How to Create a Successful Customer Referral Program?
Referral marketing generates from 3 to 5 times higher conversion rates than any other marketing channel. The success of referral programs comes from our natural tendency to trust word-of-mouth much more than any other promotion form. It also delves into the inner desire of peer validation that we all share. In short, people would rather have a friend explain to them why they need to check out a business, rather than listen to the business talk about itself (duh).
Nielsen's report proves that the recommendation is the most trusted for customers sitting on the fence. According to the statistics, as many as 92% of customers trust their friends’ advice, 77% of customers are willing to buy a product or use services recommended by someone they know; 83% of clients are eager to recommend, but only 29% do.
Referrals are low-hanging juicy fruit for your business. But how do you create a referral program that works?
What is a referral program?
"Reference marketing is an organized form of promoting products or services through customers to their friends."
A referral program is nothing more than a recommendation of a given product to another person. Let’s assume that you have an account in a bank with an active referral program. You can recommend this or a similar banking product offered under the program to a friend or a close family member. In exchange, the bank pays an appropriate bonus or award both to the person who took advantage of the recommendation and to its current customer who recommended the product, that is, sold it to other customers.
The above scenario is an example of a double-sided referral program in which both parties get rewarded. If this doesn’t suit your business goal, you can also launch a one-sided referral program in which only one party (the referrer or the referee) gets a reward.
How to make your referral program a blazing success?
Coming up with a referral program that will bring the expected results doesn't have to be complicated. There are various tricks to help you successfully convince undecided customers. Here are some of them:
Great customer experience is not enough
If you stop at that, not even 30% of satisfied customers will share the experience with their friends and family. It would be a colossal waste, right? So, let the referral incentives do wonders for your referral program. Incentives such as coupons, gift card credits, loyalty points, or free items will motivate customers to spread the word about your brand. More than 50% of people are likely to recommend a company if offered an incentive in exchange. And 39% of consumers claim that incentives such as discount coupons, free items, or gift cards significantly increase their chances of recommending a brand.
Referral programs are all about conversion
Referral programs aren't about recommendations – they are about conversions. The bottom line in every referral program is to convert visitors into paying and satisfied customers.
Assuming that you already have recommendations, where are your booming conversion rates? Suppose more than 90% of people trust in their friends’ opinions more than in any other form of advertisement, and only 74% decide to purchase for the same reason (recommendation). What happens with the remaining 20%?
These are only examples of numbers that present a gap between the number of recommended customers and the final number of referral acquisitions. In the real-life of a traditional referral program, this gap can get and usually gets much broader.
Read on to see three tested techniques for upgrading your referral marketing and turning more recommendations into conversion growth.
Offer double-sided benefits
During a double-sided referral campaign, the incentive is offered to both the referrer and their friend. For example, your customer gets 15% off the next purchase and a gift card for a friend with $10 to spend in-store. Why this approach works?
- Your customers are motivated to spread the word by word-of-mouth.
- It’s a chance to endow friends or family with real value carried by a gift card or coupon code.
- With an incentive in hand, referred customers are more likely to follow the word-of-mouth.
Gamify your referral program
Run a program that is fun for customers. Gamification is no longer a marketing embellishment. It’s a proven technique for keeping customers engaged along the way.
Multi-level programs reward customers according to the number of referred customers. Thanks to this, clients won't stop at just a single recommendation. Rewards are like levels in the game. With every new acquisition, a customer gets better compensation.
- Make rewards a surprise.
- Inform customers at the very beginning about the program rules and reward schema.
- Put a time limit on every incentive.
Create referral groups
Each customer is going to be motivated by different referral reward – there is no one-size-fits-all strategy here. Various promotions with attractive incentives may activate dormant users and show you clues for improving reward schema.
- Run rapid flash-sales for referrers. For example, if you introduce your friend tomorrow, you'll get 50% off your order.
- Launch a gift card campaign with a predefined balance to spend for friends and family of your customers. By adding a short time frame, you can count on a fast conversion spike.
- Create social contests for customers and their friends, reward both sides for social shares or other activity within your profile.
- Offer product-specific deals based on order history or cross-selling. Such personalized campaigns help you to exceed customer expectations and build loyalty.
Spread the word yourself
Referral marketing is all about open and honest communication. If you want to succeed with a referral program, you also need to make sure that you not only tell customers about the referral program, but that the rules of the campaign are transparent, fair, and straightforward.
Here is what you can do to make sure that customer won’t miss your referral program next time they visit your website:
- Train the sales staff to pass the information to customers at the points of sale.
- If you run a website, you should advertise your referral program on the main page and a dedicated landing page.
- Create save-worthy images and catchy tag lines to promote your referral scheme on your social media channels.
- If you have access to customers’ e-mails and explicit permission to contact them for marketing communication, inform them about your referral program via a dedicated email campaign.
There are many ways to boost the number of customers joining your referral program. Only with extensive user research, you will find a referral strategy that’s right for you.
Turn more happy customers into conversion growth