Have you been aching lately to give referral marketing a go? Or maybe you know that your products and services are being recommended, but you’d like to have access to more information about what’s going on and promote them further?
We completely understand. According to research, such as that done by the guys at Hinge as described in their fantastic book “Inside the Buyer’s Brain” (grab it for free upon registration), it quickly becomes apparent that referrals deserve more of your attention. To quote:
“We wanted to understand how buyers go about searching for the help they need. Where do they look when they want to find a new firm? In our research, we heard the same response again and again: More than 70% of buyers ask a friend or colleague for a recommendation.” (emphasis added)
Extole, who are experts in referral marketing, also make it quite clear in their 2015 book “Referral Marketing Best Practices”:
“Referral marketing is one of your most effective options. It's the third channel alongside SEO and SEM, and it reaches people who those channels can’t. Instead of waiting for people to search for your brand, it proactively reaches high-quality potential customers through people they trust: their friends who already know about you.
Referred customers have higher NPS scores than customers who come through other channels, along with high LTVs. They’re also more likely to share referrals themselves, which means a referral marketing creates a self-sustaining flywheel effect.” (emphasis added)
One year on, in their 2016 publication “Referral Marketing Best Practices”, they nail it down with plain and powerful numbers which emerged from the findings of their research:
“Referred customers are:
- 18% less likely to churn
- 25% more profitable
- 20% higher AOV each year
- 25% higher LTV”
All in all, the message is clear and universal for businesses of all shapes and sizes: referral marketing is one of the most effective marketing techniques. If you’re not running a referral campaign right now, I urge you to run some experiments right away.
In this post, we’ll show you how to achieve great referrals; you’ll see how a simple referral program can be introduced into your environment without overburdening your developers, thanks to an API-first approach to marketing campaign implementation.
Disclaimer: throughout this post, we will be reviewing our own product: Voucherify, as well as its latest referral campaign features.
What should a referral campaign look like and how would you implement it?
A basic referral campaign you might want to start with could be just a simple formula, such as “recommend 10 friends and you both get 25% off the next purchase”.
To do this, you need to put a mechanism in place that will help you identify customers of yours who bring in new customers – the Referrers – as well as those new customers that the Referrers brought in – the Referees. Then, once you have this information, the mechanism needs to provide both groups with 25% discount vouchers.
For this to work, you will need individual referral codes for your existing customers. You send these codes out to your customers and they give them away to their friends, who will then enter the codes upon making a purchase. As soon as you receive an order with one of the codes, you will be able to catch the referral and reward both the Referrer and the Referee as planned.
At this point you may face a dilemma: You’re most likely already running an environment that covers your e-commerce, CRM, and marketing channels - and you’d like to have referrals integrated into it. But on the other hand, it’s hard to justify putting too much development effort into what is basically just an experiment, and this one sounds like it could easily get tricky during development due to multiple integration points.
Thankfully, you can skip the headache using Voucherify; it not only provides you and your team with a way to run a referral experiment quickly but also to do this in a way that is already integrated into your environment, without any development heavy lifting. Here’s how.
Roll up your sleeves and get to work…
To start, Voucherify comes with a nice web GUI that you can use to set up a referral campaign.
Once you go into Campaigns and add a new “Referral program”, you can specify the details in just a few steps.
First, you define how to reward your Referees. Here, you can choose from the many types of incentives Voucherify works with, such as vouchers, coupons or gift cards. For the sake of this example, we’ll choose a simple 25% discount voucher.
Next, you get to choose what the codes that you’re going to send out to your referrers will look like. Each of these codes is essentially a bunch of letters and numbers and you can use any mixture of fixed characters here, as well as placeholders for characters that Voucherify will automatically generate for you to distinguish individual codes and achieve the required fine-grained tracking of referrals.
Next, you are given the option to specify under what circumstances your referees are rewarded. For instance, you may want to reward only new customers who place an order for $100 or more – a very handy option if you plan on devising a more nuanced campaign. In this example, however, we’ll skip this step, as we have planned for no such limitations.
Finally, you are given the chance to introduce similar limitations on rewards granted to referrers. You can specify to which customer segment (newly created or previously configured) you’d like to distribute referral codes – and what type of rewards the referrers are to receive in return for their successful referrals. In our example, we chose to distribute the codes to everyone who has attracted 10 new customers, and a 25% discount voucher was the reward offered.
