Referral marketing programs are one of the most effective ways to acquire new customers. Research shows that people are 4x more likely to make a purchase after being referred by a friend. Moreover, customers who have been referred also have a 37% higher retention rate than those acquired via other channels. As customer acquisition costs keep increasing, more and more marketers are turning to referral marketing as another high-value channel in their marketing mix.
Many brands rely on referral programs to attract new customers and increase average customer lifetime value (CLV). Customers that connect with you through referral are typically a better fit for your company and far less likely to churn —this shouldn’t come as a surprise. People tend to refer products to their friends only when they know their friends are searching for such a product, or are at least open to considering it.
Now that you’re aware of the benefits of a great referral program, how can you create one that works for your brand and your customers? In this post, we’ll discuss the primary step in creating a strong referral marketing program.
To help motivate customers to share the positive experiences they had with your brand with their network, you need to make this as easy and enticing for them as possible. To do that, you need to understand what your ideal customer profile is and how to target those customers effectively.
Ask yourself the following questions:
Use the incentives they are most likely to enjoy — such as vouchers, cash, discounts, or store gifts. While cash rewards are frequently cited as the most desirable type of incentive across industries, you need to look closely at your customer data to understand if that applies to your customer base as well.
It is important to review your data on your best-selling products or services. If you’re already using incentives, keep track of which ones perform the best and for what type of customer segment. Then make a strategic decision and select what product you’d like to put forward. Will you choose the cash cow and increase the sales more? Do you have some old inventory stock you want to dispose of, or maybe you have some products that underperform and might benefit from some extra attention? Or perhaps a newly launched product? This is a strategic choice that should align with your company goals, so be sure you know what is the most important for your baseline.
For example, Lebara’s open referral program allowed even non-customers to refer their products, while the two-fold incentives rewarded both the referrer and the referred friend. Furthermore, Single-Sign-On authentication eliminated the need for user registration and boosted program engagement. Referral programs became a key growth driver for their online marketing and sales channels. The results speak for themselves: 18% visit to conversion rate, while 15% of successful referrers generate two or more new customer sales with the referral program.
To better understand your customers and how to target them, there is no better way than actually talking to them. Run customer surveys and interviews every twelve months.
When it comes to interviews or focus groups, you can already begin to put the incentives to use. Offer a small gift, such as an Amazon gift card, in exchange for 45 minutes of their time for a one-on-one interview. This gives you enough time to establish a deep enough rapport to find out what will drive them to refer more people to you.
Moreover, surveys can help enrich the data you collect from your customer interviews. Try to keep surveys short — no more than 5-6 questions to increase your completion rate. You should also share customer surveys at the right moment. The best moments to ask your customers for such a favor are moments of high intent. For example: right after your customer has downloaded a free resource, made a purchase on your site, or after receiving something from you. This makes them more likely to be generous and share their thoughts with you.
Once you’ve learned what your ideal customer profile is and how to target your customers effectively, you’ll need to set specific goals for your referral marketing programs. Stay tuned for the next blog post that will discuss just that!
Want to find out how Aklamio can help make your referral program a success? Reach out to us here.
May 20, 2022
May 17, 2022