There has been a lot written about refer-a-friend and what will and won't work when a company is trying to encourage their customers to share with their friends. If you were to sum it all up in one sentence it would probably be something like this:

"In order for a referral to happen, it has to be beneficial to the relationship between the referrer and their friend."

When it comes down to it, friendships are way more important to people than discounts or cashback. How our friends perceive us is important to us and very few people will be willing to risk how they are perceived by their friends for the sake of a a small amount of money. The key then is to make sure that the recommendation is likely to be well received by the friend. We want the recommending friend to receive appreciation rather than scorn. There are ways that the refer-a-friend scheme can help with this and we'll write more about how you do this in a future blog post on optimising the referral funnel.

So if its all about friendship and relationships, why is Mention Me helping companies incentivise referral with discounts and money? Well, because if you get everything else right - so that the customer feels like they are giving something that they're friends will appreciate - then discounts and rewards can help. Research from the Journal of Marketing shows that referral programs perform best when they include a special offer or discount to friends.1 Rewards can act as a sweetner and as an incentive to remember to share. To not only share a site that we think our friends will like but also to offer a discount because we're an insider feels like it will enhance our friends' perception of us. Similarly, it only then feels right if you're referring the business that you should also receive something. And there's a far higher chance that you'll remember to share the site in the first place if you know you'll be rewarded for it (in addition to the appreciation they'll receive from their friend!).

References

1. Ryu, G., Feick, L., “A Penny for your Thoughts: Referral Reward Programs and Referral Likelihood,” Journal of Marketing, January 2007