Referral Engineering: Turning Customers into Brand Advocates

Why aren’t people responding to your adverts any more? 

That’s a question increasingly troubling marketers who are ploughing more and more money into digital marketing channels and getting ever-diminishing returns.

It doesn’t make sense. We live in an era where marketing has evolved into a highly sophisticated, technology and data-driven numbers game. 

But there is an explanation. It comes down to trust and relevancy. Consumers increasingly distrust adverts, suspecting advertisers of using intrusive tactics to target them. And they’ve been bombarded with so many low-relevancy messages that they’re inclined to dislike them too.

To reach new customers in this climate, you need an inherently trustworthy and relevant form of marketing. 

That’s where your existing, loyal customers come in. They already trust and like your brand. They’re primed to recommend your brand to those friends and family members who they have good reason to suspect will also like it. And, unlike digital ads, they’re both trusted and liked by their friends and family members. 

But how can you harness your best customers’ natural willingness to recommend your brand? 

In theory, the answer should be referral marketing. But in practice, it often isn’t – here’s why.

The untapped potential of referral 

Referral marketing is about offering customers an incentive for promoting your brand, and their friends an incentive for taking them up on that offer. 

It has the potential to harness your customers’ innate desire to recommend in order to bypass growing consumer distrust for advertising. So why does it so often fail to deliver?   

The problem is, brands don’t see referral as a fully-fledged marketing channel, but as an ad-hoc add-on that can be plugged into other marketing channels and switched on for short-term campaigns. 

As a result, they try to pull it off with simple referral widgets that neither track, collect or adapt in line with customer data – and that data is absolutely essential to making referral work, because the formula for getting referral right differs for every customer. 

The complex psychology of referral 

On one level, the incentive brands offer customers for referring is literal and tangible – whether it’s a discount, coupon, or charitable donation on their behalf. But there’s another, less tangible but more powerful incentive at play here: the incentive of social capital.

Simply put, the person you’re encouraging to refer has to feel like recommending your brand is going to make them look good – and not somehow embarrass them.

Some people will be incentivised to refer by the lure of credibility – they’re the first to find out about your brand and they’re helping their friends discover it too. Others (the super passionate brand fans) want to refer, not because it makes them look cool, but because they want to give your brand a vote of confidence. In both cases, a financial incentive might help – but it’s only the tip of the iceberg. 

That’s why, to make referral work, you need to be able to understand individuals’ motivations for referring, at scale – so you can target them with the right messages at the right time, automatically. 

This demands a scientific approach that generates and draws on data to work out how to make referral attractive for each and every customer (and would-be customer).   

Enter the science of Referral Engineering®

Referral Engineering® is our data-driven approach to referral marketing that enables you to harness your best customers’ positive sentiment at scale – and turn your most loyal customers (and their friends and family members) into your brand’s biggest cheerleaders. 

And it generates some pretty amazing results, such as:

• An average of 8% increase in customer acquisition 
• An average of 11% (average) increase of first order value
• 10x ROI on referral marketing as a channel 

This success is the result of a combination of expertise in referral psychology and the relentless tracking, testing and application of data. 

We call the insights gleaned from referral data Referral Intelligence®, and its applications are widespread. Here are a few examples:

Segment your audiences and get to know individual customers

A/B testing by cohort is at the heart of the science-based Referral Engineering® approach. We test different referral tactics among segmented groups of similar customers to find out what drives the biggest response in different audiences – and to optimise subsequent referral programmes accordingly. 

You can also use these tests to draw conclusions about individual customers that help you to nurture your relationship with them. 

For example, you can learn a lot about customers by finding out what incentives most attract them. Let’s say you test the incentive of a future discount against the incentive of an instantly-acquired free gift. Those that choose the delayed gratification may be indicating they will become more valuable long-term customers.

You can also work out if a customer has a high or low Propensity to Refer® – that is, if they’re likely to refer when offered the chance, or not – and optimise their customer journey accordingly. If they’re ready to refer, you can offer them that option – if they’re not, you can focus on some other tactic for building up their Propensity to Refer®. 

Find out who your most valuable customers are – and get more of them

When you have the visibility of what referral activity is taking place that Referral Engineering® gives you, you can start to identify who your most valuable customers really are. They often look very different to who you currently see as your best customers.

Rather than so-called ‘lifetime value’ (which is based on sales revenue alone), you’ll discover that customers with a high Propensity to Refer® can actually have the greatest ‘extended lifetime value’ to your brand. That’s because they typically bring in new customers to your brand – customers who, having been referred, are themselves 5x more likely to refer.  

Based on this knowledge of which customers bring the most value to your brand, you can create lookalike audiences and refine your non-referral marketing campaigns accordingly. 

By doing this, you can achieve spectacular results. Our partner social agency Nest Performance has implemented Referral Engineering® tactics to help its customers improve targeting. To take one example, SPOKE Menswear increased conversion rates by 65% using lookalike profiling.

Get started on the path to Referral Engineering®

Mention Me (brand advocacy platform) is the only company that can provide you with a true data science-based approach to referral marketing. 

Our platform doesn’t just make tracking, testing and optimising referral easy for your brand – it also makes referral easy for your customers, thanks to its unique Name Share® feature. 

Name Share® takes the hassle out of referral marketing. There’s no more coupons to keep handy or codes to remember. You simply enter the name (or sometimes e-mail address) of the person that made the recommendation at checkout.

We also have a team of Referral Experts to handle the complexity of getting you up and running in as little as 30 days.

To find out more about Referral Engineering®, the applications of Referral Intelligence® and what those first 30 days (and beyond) might look like for your brand, check out our eBook, ‘A Beginner’s Guide to Referral Engineering™’.