What Cialdini can teach you about reward marketing and referral programs

Having finally finished Cialdini’s beast of a book: Influence: The Psychology of Persuasion (if anyone needs a draft excluder, you know where to find me!), I turned to think how the principles he identifies can be applied towards reward marketing, and referral programs in particular.

If you’re unfamiliar with his work, what’s particularly interesting about Cialdini is that, unlike most marketing psychologists, rather than carry out tests on students in a University setting, he studied the techniques and tactics commonly used by ‘Compliance Professionals’ to influence behavior and decision-making by consumers. If you wonder what he means by ‘Compliance Professionals’, he means salespeople, marketers, fundraisers and others who have developed practices based on a deep understanding of the psychological principles that drive choice and action. And, what’s more, he learned these techniques by actually enrolling in sales schools to learn directly from the practitioners and by interviewing some of the World’s best salespeople.

Cialdini’s 7 Principles

In short, he lists 7 tactics commonly used by Compliance Professionals which are:

• Reciprocation
• Liking
• Social Proof 
• Authority
• Scarcity
• Commitment and Consistency
• Unity 

Cialdini explains that, although many of these principles are complementary and can work well together, the choice of tactic is often decided by the context of what you want a person to do and by how well that person knows your brand.

Looking at each of these in turn:

Reciprocity

We’ve already written a blog about the psychology of reciprocity, but Compliance Professionals have long understood that we are conditioned to reciprocate when someone offers us a gift or something for free. Perhaps this comes from our ancestors’ survival instincts, such that when a neighbor offered you food you’d feel the need to reciprocate and offer something in return. No doubt driven by the fact that you’d want that neighbor to offer you sustenance again the next time you had nothing to eat!

And what’s really interesting is that we often give back much more in terms of value than we receive. As an example of this principle in action, Cialdini cites a study that found it was easier to sell raffle tickets to people after you first bought them a Coca-Cola. Other common examples include:

• Sending a small monetary gift like a Starbucks card when asking a person to complete a survey increases the likelihood of completion.
• Giving more mints with a restaurant check increases the tip a waiter is likely to receive. 
• Giving free beauty samples or free food samples, like pizza slices or cheese on a stick, in a grocery store increases the likelihood of purchase.
• The famous Tupperware parties which begin with each person being given a free Tupperware product. 

So, if as part of a loyalty or surprise and delight strategy, you’re already sending customers rewards to thank them for being a loyal customer, for upgrading or just because it’s their birthday etc., then this is the perfect time to ask for a referral because not only is this a feelgood moment, by giving the gift you’ve engaged the principle of reciprocity.

You should also think about what other events you can tap into that feelgood factor, such as when you upgrade a customer’s account, give them a Ninja Status or a status recognition as an Ambassador etc. Not all of these need to even cost you money, and status based recognition can work particularly well where, as Cialdini notes, the gift is personalised. 

But you should ask as soon as possible after giving the gift, as Cialdini writes that the desire to repay declines with time.

Hear from Michael Goodbody, Former VP, Head of Marketing & Comms at Robinhood on how stretch targets can work in referral marketing:

You can create this idea of this perceived value of money and on average it might still only cost you five or 10 bucks per referral up to 10 and then $1,000 for the 10th, but the consumer sees it as $1,000 or like a hundred bucks each [referral] and you’re actually paying out five.
Michael Goodbody, Former VP, Head of Marketing & Comms at Robinhood

Liking

Cialdini states that messages are more likely to be successful if the recipient can first be made to feel positively towards the messenger and he explains that one of the tactics used by super car salesman Joe Girard was to send people a simple postcard saying ‘I like you’.

“There is nothing more effective in selling anything then getting customers to believe, really believe, you like them”
Joe Girard, Guinness Book of World Record “Greatest Car Salesman”

Cialdini lists the different ways a brand can get people to like it including:

1. Physical attractiveness – due to ‘halo effects’, we automatically assign favorable traits to goodlooking people like talent, kindness, honesty, agreeableness, trustworthiness and intelligence. And, although these are unconscious associations, studies have shown better looking people earn more, and you’ll have noticed just how many brands are represented by good looking actors. From the perspective of getting your customers to refer, you can imagine how making sure that the program looks nice and is on brand will convey more feelings of liking than some quickly put together agile in-house effort. Appearance matters!

