4 Things the Best Customer Referral Programs Have in Common

As a strategy and practice, customer referral marketing relies on the built-in trust factor of human relationships—and that’s what makes it such a, well, trustworthy way to generate warm leads and new sales.

A person looking to purchase, say, accident insurance will often ask family members, friends, and even colleagues, “Do you know of a good agent?” leading someone to hand them a business card or make an introduction over email. With this new connection, the insurance agent writes the new business, earns a new customer—and thanks the referrer with a $25 gift card to a local restaurant. Everybody wins!

It’s no wonder a 2017 Alignable survey reveals 85% of small business owners say word-of-mouth referrals, like the one in this example, are the best way to acquire local customers.

Referral marketing has a place in the marketing plans of companies of all sizes, across industries and global B2B and B2C markets. While customer referral programs vary widely from company to company, the most successful ones share some best practices in common. Let’s take a look:

1. Successful Customer Referral Programs Start with A Goal
All customer referral programs have with the same objective: to get customers to refer new business your way. But it’s not that simple. What are your goals, really?

• To retain customers by keeping them engaged in your growth?
• To gain new customers?
• To build a network of brand advocates for viral marketing?
• To boost revenue?
• To shorten the average deal-closing time?
• To gain trial of your products and services

Let’s turn to the now-famous example of New York-based grooming brand Harry’s pre-launch referral program, which generated 100,000 leads within its first week! The non-purchase based program rewarded people with free product for referring friends to the new service: referring five friends would earn the referrer free shaving cream, 10 referrals earned them a free razor, and so on. Referees, in turn, were rewarded with 10% off their first purchase.

By starting with a goal in mind—in Harry’s case, to spread the word about their new business and build a database of potential customers—it becomes easier to build the nuts and bolts of the program. It helps you decide which customers to target, the process for submitting referrals, and the rewards you offer.

2. Successful Customer Referral Programs “Do the Math”
Referral marketing has strong legs to stand on. Its impressive performance as a lead generator is closely tied with the power of customer ratings and reviews: people value the opinions and recommendations of others. After all, word-of-mouth marketing, reports McKinsey, is the primary factor behind 20% to 50% of all purchasing decisions.

But a formal referral program can only work if a company trusts their satisfied and loyal customers to refer qualified new business their way in the first place. That’s why it’s important to identify which customers (or even vendors and employees) can participate in the program—and make it profitable.

Take T-Mobile, for example. Their small business (with 12 or fewer lines) and individual customers—specifically those with branded postpaid monthly phone plans and active and in-good-standing accounts—get a $50 Prepaid MasterCard® Card for every friend who opens a qualifying account.

The wireless network operator “did the math” to determine which customers are likely to provide leads that actually result in new business; they’re people who have been customers long enough to have accounts in good standing and can be expected to remain long-term customers, especially if they take advantage of the referral program, which allows them to refer up to 100 new accounts each year.
3. Successful Customer Referral Programs Say “Thanks” in Just the Right Way
T-Mobile’s $50 gift card is clearly an incentive that pays off. But arriving at a formula that works requires taking the time to understand your customers and what will motivate them to keep referring business. To figure out what to offer, ask your customers directly. You can also do some research to see what your competitors are doing—and put your own spin on it.

As we’ve seen, free products and gift cards are part of highly successful customer referral programs. But rewards are perceived differently by everyone—and you need to figure out what your customers will value most.

Your customers might be thrilled with marketing swag (e.g. company-branded clothing or office supplies), priority access to your C-suite or marketing team, donations to their favorite charity, or even branded experiences. Tesla, for instance, invites qualifying referrers to attend an official unveiling event.

4. Successful Customer Referral Programs Make it Easy
Since customer referral programs vary in complexity and involve different levels of investment in the sales process, “ease of use” is a relative term! Whether they’re helping you sell $5 mobile apps or a $125,000 car, your brand advocates need to know how to sell your brand and how they will benefit. Give them the tools they need to do so.

Maybe that’s as easy as texting them a URL to a referral’s contact form on your website, or training them via web conference to spot your “perfect” customer. It’s even possible to have an entire department dedicated to supporting the work of your customer referral team.

What’s important is that your customers know what to do when they have a referral to share and the process is convenient and hassle-free. That means your communications—no matter the marketing channel—need to be clear, offer-oriented, and easy to act on. Sounds like good advice for any direct response marketing initiative, doesn’t it?

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