How Nuuly Scaled Profitably with Referral Marketing

‍

By Rachel Smith, Partner at Monark & Co.

Nuuly is a subscription-based clothing rental company under the URBN umbrella that launched in 2019 with a clear mission: give customers access to high-quality, fashionable clothing without the commitment of ownership. Similar to Rent the Runway, Nuuly provides subscribers with the ability to select six items each month from a catalog of hundreds of brands—including URBN’s own Anthropologie, Free People, and Urban Outfitters—alongside many independent labels.

Since its inception, Nuuly has remained committed to expanding its product catalog and delivering value to customers. This innovative model, which resonates with sustainability-conscious shoppers, has proven to be highly profitable for URBN (Figure 1).

Key to Nuuly’s growth has been its strategic implementation of a referral program to help build its subscriber base. Powered by Friendbuy, the program transformed Nuuly customers into passionate brand advocates, driving significant subscription growth and establishing Nuuly as a leader in the rental market. 

Figure 1: Nuuly’s rapid subscriber and revenue growth, as reported in their FY25 Q3 investor presentation.

Source: URBN Investor Relations Q3 F’25 Presentation

I was fortunate to be part of Nuuly’s launch team from 2017 to 2020, working alongside a talented group of professionals. In this article, I’ll share insights from Nuuly’s early days, including how we scaled the brand and implemented referral programs that were foundational to Nuuly’s continuing growth.

Nuuly’s Market Entry: Setting the Stage for Growth

Entering the fashion rental market meant overcoming consumer skepticism towards a new way of shopping. We knew we needed amplification beyond traditional marketing. Our launch strategy included building robust models to track the success of every marketing channel from the very beginning. This ensured that every initiative, including the referral program, was aligned with broader business objectives.

Figure 2: An illustrative example of a monthly revenue and channel tracker similar to what Nuuly implemented to manage their market entry strategy (View and download the full spreadsheet template here →).

Nuuly’s Building Blocks for Success

Developing Customer Segments

We classified subscribers into key lifecycle stages - new, retained, inactive, and reactivated - and made assumptions for the daily counts in each stage.

Figure 3: Customer Segmentation Framework for Subscription Businesses (Click here for full-resolution image).

Defined Revenue Models and Assumptions

Nuuly developed detailed models to forecast repeat business, channel growth, and customer behavior. These models informed the allocation of resources to our various marketing channels.

Example: If the average subscriber lifetime is projected at 3.5 months, but subscribers acquired through referrals stay for an average of 6 months, this insight can guide resource allocation—we can justify increased investments in areas such as staffing, promotional incentives, paid marketing, and site or email real estate to amplify its success.

Defined KPIs

To complement the revenue models, we tracked critical metrics from day one, including:

• Gross and net revenue to monitor the impact of returns and cancellations.
• Customer satisfaction (CSAT) to ensure high-quality experiences.
• Retention rates and customer lifetime value (CLV) to validate the effectiveness of marketing channels.

Launching the Referral Program: A Data-Driven Approach

Nuuly recognized from the outset that word-of-mouth referrals would be critical to our growth. We were introducing rental as a concept and asking people to try something totally different – so we knew that friends telling friends would be essential in breaking down barriers and driving adoption.

With this in mind, we launched our referral program within just three months of Nuuly’s debut. We had only a few thousand subscribers—hardly a critical mass—but we understood the value of activating these early adopters into advocates. We integrated the referral program into existing channels like email, CRM touchpoints, and paid campaigns (on Meta, to begin), and we saw an immediate boost in acquisition.

With Friendbuy as the backbone, Nuuly crafted a program that rewarded both referrers and their friends, and maximized word-of-mouth traction by embedding referral opportunities throughout the customer journey.

Referral Program Foundational Strategies:

1. Ease of Access: Referral CTAs were prominently placed to ensure visibility across key customer touchpoints (more on this in the next section).
2. Reward Structure: 
   
   • Competitive incentives motivated customers to share widely.
   • Referred friends always received special treatment, with exclusive offers that were more appealing than standard promotions. 
3. Integrations: Friendbuy’s platform was deeply integrated into Nuuly’s tech stack, enabling personalized experiences across channels and real-time data tracking.

Nuuly's onsite referral experiences enabled subscribers to easily share via email, SMS, social media, or direct links.

 Email Marketing for Tiered Promotion: Refer More, Get More. Customers earned increasing rewards, up to $60 off, by referring multiple friends.