 
Hear from Asya Kuznetsova, Senior Product Manager at Wise as to why referral marketing is the perfect lookalike marketing:


Why Referral is the Perfect Lookalike Marketing | Wise Asya Kuznets...

Why Referral is the Perfect Lookalike Marketing | Wise

Asya Kuznetsova: "The biggest learning is that actually people invite lookalike people."

"The main mistake is that they have the same referral program basically open for everyone."

"Some customers who would generate you more costs than profit."

"Target audiences - the key customers that you want to grow. At Wise's, size we operate almost everywhere in the world, so we have several key Target segments."

"The Baseline is that first people invite lookalike people, and the second one is that your referrals should target only target customers. Otherwise it would not work and you would just shoot at everyone and get almost no-one."


 
2. Similarity – people tend to like people like them, whether that is due to having similar opinions, personality, traits, backgrounds or lifestyles. And studies have shown we’re more  likely to help those who wear similar clothes to us, and people are more likely to purchase a product where the brand name shares the same letters as their own name or even complete a survey if the sender’s name sounds similar to their own. Even just claiming the same values can work! Now we’ve already seen that referral is the perfect lookalike marketing, where high value customers tend to know other high value customers, but from a referral perspective, it makes sense that, if you can segment your customer base, you have different referral programs targeting each segment. So if you wanted to target more young women, your referral landing page could have images of younger women and use language more likely to appeal to them.
3. Compliments – people are just so susceptible to flattery. Studies show that hairdressers who gave more compliments to customers get more tips, and children praised for working hard at school continued to work hard. Using the principle of altercasting means that people praised for being good citizens tend to be more likely to remain good citizens, as they have been given a reputation to live up to. So in the context of referrals, you should celebrate referrers, and particularly top referrers, by telling that they made a smart choice, telling that they’re a top advocate (something for them to live up to by referring more!).

 
Hear from Buyapowa’s Director of Brand, Robin Bresnark as to why mere increased exposure predisposes us to like something:


What is Charles Goetzinger's bag experiment? Robin Bresnark: "Mere...

What is Charles Goetzinger's bag experiment?

Robin Bresnark: "Mere exposure theory.

The more we see something the more we like it.

There's two people of note in those pictures. You got the guy in the middle on the left, and the guy with the big giant black bag over his head and body.

Here's how the experiment went:

One day, this guy known only as 'the Bag' turns up and goes in this class. And the reaction from the other students is not kind:

'Who's the bag?'

'What the hell does he think he's doing?'

It's weird and they're kind of freaked out.

Now the months go by, months and this goes on for months and the mystery student keeps coming to class shrouded in his bag. Turns out contrary to popular belief, familiarity doesn't breed contempt at all, and nor does absence make the heart grow fonder. But gradually his peers reactions turn from hostility to curiosity and eventually to friendship.

That's why repeating a message again and again through more and more channels can work wonders when it comes to marketing. Keep repeating the invitation and even the coldest customers begin to thaw."


