Referral Marketing Strategies: Turning Customers into Advocates
Read time: 7 mins
Think of referral as a funnel — just like the customer journey funnel you use for your other acquisition channels. Picture it this way: at the starting line of the funnel, you’ve got all those awesome clients who’ve already bought from you. And at the finish line? Newcomers referred by your loyal fans.
Now then, a proper referral programme is like the turbocharger for every step of this funnel. It’s all about fine-tuning each stage to make sure you’re getting the most referrals possible. You want that funnel to be like a well-oiled machine, smoothly guiding your customers from “I bought this” to “Hey, you should totally check this out!”
After breaking your referral customer journeys down, you can start thinking about making improvements. One effective method is to integrate your programme with referral marketing tools such as personalisation-oriented Ometria, which allows you to tailor your efforts to the preferences and behaviours of individual customers.
But what’s the key to making it all work? The short answer is, a good referral marketing strategy.
Key Components of a Successful Referral Programme
A well-designed referral programme is built on a foundation of three components, which we’ll refer to as the “3 P’s of Referral”: Practicalities, Psychology and Promotion. Let’s delve into each of these to gain a better idea of what it takes to create an effective referral programme that not only brings in new customers but also makes the existing ones stick to your brand.
The first crucial element to consider when developing a customer referral programme is the practical side of things. This aspect focuses on the tangible, real-world factors that can make or break your referral initiative.
Do You Deliver a Worthy Product or Service?
Before you even think about implementing a referral programme, you must ensure that your product or service is top-notch. The success of your programme largely depends on the satisfaction of your existing customers. People are more likely to refer their friends and family to your business if they genuinely believe in the quality and value of what you offer.
Take a moment to assess your product or service. Is it meeting or exceeding the expectations of your customers? If not, it’s essential to spot and address any issues before launching a referral programme.
How Do Your Customers Like to Communicate?
Understanding your customer base is crucial when creating a successful referral programme. One key aspect of this understanding is knowing how your customers prefer to communicate. Are they active on social media? Do they prefer email or face-to-face interactions?
Tailoring your referral programme to align with your customers’ communication preferences can significantly increase its effectiveness. For example, if your customers are active on social media, consider implementing a referral system that integrates seamlessly with the most popular platforms.
How Does Your Offer Compare to Competing Ones?
Another vital practical consideration is the competitive landscape. It’s essential to evaluate how your referral offer stacks up against what your rivals are providing. Are you offering discounts or incentives that are attractive enough to motivate your customers to refer others?
In a world saturated with customer referral programmes and discounts, yours must stand out. The offer should be compelling enough to inspire action but not so excessive that it harms your bottom line. Striking the right balance in this “discounting environment” is crucial for the success of your referral programme.
At its core, a referral programme is about tapping into the psychology of social interaction. When someone refers a friend to your business, they take a social risk and pledge their social capital. This means they are putting their reputation on the line by recommending your product or service to others.
To make your referral programme truly successful, you must consider the social risks involved. Ensure that the act of referring is perceived positively by your customers. For example, rewarding both the referrer and the referee can boost the social capital of your customers, making them more likely to participate in the programme.
The final component of a successful referral programme is promotion. How and when you promote your referral programme plays a significant role in its effectiveness.
Referral campaign promotion should be strategically timed for maximum impact. The point of greatest customer delight is often immediately after a purchase, but the specific timing can vary depending on your offering.
If your business provides immediate value and satisfaction, then of course, promoting the referral programme right after purchase can capitalise on the customer’s positive experience. However, if your product or service involves a longer-term commitment or requires time for the customer to see the benefits, you might want to consider timing the promotion accordingly.
Segmentation Strategies for Targeting Advocates
Strategically breaking down your customers and giving your online referral marketing programme an A/B test is like digging for treasure in your customer engagement strategy.
Believe it or not, A/B testing can boost your referral programme’s performance by up to 80%, and that’s quite a big deal.
Start with the basics. Segment your customers based on what matters most to your business. If you’re all about propelling repeat purchases, slice and dice your list by order numbers. But if you’re more into increasing revenues, group them by average order value.
Once you’ve got your customer segmentation sorted, pick what you want to test first. Referral incentives are a popular starting point. Something as simple as comparing a fixed-sum reward to a percentage discount can be an eye-opener. You might be surprised; maybe your customers prefer smaller discounts when referring friends, as was the case with one award-winning airport lounge provider.
Remember, it’s a journey, and every little test can take you closer to the treasure chest of customer advocacy.
Optimising the Customer Experience for Advocacy
For starters, you need to inform your customers about your referral programme. We recommend an incremental approach, taking off with a limited number of touchpoints at the onset of the programme and gradually intensifying promotion as you gain insights into what resonates most with your customer base.
Next, empower your customers with the necessary tools to facilitate sharing. The methods may vary based on the demographics and preferences of your brand’s audience. Email is a conventional and effective means, but the evolving landscape of social channels caters to diverse consumer segments. That said, Mention Me clients have the option to select from various channels based on their customers’ preferences. Furthermore, we have introduced a unique “Share By Name” functionality. Given that referrals often occur within natural conversations, this feature enables customers to claim their introductory offer simply by using their name, creating a seamless experience. You need to constantly experiment with various sharing channels to determine the most suitable ones for your brand.
Let’s also talk about incentives. While just one component of a referral programme, they can have significant influence, making it vital to experiment and identify the encouragement that resonates best with your customer base. Testing may appear straightforward, but ensuring consistent offer messaging to different customer segments can prove to be more complex, particularly when the offer is redeemed months later.
A referral marketing platform equipped with A/B testing by cohort (such as Mention Me) is pivotal in maximising results. Beyond assessing the type of incentive, it is essential to explore how the rewards are distributed between the referring customer and their friend. Factors such as whether displaying the referrer’s offer first or offering a larger reward to the referrer as opposed to their friend can influence outcomes. Psychological factors come into play, and only rigorous testing can help you discover what works best for your brand.
As systematic A/B tests have been found to lead to a significant increase in referrals — often ranging from 3 to 7 times the initial referral rate within the first six months — we have put up a list of referral marketing ideas to experiment with.
Measuring and Analysing Referral Programme Performance
A robust referral marketing platform plays a pivotal role in referral tracking. First and foremost, it provides you with the ability to monitor who has initiated referrals and the nature of the incentives they have received. Additionally, it assists in evaluating the most effective combinations of incentives and promotional placements.
The Mention Me client portal offers a convenient interface, granting you immediate access to these vital insights. Our data-driven approach empowers you to engage in referral programme management, ensuring your initiative operates at its peak performance and continues to be a valuable asset in your marketing strategy.
It’s important to underscore that referral is a notably cost-efficient marketing channel, and here are some compelling statistics to drive the point home:
- Referred customers tend to spend 25% more than non-referred customers, offering a substantial boost to your revenue.
- They are three times more likely to refer onwards, effectively creating a self-sustaining cycle of referrals.
- They typically have a 100% higher LTV (also known as CLTV, or customer lifetime value).
- Referring customers are more inclined to make repeat purchases, which strengthens the bond between your brand and your loyal clientele.
These benefits not only make referral marketing systems a cost-effective strategy but also a highly rewarding one that can significantly impact the growth and sustainability of your business.
And that’s how referral marketing works its magic. It’s all about capturing and nurturing customer advocacy, keeping the buzz alive and recognising those who spread the word. We at Mention Me team up with brands big and small to seize these convos and transform them into fully fledged referral programmes. If that resonates with you, you’re more than welcome to book a free demo with one of our specialists who’ll walk you through everything related to our referral platform.