Referral marketing can deliver “stunning profits” for your company, according to a study published a few years ago in the Harvard Business Review.
The study found that referred customers for a bank are 18 percent more loyal and 16 percent more profitable than non-referred customers.
Banks aren’t the only types of company that have benefitted from referral programs.
DropBox, the online file sharing service, is considered one of the most successful referral programs of all time. The company’s referral program helped DropBox grow from 100,000 to 4 million users in less than 18 months.
Is Your Referral Program Missing the Mark?
Despite these tantalizing numbers, your referral marketing program may not be delivering desired results.
This checklist of five referral marketing best practices will help you determine if you’re following referral marketing best practices:
1. Are you promoting your referral program effectively?
Like most marketing programs, the success of your referral marketing campaign depends a lot on effective promotion.
Are you using all of the promotion tools available to boost awareness of your referral marketing program and invite people to refer friends?
Here’s a list of 10 ways and places you can leverage to promote your referral program. How many of these are you using?
1. Dedicated emails
2. Email newsletters
3. Reminders including footers in other emails
4. Banners and buttons on your website
5. Social outreach via your Facebook, Twitter, LinkedIn, plus other social channels
6. In-product reminders. Invision is a good example of a company that does this well. It seems like about every 10 times I log in to Invision, I get a request to refer friends.
7. Paid media including Facebook custom audiences
8. Messages from all customer-facing employees like account managers plus your business partners to promote the program.
9. Invitations to referral friends in post-purchase messages like Thank You pages
10. Create a contest or sweepstakes. TiVo generated over 100,000 referral actions in a referral sweepstake managed and powered by Zuberance. http://zuberance.com/case-studies/
2. Is your referral reward and/or incentive compelling?
Rewards and incentives boost referral results but only if they’re compelling. Here’s what I mean by “compelling.”
· Valuable: The rewards and incentives are viewed as valuable by your potential referrers and prospects. By the way, valuable doesn’t always mean money. DropBox gave referrers and their referred friends free storage.
· Relevant: Your rewards and incentives should reflect the price of your offering. Tesla gave referrers $1,000 for each referred-in customer. That may seem like a lot. But the average price for a Tesla is about $70,000.
· Timely: There should be adequate time for referrers and referred friends to promote your offer and receive incentives and rewards. This is especially the case for considered purchase decisions like travel. For example, a referral reward of $500 off for a trip to Europe if you book and take your trip in the next 30 days doesn’t make a lot of sense. That is, unless you’re on the run from the law.
3. Are you inviting everyone to refer friends?
Referral programs shouldn’t be limited to current customers and Advocates. Are you inviting all of these types of people to refer friends to you?
· Current customers
· Past customers
Invite Detractors to Refer Friends?
We’re often asked this question: Should we invite Detractors (people who respond 0-6 to the 0-10 likely to recommend question) to refer friends?
You probably don’t want to send referral offers to customers who responded 1 or 2 to the 0-10 question. It may just irritate them more.
However, you may want to invite customers in the middle range of the Detractor category -- like 3-6 – to participate in the referral program.
Keep in mind that the Net Promoter scale is unforgiving. Only customers who answer 9 or 10 (highly likely to recommend) are considered Promoters. Many Passives and even some Detractors would refer friends especially if there is a compelling incentive.
4. Are you making it easy for referrers?
I’m an advocate of Bill.com, the online bill paying service. But I’m not an Advocate of the user experience of Bill.com’s referral program.
Bill.com does a good job of promoting the referral program on the home page of its website. The “refer a friend” call to action is right there in the upper right-hand corner of the site.
But the referral form doesn’t follow best practices:
· It only gives me one way to refer friends
· There is no social sharing capability
· I must put my friend’s phone number on the form
· I can only refer one friend at a time
Check it out for yourself: www.bill.com and let me know what you think.
Review your user experience for referrers and referred friends. Making it easy is super-important.
5. Are you personalizing the referral experience?
Lastly, here are several ways you can personalize the referral experience. Are you using all of these:
· Putting the referrer’s name in the subject line of the email to the friend. Example: “Rob has an offer to share with you”
· Putting the referred friend’s name in the body of the email. Example: “Debbie, I recommend this product to you.”
· Enabling referrers to choose from a couple or three offers to share with friends.
If You Don’t Succeed at First…
You’d love to have the kind of success that DropBox did. Who wouldn’t?
Truth is, very few referral programs achieve success immediately. Here are the key questions to ask yourself:
1. Are you carefully analyzing data from every element of the referral program flow and user experience? Where are the “drop off points” occurring? Are certain types of your customers participating at a higher rate in the program than others? Why?
2. Have you tested other referral rewards and incentives? I know of brands who tried over a dozen different rewards and incentives before finding the right formula. Don’t over-react. Give rewards and incentives adequate testing time.
be patient and persistent
Your customers are inundated by marketing messages – about 5,000 each day – including referral offers from other vendors. Ongoing promotion is critical if you’re going to break through this communications clutter.
Feel free to reach out to me at firstname.lastname@example.org if you’d like to discuss your referral program.