Referral programs can prove to be powerful business game plans that turn your customers into highly effective, personal sales teams. They work by incentivizing your current customer base to become your brand ambassadors.
When planning referral programs, you should target those customers who already love your brand, products, or services. These programs are a way for such customers to share their positive experiences while getting rewarded for doing so.
Effective referral programs can play a big role in driving new customer acquisition. The key is to create the right programs for success. The following guide takes you on a step-by-step process.
Benefits of Referral Programs
Before you create and implement your first effective referral program, it is important to know about the benefits of using this strategy. Some of the most profound reasons are as follows:
i. Cost-Effective New Customer Acquisition
Customer acquisition costs have increased significantly over the past few years. Referral programs assist you in acquiring new customers in a cost-effective manner. It can reduce your ad spend while increasing conversion rates since almost 50% of customers trust brand referrals from their peers more than advertisements.
ii. Improved Brand Loyalty
Over 52% of customers demonstrate brand loyalty by recommending it to their friends, family, and colleagues. Satisfied customers are highly likely to talk about a brand. This can be through word-of-mouth or social media posts. Using referral programs can boost brand loyalty, as it focuses on rewarding such customers for their organic promotion. These programs can, thus, turn satisfied customers into brand advocates and ambassadors.
iii. Growth in Sales & Revenue
Referral programs naturally increase your business’ sales and revenue, as many of the people referred to your brand are highly likely to make a purchase. When you track your referral sales, it can provide valuable insights that can further help you create more lucrative programs to boost sales.
iv. Improved Customer Lifetime Value
Referred customers, who are peers to the customer who referred them, are highly likely to have somewhat similar likes and preferences. This means that there is a good chance they are more likely to tag along with your brand than someone else who just came across your brand by chance. The American Marketing Association reports that a referred customer has at least 16% higher value than a non-referred customer.
Besides, referrals also help create a community around your brand.
Steps for Creating an Effective Referral Program
A well-planned referral program can not only help you draw new customers. It can also strengthen your relationships with your current customers. It is recommended to follow these steps to create effective referral programs:
i. Set Program Objectives
Find out what you want to achieve through your referral program. You may want to improve and expand retention or explore new areas for generating revenue. Besides revenue, you may want to build brand credibility as well. This requires considering and defining your objectives.
Examples of objectives you can pursue include:
- Generating a targeted number of leads/impressions
- Growing your newsletter subscriber list or social media following
- Increasing conversion rate or sales by a certain percentage
You will also have to determine the customer experience KPIs to be tracked. These KPIs will be tied to your goals.
ii. Determine the Rewards
Next, you should determine the rewards and incentives required to encourage your customers to recommend your brand to others. This will require studying your customers, their likes, and preferences. Some common referral program rewards include:
- Coupons
- Discounts
- Gift cards
- Brand merchandise
- Referral points
- Product/service upgrades
- Free trials
- Giveaways
Once the reward has been determined, you should determine who will be getting it. This can be based on a one-sided or two-sided reward system.
- One-Sided Reward System: In this system, you will be rewarding only the referrer. A high-value incentive will be involved here, encouraging your customers to refer your brand to others. However, this will not incentivize the referred customer to join the program or remain loyal.
- Two-Sided Reward System: As the name suggests, both the referrer and the referred person get incentivized. This system can deliver greater value. The engagement is usually high in this case. Both can be rewarded the same or the reward can be customized for each group.
Studies show that 9 in 10 referral programs incentivize both the referrer customer and the referred person who becomes a customer.
When choosing rewards, it is important to keep your budget in mind. Still, it is beneficial to provide a wide range of incentives to attract different types of customers. If you are on a budget, you can consider using any surplus inventory items as rewards
iii. Craft a High-Conversion Referral Program
When crafting your referral program, there should be an alignment between your customer service approach and your campaign’s tone. This is important because the recommendations made by an existing customer are usually a potential customer’s first impression of your brand.
How can you create a great first impression?
- The message should be crystal clear
- The program’s aesthetics must be consistent with your brand’s looks
- Use attention-grabbing headlines to increase the chances of conversion
Use headlines that get customer attention and convince them to sign up for the program. The headline must summarize the entire program in as few words as possible.