All that’s left to do then is… roll it out, with a little help from your developers.
At this point, you are ready to run the campaign. To do this, you’ll need three things:
Firstly, you’ll need your ensure your customer data is present in Voucherify; so that it knows who to distribute the codes to. You can import customer data on your own, using a bog-standard CSV file. Any CRM you are working with can export a list for you in this format which means getting your hands on the data should be hassle-free. The only thing you’ll need to make sure of is that the data contains everything that Voucherify needs to work with. This is easily achievable with the use of Excel, especially as everything you need to do is carefully described in Voucherify docs.
If you have more development time for this, there’s also a convenient API that you can use to reflect your customer data in Voucherify and keep it consistent with your CRM. This approach has the benefit of scale and pays off quickly when you start working with more referral experiments, keeping your total experiment cost low.
Having migrated the customer data, you’ll need to put something into place that will validate the codes upon checkout: a way for your customers to enter a referral code, and then a bit of code that will pass that code on to Voucherify.
Voucherify makes this much easier than it seems, it’s designed for plug and play. For a web-based checkout, it provides a ready-made widget that your devs can embed in no time that will handle all the necessary input and backend interaction and send back a signal when a code is validated. For other channels, there is a well-documented API your devs can work with that makes it just as simple.
This, again, will only have to be done once. All referral campaigns that you run afterwards can reuse the integration that your devs put into place at this point.
Finally, you’ll need to send out the codes. This is specific to the channels that you work with. Voucherify provides a good API for generating the codes and sending them out, e.g. using MailChimp. Some code work will be necessary here, but once again, we’ve made sure to keep it brief for your devs – and, as usual, once you have publishing infrastructure in place, you can reuse it later.
And that’s it! All that’s left to do is sit back, relax, munch on some popcorn and await the results.
Discover how well it works
Ok, so the codes are out. Now you’ll want to know if people are actually using them as well as how many new customers the campaign is generating.
If you fancy carrying out a quick experiment like the one in our example, Voucherify’s got you covered. In addition to the mechanism for collecting referrals, it also provides you with a dashboard that you can use to visualize and analyze them. All you need to do is go to the “Campaigns” tab, select your referral campaign and check out the redemption history. This will give you a comprehensive view of all customers that have used your referral codes as well as details of their transactions.
If you’re looking for a speedy means by which to check if your campaign is gaining traction, there’s no need to look any further. Still, should you wish to analyze the data in more detail, you can always make use of the built-in data export functionality which presents you with all the campaign history data and can be used either in Excel or your BI environment.
…and react when it doesn’t
Once you take a closer look at the data, you may find that not all of your referral sources are equal. Regardless of your target group, it is not impossible, or even uncommon, to find sources of poor quality referrals. For example, some users may repeatedly bring in new customers who make low-value purchases just to get a discount voucher.
Clearly, this kind of behavior can significantly harm the efficiency of your campaign but don’t despair! You’re armed with a weapon with which you can fight back.
With Voucherify, you can protect your campaign by blocking customers that you suspect are trying to exploit it. All you need to do is invalidate their referral codes. I’m sure you’ll agree that it doesn’t get any simpler than that.
In this post, we’ve shown you how to run a basic experiment for a referral campaign. Voucherify will make it easy for you to run it as a one-off, but where it becomes really powerful is for keeping multiple campaigns in sync across promotions and business environments.
The key to unlocking this power is integration with your existing environment of CRM, distribution tools, etc. This is especially important when you are already running a tailored environment that allows you to experiment with marketing campaigns and scale them quickly and cheaply.
Voucherify is designed with an API first mindset, exactly for the purpose of lightweight and seamless integration into such environments. This guarantees that not only will you find it helpful, but also the developers on your team will appreciate the time savings, and those savings will quickly start accumulating into a much lower total cost of running and maintaining referral campaigns.
In the next post, we will continue on the topic of referral campaigns, focusing on the finer details of integration and getting the most out of the API. Make sure to check it out.
Voucherify is, however, not just a tool for referral campaigns. It will do voucher, coupon, and gift card campaigns. It will allow you to reuse the rewards you define, such as coupons or gift cards, across campaigns. And, most importantly, it will give you low-level API-first access to everything it supports, so that you can integrate it into any kind of software environment and support any marketing scenario. Make sure to check out all the functionality we offer, there’s plenty to choose from.