client isn't doing you a favor. They're giving a friend a gift.

What would the reward be in your business? Drop your industry below and I'll tell you what I'd offer.