 
4. Familiarity/Exposure – our attitude to liking something is influenced by how much we are exposed to it. We discussed the famous Goetzinger’s bag experiment in our recent Referral Codebreakers webinar, but simply put the more an audience is exposed to something the more they like it. Cialdini gives the example of an ad for a camera where more people came to like a camera the more ads they saw, often when they weren’t even aware of having seen the ad. Similarly, the more frequently a person’s face was flashed on screen the more people came to like the person and, from a negative point of view,  fake news becomes more believable the more people are exposed to it. In the context of a referral program this means the more you promote your program across consumer touch points, the more likely they’ll like the idea of referring!
5. Make people think you’re part of the same team – while Cialdini talks about ‘the good cop bad cop routine’ of where the ‘good cop’ tries to convince the suspected criminal that he or she is on their side, or the car salesperson who pretends to battle with the boss to get you a good deal, when it’s just an act, you’ll get more referrals when your customers feel part of the same community. Simply talking to customers using the pronoun ‘we’ and asking them to invite friends to join your community can increase the likelihood of referral. Here giff gaff and Tesla are great examples of brands who created a sense of community and purpose among their customer bases and drove referrals as a result.
6. Association principle – Cialdini shows that sales people who call naming a friend saying ‘John Moore suggested I call you’ have higher success rates. Sales increase in stores when sales signs are placed in the shop window even though there is no sale. People tend to be more likely to like something when they’re eating etc. From a referral point of view, using the name of the referrer throughout the referral journey is something that we’ve seen greatly increases the success rate of referrals.
7. Associating yourself with good news and success. People tend to like people who bring them good news and, just as we know that the ancient Greeks used to kill the bearer of bad news, people don’t like people who bring tales of woe and sorrow. Quite simply, think of moments when you bring people good news, whether they just got an upgrade, or whether the community that they’re a valued part of just reached 1 million members. Those are good times to ask for a referral!
   

Cialdini also states that a powerful motivator is being able to change [a potential customer’s] feelings, counteract them with other feelings, and in this sense just after having solved a problem for your customer is a good time to ask for a referral. Perhaps unsurprisingly, our Referral Codebreakers research found that people were most susceptible to a message to refer after a successful engagement with customer support. 

Social Proof

Social proof is one of the most powerful principles, whereby Cialdini shows how a restaurant was able to substantially increase the sales of a more expensive menu item by simply labelling it ‘the most popular choice’ and how bartenders get higher tips by ‘salting’ their tips jar with a few large notes. In short, social proof is a mental shortcut or judgemental heuristic people use when faced with uncertainty. That’s because, as a general rule we make less mistakes when acting in accordance with the actions of others, that’s unless you’re a lemming of course. 

But social proof actually provides us with a lot of valuable information confirming that an action is:

• Valid – we assume that the most popular choice is the correct one
• Feasible – knowing that a lot of people have done it means it’s achievable
• Socially acceptable – we avoid the stigma of being the odd one out

In the case of a referral program, social proof can act to reduce the psychological barriers to referral and action from the friend by adding statements in communications and throughout the referral journey that:

• You have a great product or service that your friend would like: ‘Join our community of 100k satisfied users – our average satisfaction rating is 4.65/5’
• That it’s socially acceptable to refer – over 10k new customers referred this year

You can encourage more referrals by stating ‘Our average referrer brought in 3 new friends’. And you can dispel doubts by reminding a customer that they too are happy with your product (a good time to ask for a referral is after a good review or NPS!). A recent study also found that customers were 20%-27% more likely to refer if they were reminded that they too were actually referred to the brand. 

Interestingly, where you don’t have social proof, you can get a similar effect by suggesting this is part of a growing trend. 

Authority

Another mental shortcut or judgemental heuristic people use is deferring to authority. People can be influenced by symbols of authority such as scientists wearing lab coats, security guards and even simply people wearing expensive designer clothes. Basically we assume that their authority means that they know more than we do and, similar to social proof, by following the advice of experts we are less likely to make mistakes. But interestingly, it’s not actual authority but the veneer of authority that makes us act. For example, people were found to be more likely to jaywalk after seeing someone in a uniform do the same thing. Ads with actors dressed as scientists are reported to work, even though the audience knows full well it’s an actor.

Interestingly, we’re more convinced by an expert who first admits a weakness. We’ve all heard speeches from motivators who start by telling us about their tough childhoods and business failures before launching into the snake oil they’re trying to sell us. But examples include brands who admit ‘while our set up costs are not the cheapest, you’ll make back more than the difference…’ or like Avis who state ‘We’re #2, we try harder’. Similarly, some negative reviews have been found to make your overall reviews more credible. 

It’s a little more difficult to find an example here related to referrals and reward marketing, other than, similar to social proof, you can use studies and expert evidence throughout the referral journey to convince referrers and their friends that they’re making the right choice.

