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Psychology of referral: what really motivates customers to refer a friend

Andy Cockburn
By Andy Cockburn — January 16, 2020 -

The secret behind every successful referral is making customers feel they have more to gain than lose. In the first of this three-part series on the psychology of referral, we’ll explore this concept of social capital versus social risk and how it influences your customers' buying decisions. 

Read on to learn:

  • Why the decision to recommend is often driven more by a desire for recognition and belonging than a financial reward
  • Why it's key to build confidence in the social benefits of recommending your brand
  • The questions in a customer’s head that you’ll need to answer to create a successful scheme.


We're born to be social

"More than features, more than benefits, we are driven to become a member in good standing of the tribe. We want to be respected by those we aspire to connect with, we want to know what we ought to do to be part of that circle."  - Seth Godin

Human beings are inherently social; a craving for social connection is hardwired into our psychology. This is just as true today as it was thousands of years ago. The emotional reward of feeling part of “our tribe” is irresistible and we’ll gladly accept the risks involved in social actions to obtain it.

But there’s a limit. If the the risk of not receiving a positive response to a social action feels higher than the potential reward, reluctance kicks in. We’re more inclined to stay quiet.

At the heart of this social dynamic is one key element: trust.

Do I trust this?

When we weigh up whether to do a social action, the following internal narrative occurs (whether we know it or not):

How large is the risk of my action being socially ignored or rejected? How confident am I that it will be socially recognised and rewarded?

This same psychological dynamic is at play in referral marketing. Recommending a product or service to friends is an act of social belonging, reciprocity and trust.

At Mention Me, we help brands build quality, long-term relationships with their customers. Our referral programmes focuses not only on finding the right financial incentive, but also on understanding the power of the social reward.  

Our in-depth knowledge of the key psychological enablers and barriers of referral is rooted in working with 400+ brands. We use a metaphor of balloons and weights to describe the psychology behind a customer’s decision-making. Let’s explore this in more detail (or you can check out our guide to the psychology of referral here).

Psychological balloons and weights

Two key factors increase the chances of a customer committing to a referral programme. These are the psychological balloons.

On the other side, two key factors decrease the chances of a successful referral. We call these psychological weights.

The more you can inflate the psychological balloons for your customers and lighten the psychological weights, the more likely customers are to refer your brand.

Screenshot 2020-01-29 at 09.40.34

Read on to understand more about each of these concepts.

Referrer incentive: do I really want this?

Incentives have to hit the customer’s sweet spot and be something they genuinely want.

You can experiment with offering different rewards, such as discounts, third party gift vouchers or loyalty points, to find that one that's most effective. Generally, discounts tend to perform well, but every customer base is different. Start with a hypothesis about which offers work for your audience, then continuously A/B test to refine and optimise that offer for conversion.

Effort required: how easy is it to get this reward?

Effort is a barrier to commitment. The easier you make it for customers to get your offer, the more likely they are to do so.

Creating a frictionless user experience is key. How many steps do customers need to complete to sign up? Are each of these steps absolutely necessary? Streamline your process as much as possible.

Social capital: will this make me look good?

Even more than incentives and a smooth experience, social capital is the absolute key to successful referral campaigns. Make your customers feel confident about looking good and getting a reward, and you'll reap results.

It all comes down to instilling and reinforcing — via your referral campaign's copy, design and positioning  — feelings such as:

  • My friends will love this product/service
  • My friends will be impressed that I know this brand
  • My friends will perceive me as knowledgeable and ahead of the trend
  • My friends will appreciate my generosity (via the reward they’ll receive), rather than my self interest (via the reward I’ll receive).


Social risk: will this be received negatively?

Social risk weighs down your conversion rate. If your customers feel the risk of recommending your brand outweighs the reward, they won't do it. 

Social risk is characterised by feelings of reluctance and tension. This includes feeling such as:

  • My friends will see this as self-serving and I don’t want to be seen as profiting from them
  • I won’t look cool sharing this 
  • I’m worried this will make me look like a spammer
  • I don’t want to be judged as the cheapskate “special offer” person.


Key takeaways

In summary:

  • The attraction of refer-a-friend-programmes is not only financial; they tap into a much deeper human need for social recognition and belonging
  • To convince customers to share a referral offer, brands need to understand how to instil trust and belief in its social benefits
  • Companies that succeed at referral marketing hit their customers’ sweet spot by presenting enticing rewards with compelling messaging that instills a sense of increased social capital
  • Social capital is the most influential psychological trigger to referral success - don't overlook it!

Companies are too often laser-focused on the mechanics of the incentive itself and on creating a seamless user journey around it. They miss out on the “heart and soul” of the offer: the emotion-fuelled psychological factors that really convince customers to share it with their friends.

Remember: more than benefits, more than features, we are driven to become a member in good standing of the tribe.

So how can you make sure your refer-a-friend campaigns achieve that?

Good question — our next two posts in the series will focus in on some of the specifics of the psychology of referral, explaining how to frame and embed your campaign’s messaging in the principles of the psychology of persuasion, positive reinforcement and compelling calls to action.

Watch this space...

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