Referral programs exist since ancient times and have been a channel that peoples and companies have used to acquire goods, resources or customers. Traditionally, these programs have a very simple foundation and are easy to implement. Basically, a person receives an incentive after he has referred a product or service to another person and the second person buys the referred product or service. Evidence of these programs we have experienced since we were small and we can now find in all industries, such as car dealers, travel agencies, telecommunications companies, shops, etc.
There are several reasons why this channel has been kept alive for so long and growing every day. The first one is because it works and others are related to our inherent need and desire to share with our people, which is Customer-to-Customer (C2C) marketing. In the past, we used to share with our friends, acquaintances and loved ones in holiday activities in our home, at work and in other random physical locations in which circumstances placed us. So, implementing a referral program was always done in a traditional way (tv, radio, posters, brochures, advertising) and using word of mouth techniques to publicize information.
Referral Marketing Program in the Age of Information
Currently, with the explosion of social media (Facebook, Twitter, LinkedIn, Google +, Pinterest, etc) in the age of information, people share more and every day online. Sharing is not new, it is part of human nature (POS 2014). We share to: bring valuable and entertaining content to others; to define ourselves to others; to grow and nourish our relationships; for personal fulfillment; to spread the word about causes and brands. What has changed are the means and the conditions in which we share, every day we share more using more networks, more people, more often and faster.
This unique situation allows companies to turn their customers into advocates of their products through social media. Implementing a referral program is the ideal channel for this purpose. It is known that the conversion rate of customers acquired through referrals is 3 to 5 times higher than the one in customers acquired by other channels (AMA). Furthermore, the average value of a referred customer is 16% greater than that of a non-referred customer.
Social media are playing an important role in this new space because people are not only sharing information using traditional channels, but each day they share more with friends online using these platforms. Companies now have the opportunity to identify customers, employees and partners with high fidelity and turn them into social advocates. These are going to start promoting their products spontaneously in social media to get a bonus after a valid referral. The way advocates recommend your products or services is sending their fellow recommendations by e-mail, instant messages, personal URLs, tweets, posts, shares, etc. and the way a referral is generated is by monitoring and linking the referred customer with his referrer.
Why Do I need a Referral Marketing Program For My Business?
There are several reasons why every business should implement referral programs to convert its customers, employees and partners into products or services advocates.
- 92% of people rely more on recommendations made by friends and family than those made by any other form of marketing (Nielsen).
- The average value of a referred customer is 16% higher than that of a non-referred customer (AMA).
- Customers can easily share promotional content on Facebook, Twitter, Google +, LinkedIn, Pinterest, via Email, Chat, print media, etc.
- Referred customers have higher retention rate and this difference persists over time (AMA).
- 43% of people are likely to buy a product when they have researched the product on social media (Nielsen).
- Referral programs and affiliate partners can improve your business relationships.
- 81% of U.S. online consumers’ purchase decisions are influenced by their friends’ social media publications (Market Force).
- Referral marketing programs help increase content generation in social media, which helps to improve the position of your website in search engines (SERP). Search engines like Google and Bing have added to their algorithms social signals to show more personalized results.
- Enables to find new agents daily at low-cost, expand your sales team online and get bonuses for each new sale.
- 79% of U.S consumers who liked "Like" a brand on Facebook, did it to receive discounts other incentives (Market Force).
Things to Consider Before Implementing a Referral Marketing Program
Before you start designing your referral program consider these guidelines to ensure that your program has the highest possible conversion.
Keep Things Simple
Your program has to be simple and easy to use. Many companies make the mistake of designing programs with long processes, difficult to execute and complex wording which causes the participants to lose interest and not participate in the referral program.
Design your referral program like if it were for small children, everybody has to be able to understand it quickly. Use pictures, charts, etc. scenarios to illustrate types of bonuses, etc. Allow advocates to share your products and services easily.
Only asks the necessary information to the participant. A referral program with a form with many fields to fill out may discourage participants. Use single sign-on methods to allow customers to register on your program automatically or use social media authentication buttons (such as Facebook, OpenID, etc.).
Involve Everyone in this process: Customers, Employees, Partners, and Affiliates
Since the ultimate goal of the program is to increase referrals customer acquisition, you have to put to work all those interested in helping. Everyone in the company should be able to register for these programs to become a brand advocate.
Many companies when implementing their referral program only consider their customers and, therefore, devote all the time and resources to build a referral program only customer oriented. This is a big mistake, you must create referral programs for each of your workforces.
Create one referral program for your customers, one for employees who are the ones who know better your products and services and one for your partners and affiliates.
Figure 1: identifying your advocate
Figure 1 Shows different workforces that can become advocates when creating your referral programs.