Some of the catchy lines can be:
- Earn $20 for every friend you recommend
- Invite your friend and get $15
- Invite a friend and secure free delivery all year round
iv. Create a Flawless Referral & Rewards Process
A simple, easy-to-understand referral process can encourage more customers to join in. Avoid creating a program that doesn’t take their preferences into account or is complicated. Give them multiple options to reach out to others. This can include social media, email, messaging, and others.
Provide all the platform options so that customers can choose one that matches their preferences. For instance, social media platforms such as Instagram are the right options to reach out to the younger generation.
v. Use the Right Channels to Promote Your Referral Program
You will also want to use the right channels to meet your customers and drive successful referrals. You can benefit from customer journey maps for creating promotion strategies and reaching your target audience on their preferred channels.
The most commonly used channels include:
- Social Media: You can share links that lead your customers to your referral program or sign-up page.
- Website: Send out your existing customers to your referral page to access the unique link or code. Create a blog post on the program and share it with your customers and social media followers.
- Email: Include shareable messages and clickable links in your emails about the referral program and the rewards.
You can also use live chat and your IVR software to include info on your referral program. The information can also be mentioned on your invoices, tickets, and receipts. When your customers find different channels to share and sign up for the program, you will be significantly increasing your reach.
You can use limited-period referral rewards or seasonal promotions to create a sense of urgency. When you use the right promotional strategy, you can enhance the effectiveness and reach of your referral campaigns
vi. Review Your Program & Promotion
You should analyze customer data to keep improving your program’s effectiveness. Customer data evaluation can provide you with valuable insights into emerging communication channels, trends, and tools. Make sure to regularly measure different metrics including customer experience to find areas of improvement. When you invest in solutions involving analytics and reporting, your referral program can be refined on a consistent basis.
Tips to Amplify Your Referral Programs
It is further recommended to use the following to amplify your referral programs and improve the conversion rates
i. Offer Giveaways
Freebies draw everyone’s attention. You can give out unsold and overstocked inventory as rewards. If you sell services, you can offer service packages or add-ons to encourage your customers to refer your brand
ii. Run Affiliate Programs
Over 8 in 10 marketers rely on affiliate marketing to improve brand recognition. You can use affiliate marketing to expand your reach. It will require you to enlist the assistance of influencers, marketers, and publishers for lead generation
iii. Run Contests & Sweepstakes
People love a sense of competition and you can include it into your referral strategy by running contests and sweepstakes. As an example, you can initiate a social media contest that gives your current customers the chance to win a reward when they produce the highest number of referrals. Such a strategy attracts new customers while also improving brand recognition.
Conclusion
There is more to a well-planned and executed referral program than creating new customers. It also increases the chances of your existing customers coming back for more. Referred customers are also more likely to be more loyal than those attracted through traditional ads. This is because they begin their journey with a positive view of your business.If you want to build an effective referral program, it takes careful planning and a better understanding of customers. Make sure to set up clear goals, define your audience, and select the right rewards that match their preferences. If you need professional help in creating highly effective referral programs or to develop other marketing campaigns, feel free to contact Clear Imaging, Inc. at (800) 380-6942. You may also send us a message.
Resources:
viral-loops.com/referral-marketing/referral-programs
loyaltylion.com/blog/advantages-disadvantages-referral-programs
blog.propellocloud.com/customer-referral-programme#Building-Launching-an-Effective-Customer
www.zendesk.com/in/blog/customer-referral-program/#
www.ama.org/2019/11/20/maximizing-the-benefits-of-customer-referrals/
financesonline.com/referral-marketing-statistics/
www.womentech.net/blog/title-how-build-successful-referral-program-drives-growth
Data Sources:
www.zendesk.com/in/blog/customer-journey-map/
Image sources
www.careerplug.com/blog/employee-referral-program/
www.friendbuy.com/blog/types-of-referral-rewards-and-incentives-for-referrals
www.referralcandy.com/blog/how-to-promote-your-referral-program
benefits of Referral programs Image
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