Email Marketing for 2-Month Promotion: Give $30, Get $15. Incentivized subscribers to refer with a compelling offer of $30 off for their friends and $15 off for themselves.

View Nuuly’s full referral program launch assets →

Building Awareness to Drive Referral Growth

Launching a referral program is just the beginning. Ensuring its visibility and relevance requires a thoughtful strategy. Our marketing team understood that program awareness is critical to success, especially given our small initial audience. We developed targeted go-to-market materials for organic social and email campaigns. Concurrently, we integrated referral messaging across all customer touchpoints to maintain long-term visibility and engagement.

Omnipresence Across Touchpoints

Referral CTAs were made visible at critical touchpoints to keep the program top-of-mind:

• Site Footer: A consistent placement to ensure referral visibility on every page.
• My Account Section: Prominent placement in the “My Account” section of the website and app.
• Search Bar Inclusion: Customer queries for “refer a friend” or “referral program” redirected users to the referral page, removing friction for those seeking the program.
• Email Communications: Referral CTAs were included in all operational and marketing emails, ensuring they reached the entire subscriber base regularly.
• Post-Purchase Communications: Emails, app push notifications, and SMS messages highlighted referral opportunities after key customer actions, such as completing a rental.

‍

Figure 4: Checklist of Nuuly’s key touchpoints for referral program visibility across website, CRM, and paid and organic channels.

Driving Engagement through Amplification

We implemented a mix of creative tactics that drove engagement and reach:

• Social Media Outreach: We encouraged customers to share their referral links on Instagram, TikTok, and other platforms, to amplify reach organically.
• Strategic Campaigns: We periodically ran elevated offers for the referral program, tied to marketing moments like Friendsgiving or Galentine’s Day, to spark interest and engagement.
• Incentivizing Virality: We placed no caps on the number of referrals customers could generate, and we encouraged participants to share widely—even on mass-spread platforms like RetailMeNot—knowing that referral acquisition costs were more efficient than traditional paid channels.

We purposefully maintained a steady drumbeat of visibility across our marketing channels, ensuring the referral program remained top-of-mind as our subscriber base grew. By combining strategic campaigns with continuous engagement efforts, we created a sustainable growth engine—empowering both existing customers and new prospects to become advocates for the Nuuly brand.

Impact: Referrals Influenced 25% of All New Customers

One of the most critical discoveries Nuuly made was that referrals influenced at least 25% of all new customers.

• Using advanced attribution models—last-click, first-click, and multi-touch—Nuuly was able to trace how referrals played a role in customer acquisition.
• Referrals were often the first or last touchpoint, but multi-touch analysis revealed that referrals also significantly influenced conversions through other channels such as paid advertising and emails or SMS.  
• By assigning partial credit to the referral channel, we could measure its true impact and align referral strategies with revenue and subscriber goals.

This insight underscored the strategic importance of referrals as a key driver in Nuuly’s marketing mix, and helped guide our company initiatives to prioritize it further.

Unexpected Upside: Referrals Fueled Retention

When we launched Nuuly’s referral program, our goal was achieving cost-efficient customer acquisition. However, it quickly became clear that referrals had an equally significant impact on retention—a gain that was not anticipated. Referred customers weren’t just easier to acquire – they were 'stickier,' becoming some of the most loyal customers with higher retention rates and greater lifetime value.

Figure 5: Referred customers show significantly higher retention rates compared to customers acquired from paid or other digital channels, highlighting referral's powerful impact on customer loyalty. (Illustrative example.)

This insight reshaped Nuuly’s approach to the referral program, which evolved from a purely acquisition-focused initiative into a dynamic growth engine, driving both subscriber growth and customer loyalty. It became a cornerstone of our growth and retention strategies, making the additional promotional incentives for referrals well worth the investment. 

Additional Strategies to Drive Referral Growth

Referral Campaigns Aligned to the Marketing Calendar

Nuuly leveraged seasonal moments and marketing events to create spikes in referral activity. These campaigns were aligned with key moments in our marketing calendar, such as Galentine’s Day, Friendsgiving, New Year’s and quarterly elevated offers.

During these events, referral offers became the focal point of all marketing communications, ensuring maximum visibility.  Campaigns were routinely tested and measured, with insights used to refine future campaigns.

Figure 6: Strategically timed elevated referral offers lead to meaningful spikes in monthly revenue, underscoring the value of aligning referral promotions with key seasonal events. (Illustrative example.)

Ambassador and Influencer Programs

Nuuly’s referral program gained additional traction through the support of ambassadors and influencers. We launched dedicated programs for influencers to share their unique referral links and codes while creating authentic content that resonated with their audiences. 