Use all Available Advocate Touchpoints
With the development of social media (Facebook, Twitter, LinkedIn, Pinterest, etc), email and other tracking technologies. Every day new tools that can be used by referral marketing programs arise.
Your referral program should allow advocates make referrals using traditional tools (radio, telephone, tv, business cards, etc) and the new tools that have emerged with the Internet (email, personal URL, links for sharing in social media, QR codes, personal codes, etc). Do not limit the amount to use, use all that make sense for your business.
Create a page that allows your advocates to share their promotional content on Facebook, Twitter, LinkedIn and Pinterest, send personalized emails to your friends, post your personal URL in instantaneous communication (chat, SMSs, etc), get their QR codes for printing on business cards, fliers, billboards, posters, etc. Add the offer a the end of the emails that are sent to users.
Figure 2: touchpoints available to promote your referral program
Figure 2 shows the means you can provide to your advocates to refer your products or services socially.
Notify your advocates when they receive a new bonus. Thank them for participating in the referral program and encourage them to continue participating.
Your loyal advocates, those who defend your brand will notice this detail and be grateful.
Ensure a Transparent Integration Process
For your users, the experience of participating in a referral program has to be very simple. It is very important to keep the program within your domain without redirects to an external site.
Implement local pages to display information related to the program and use tabs and sections to group information in an organized manner. Check our use cases to guide this process.
Let your advocates redeem their bonuses and monitor the growth of their program directly from your website.
Create Fixed or Variable incentives and with Tiers to Attract More Advocates
Depending on the budget for this program, you can design referral programs more or less attractive. Use fixed incentives when you want to give your advocates a fixed amount per each valid referral (Eg $5) and a variable bonus when the bonus depends on the amount of money the user is paying into the system (Eg 10%).
Another alternative is to create multiple tiers per campaign which makes the promotional campaign much more attractive to participants. You can increase the value of the bonus to give depending on the number of valid referrals that the user has made in the program. For example, you can give $5 for the first 5 referrals, $8 from the fifth referral and $10 from the tenth referral on. In this particular case, the program uses 3 tiers to give the bonuses. Figure 3 illustrates an example.
Figure 3: tiered incentive
Remember, the more attractive the campaign the more advocates participate in the program.
Keep Your Referral Program Healthy
Your referral program is constantly evolving according to multiple factors. To maintain healthy your referral program, recruiting new advocates and producing constantly new clients, you should constantly monitor the performance of your program, analyze the data provided and act as needed.
Monitor shares, clicks and referrals participation, bonuses generated, top advocates, etc. and optimize your program as needed. Put your resources in the areas that are really working to get the best of them.
The Referral Program Process at Genius Referrals
A referral program is a process that have five parts. The primary goal of the process is to convert clients into advocates and to increment customer acquisition, turning friends into new clients. First, the company designs and begins to offer the program to their clients, then customers start participating by recommending friends, the company identifies the newly referred clients and give bonification to their advocates. Finally, the program is often optimized by the company as time passes.
1- Company launches a Referral Program
The company creates a referral program using the tools provided by Genius Referrals and start promoting the program to their customers using all available means: email lists, website headers as part of the e-mails, etc. Figure 4 illustrates an example.
Figure 4: refer a friend offer
2- Customers get interested in the offer and participate
Customers with high fidelity start participating in the program. The offer clearly describes the functioning of the program and provides the necessary tools that customers need to promote the product or service in social networks and other media. Figure 5 illustrates an example.
Figure 5: Tools to share a referral program
3- Advocates Share Products and Services with their Friends
Advocates share the offer with friends via Facebook posts, Twitter, LinkedIn and Pinterest, via email, instant messaging and by printing a QR code on business cards, fliers, posters, billboards, etc. Figure 6 shows an example.
Figure 6: shared offer
4- Friends Receive Recommendations
Friends, take advantage of the sale offer and instantly start participating in the referral program, thus becoming new advocates.
5- The Referral Program grows over time
As the offer spreads in social media and among your customers friends, your referral program begins to grow rapidly consequently increasing your pool of customers.
You must monitor and optimize your program to keep it growing and generating new customers. A simple way to ensure this is to create multiple campaigns for your products, you must have a general offer running all the time and also run offers for short periods of time (weekend) to encourage your advocates and prospects. Figure 7 shows an example.
Figure 7: referral participation
At Genius Referrals, our mission is to provide the necessary tools and the ideal integration environment that your company needs to build a referral marketing program easily, at low cost and without having to spend large amounts of resources.
With the continuous growth of information networks and tools available to share. Sharing on the Internet is already part of our culture. Companies have noticed this phenomenon, and increasingly consider implementing referral programs as an essential part of their business to promote their products and thus acquire new prospects and customers, with high acquisition value and fidelity. Besides improving traffic to their Web site and search engine ranking (SERP).