Scarcity 

Scarcity is a great psychological principle as loss aversion means that people are intensely motivated to avoid losing something, and they are more motivated to avoid losing something that they already have than they are to earn something new. That’s why casinos regularly give jackpot winners free cash, knowing that they’ll lose that and then blow their winnings trying to get that free cash back. 

This works when a customer thinks they have a deal that’s going to be taken away from them. A great example of this is how Revolut uses FOMO, by offering the chance to earn a high referral reward before a date. Then ending the offer and later replacing it with a lower offer, creating a desire to act now before the deal goes away again, or at least a desire to act fast next time the higher reward deal reappears. 

Cialdini talks about how dangling a carrot and then taking it away is so powerful. It’s why people want to watch a film immediately after it’s been banned. Examples of how brands use the principle of scarcity cited by Cialdini include how Booking.com tells you how many people are actively looking at this hotel room deal right now and that there are only X rooms left at this price. Or how Apple deliberately understocks before launch, and how toy firms deliberately understock before Christmas, to create a feeling of scarcity, even though extra stock will be released in a few weeks. 

As evidenced by the Revolut example, the way to do this is to run short term booster campaigns with extra or different rewards that are only available up to a set date, or perhaps only available for the first thousand referrers. 

Commitment and Consistency

People like to act consistently with their past behavior and more when they’ve made a public statement in favour of a brand or an action. In other words, people have a desire to be seen to be consistent with a choice they made or with something they said. 

Examples include voters feeling more sure of their decision after they voted in an election than they did beforehand. Amazon famously offered all its employees a ‘pay to quit’ program, saying it only wanted motivated employees. But the point was, by offering an incentive to leave they got workers who decided to stay to reaffirm their commitment to the brand and increase their motivation to stay. 

Consistency is also another mental short cut which means you don’t have to think too hard about each decision, and you can rely on your System 1 thinking of biases and mental shortcuts rather than your slower and more energy consuming System 2 thinking (Kahneman).  Cialdini even says it can lead us to act contrary to our best interests as ‘people hide inside the walls of consistency to protect themselves from the troublesome consequences of thought.’ He gives the example of toy companies who advertise aggressively before Christmas to get parents to promise to buy a toy for their child, but then deliberately understock then release more stock in the New Year, knowing that parents will feel pressured to act in accordance with their commitment and buy the toy in the New Year. 

In the same way, getting someone to make a public commitment or take a stand on an issue will make them more committed. Examples include getting a testimonial from a client and in an interview situation where the candidate who asks the interviewer what were the reasons they were asked for the interview, will lead the interviewer to focussing on those positives. Charities often use the foot in the door principle of first asking you to sign a petition before making a donation. 

In the same way, once a customer has referred, you should encourage them to refer again, as they will likely see themselves as the kind of person who makes referrals. Also someone who gave you a testimonial or NPS should then be asked to be consistent with their statement and refer friends. 

Unity

The last principle is unity, given that people are more likely to say yes to someone they consider ‘one of them’. Where likeness can turn into liking, as we developed above under the liking section. That’s why armies march together and people like photos that look like them. 

As mentioned above, creating a community and having different programs for different segments of likeminded or similar people can take advantage of this principle. But people also like it when they are required to do something, such as the IKEA effect or the Betty Crocker example of having to beat an egg in the cake mix. From a referral context, this could be as simple as allowing people to write their own referral recommendations. 

Conclusion

Like all marketing, Reward and Referral Marketing Marketing, is based on a foundation of marketing psychology that allows marketers to understand how people think and what motivates them to take action and take action now. The 7 principles listed by Cialdini provide a useful summary of how you can work with these principles to get more referrals and motivate customers to take action. 

Cialdini’s work identifies which principles are more effective for which marketing goal:

• When you’re trying to drive awareness of your brand and build a relationship the key principles are reciprocation, liking and unity
• When trying to reduce uncertainty you should lean on social proof and authority
• And to generate action, the key levers are consistency and scarcity

When you work with a leading enterprise referral platform like Buyapowa, you can be sure that the software has been developed to allow you to take advantage of all these principles to maximize positive outcomes for your brand. If you’d like to know more, please get in touch.