These influencers became powerful channels in their own right, expanding our reach and contributing significantly to customer acquisition. 

Testing, Personalization, and Optimization

We worked closely with Friendbuy to iterate and improve the program.

• Offer Testing: Nuuly ran A/B tests to optimize rewards. For example, doubling rewards during limited-time campaigns boosted signups without negatively impacting customer acquisition costs (CAC).
• Personalized Messaging: Nuuly sent targeted referral communications based on customer behavior, such as recommending the program to high-satisfaction users and frequent renters.
• Program Evolution: Over time, Nuuly added referral tie-ins to loyalty and retention campaigns, ensuring the program remained relevant.

Summarizing the Impacts of Nuuly’s Referral Program

Nuuly’s innovative referral strategies and customer acquisition models have made it one of the most profitable ventures under URBN’s umbrella, as reported by The Wall Street Journal. By leveraging Friendbuy’s platform and embedding referrals throughout the customer journey, Nuuly achieved transformative results across key metrics:

• Acquisition at Scale: Referrals consistently influenced 25% of new subscribers, underscoring the program’s effectiveness as a scalable acquisition channel. Activating existing customers into advocates created a powerful growth engine.
• Cost Efficiency: Referral-driven customers consistently delivered a lower cost-per-acquisition (CPA) than paid channels like Meta ads. Nuuly was able to reduce its reliance on expensive paid campaigns while achieving comparable—and often superior—growth outcomes.
• Retention and Loyalty: Referred customers consistently demonstrated higher retention rates and lifetime value (CLV) compared to those acquired through other channels. This validated the referral program’s role not only in bringing in new subscribers but also in fostering long-term customer relationships.
• Social Amplification: Referral-driven sharing extended beyond direct customer-to-customer interactions. Social media platforms, strategic campaigns, and influencer collaborations expanded the program’s reach, amplifying Nuuly’s visibility and credibility across a broader audience.

Nuuly's referral program was more than just a tool for customer acquisition—it delivered multifaceted benefits, from driving retention and social amplification to boosting engagement and fueling the continued growth of the brand.

Takeaways for Growth and Retention Leaders

Nuuly’s success provides a blueprint for leaders looking to drive both acquisition and retention through innovative strategies.

‍Track KPIs Early 

Define metrics like referral attribution, retention rates, lifetime value, and cost-per-acquisition (CPA) from the outset. Early tracking ties referral performance to long-term goals, enabling data-driven optimizations. 

Nuuly found that referred customers stayed longer and spent more, justifying larger incentives.

Integrate Referrals Across the Customer Journey 

Achieve omnipresence by embedding referral CTAs at critical touchpoints. Promote the program through email, SMS, and on social media.

Nuuly placed CTAs throughout the site, in emails and SMS, and made the program searchable, ensuring it was accessible and top-of-mind for subscribers.

Encourage Unlimited Sharing to Maximize Reach

Nuuly encouraged customers to share referral links freely, even on platforms like RetailMeNot. Removing caps on referral rewards incentivized enthusiastic participation and amplified reach.

The cost of referral incentives was consistently lower than Nuuly’s paid acquisition costs, enabling a highly efficient and scalable growth strategy.

Special Treatment for Referred Friends

Referred friends always enjoyed exclusive offers that were more appealing than Nuuly’s standard promotions.

This strategy boosted conversion rates, with referred friends becoming some of our most loyal customers, staying longer and contributing to higher retention rates.

Align Referrals with the Marketing Calendar

Strategically tie referral campaigns to seasonal events and quarterly promotions to amplify reach, boost performance, and maintain steady engagement.

Nuuly’s campaigns during Galentine’s Day, BFCM, and other key moments such as double-credit weekends drove notable spikes in engagement and conversions. 

Leverage Technology to Scale Referrals 

Use a robust platform to streamline referral program management, optimize performance with actionable insights, and enable your marketing team to run dynamic campaigns.

Powered by Friendbuy, referrals contributed to 25% of Nuuly’s customer acquisition, with referred customers becoming some of our most loyal and profitable – turning the referral program into a truly reliable growth engine.

Conclusion

Nuuly’s referral program has been a cornerstone of its success, driving revenue, profitability, and long-term customer growth. Their success demonstrates the value of referral marketing as a strategic channel and a reliable growth engine. With platforms like Friendbuy, any brand can harness the power of word-of-mouth to achieve measurable, scalable results.