Do’s and Don'ts of gamifying your referral programme

So, you want a refer-a-friend programme that goes viral (don’t we all); and you’ve heard that one of the ways to do that is gamification.  

But what does gamification really mean in the context of referral?  And knowing that referral is tricky to get right, how can you avoid the embarrassment of creating a gamification plan that actually does the opposite - depress the performance of your programme?

How do you get gamification right?

Gamification is commonly defined as:  the application of typical elements of game playing (e.g. point scoring, competition with others).  The hope is that it will encourage greater engagement with a referral programme (more sharing).

You could spend a lot of time and resources devising a gamification system for your referral programme with points, group actions and competitions but we don’t advise sinking money or planning into developing a complicated system until you’ve tried a few simple experiments and you have a good idea of what will really work with your customer base.  

We’ve written a guide about experimenting with your referral programme.  You can download it for more information. 

After all, referral is one of the most psychologically complex customer acquisition channels.  It draws heavily on how both your customers and their friends feel about your brand.  The risk is that a well regarded brand can come up with a gamification mechanism so clunky that it actually depresses referral performance rather than enhancing it.

So, how do you know you have all the elements right?

A simple way to do this is to use your content management system and AB testing and segmentation principles.   We’ll take a look at three examples some of our clients have experimented with over the past year and we’ll share the good and bad points from each one.

Example 1:  A competition at a lingerie brand

Earlier this year we ran a competition for one of our clients who specialises in ladies lingerie.  We created a bespoke look and feel using the Mention Me content management system and they drove just over 50k people to it using various email promotion points.  

The competition mechanism was for existing customers to ask friends to sign up to be a VIP and also give them 20% off their first order.  In exchange the referrer was entered into a draw to win a £250 gift card.

So, was this competition incentive effective in driving referral?

Looking across several stages of the referral funnel we see different results:

• Customers shared the competition offer 3x more often than they shared the normal refer-a-friend offer.   The number of times each person who shared the offer did so was also higher for the competition test group.  It rose from an average of 1.4 shares per sharer to 1.9 shares per sharer.

• Further down the funnel the competition was less effective.  The number of referred friends who went on to become new customers was actually heavily depressed in the segment who saw the competition.   This is likely because the call to action was split (make a first purchase AND sign-up to become a VIP).

• And what about the second call to action?  This was actually highly successful.  500 customers joined the VIP programme as a result.

Lesson from this experiment:  Be careful with layering of incentives in a competition (e.g. get 20% off AND become a VIP).  This can sometimes create unexpected results.  Customers can become confused when presented with more than one action so be careful to incentivise the right behaviour!

Example 2: High street fashion retailer incentivises multiple referrals

We helped a well-known high street fashion retailer run an experimental campaign earlier this autumn.  The goal was to encourage their happy customers to refer repeatedly.  

The marketing team had already run several experiments to measure the base rate of sharing amongst their customers under different incentive types like: free shipping, 10% off and £20 off; and they knew their customers normally shared with between an average of 1.3 and 1.5 friends.  

The team devised an innovative competition mechanism to test whether they could increase the share rate: every referral would be another entry into a competition.  The prize draw was compelling - a generous shopping spree PLUS a luxury camera.

So, what happened next?  Once again the results at each stage of the funnel were different:

• The percentage of customers willing to share increased dramatically - more than doubling during the period of the competition.

• However, the number of times each customer shared did not increase as much as was anticipated:  From an average of 1.3 to 1.5 times per customer up to 1.7 per customer.  

This is likely because the average order value for this retailer is quite high.  The more considered the purchase the harder it is to think of who might be interested in receiving it.  This acts as a natural cap on referring behaviour which gamification alone probably can’t fix.

• It was a different matter towards the latter stage of the funnel.  Referee conversion was steady.  The brand were happy to use their referral channel to amplify the wider competition entry list and deemed the initiative a success.

Lesson from this experiment: Be realistic about how many repeat referrals your brand can achieve.  This is linked to many factors including: your AOV, the length of your purchase cycle, whether your product is an impulse buy and the demographic of your target customer.  Just adding a gamification mechanism without considering the core dynamics of the product probably won't yield the desired results.     

Example 3:  Communal incentives at a beauty brand

This famous beauty brand wanted to measure how effective a communal reward would be at encouraging groups of friends to engage.  

This mechanism differed from the first two discussed in above in that it explicitly stated a double referral would be required (refer two or more friends) to be eligible for a reward.

• The rate of sharing increased, but only by a tiny margin.  Perhaps explicitly stating ‘refer 2 friends’ was already too much of a barrier for customers?  The brand followed-up with other AB tests and found that it was actually much easier to increase the rate of sharing through other changes: for example by adjusting which social media channels they offered for sharing.  

• Further down the funnel the rate of purchase by the friends who had been referred stayed very strong.  

This brand kept their copy very simple and didn’t mention the communal incentives to their referees.  They focused the new customers on a simple message:  you get a free product with your first purchase.

Our hypothesis was that a tangible and desirable free product would be much more motivating to a new customer.  Especially when teamed up with a photo of the freebie, this technique proved very effective.

Lesson from this experiment:  Asking up front for a specific number of referrals can create a barrier to referral.  Better to use a tiered rewards system, like the one offered by Mention Me.  This way customers can keep referring OR opt-out and claim their reward immediately - whichever suits them better.  

In Summary

Adding a bit of gamification is a nice way to spice up your referral programme. But remember that no two customer bases are the same.  The techniques that work for one customer demographic might not be suitable for another.  Here’s our key takeaways for making a success of gamification:

• Be clear about the behaviour you want from customers - don’t let complex gamification mechanisms confuse them.
• Be realistic about how many repeat referrals you can reasonably ask your customers for.  Imagine yourself in your customer's’ shoes.  How many friends might you be able to refer?
• Don’t create barriers to referral.  This might stop your happy customers from referring even once.  Better to offer a tiered rewards system which allows customers to ‘cash out’ their reward at any level.

Above all before investing your business's resources in a specific gamification plan, test a few options to ensure you offer something that genuinely resonates with your customers and encourages the behaviour you want.

After all, the customer is king.