You’ve heard of the boiling frog theory, right? Put a frog in boiling water and it’ll jump right out. But put it in tepid water, then slowly bring that water to the boil, and Mr Frog will happily sit there until he’s cooked to death.
Utter nonsense, of course. Put a frog anywhere and it’ll jump out – that’s just what frogs do – but, as a metaphor, the boiling frog theory’s pretty helpful. Because, as people, we act like boiling frogs all the time: unaware that the circumstances surrounding us are getting seriously perilous, but failing to do anything about it until it’s too late.
And that’s exactly what’s happening to Digital Marketing right now. The water’s been getting steadily hotter and hotter for years now, as old tactics like SEO, PPC, affiliate and social are generating worse and worse results. But no one’s jumping. You’re not jumping. And you absolutely should.
Specifically, you need to jump towards referral marketing and add a first-class refer-a-friend programme to your marketing mix – and quickly. Here’s six reasons why:
- Your average cost for acquiring a new customer is rocketing. CPA varies wildly between industries – it can be as low as $10 for retail and as high as $350 for banking or telecoms – but one thing’s consistent: that cost has risen about 60% over the past two years. Meanwhile, lifetime value remains static at best, meaning that your margins are being squeezed to the point of crisis. Here at Buyapowa, our clients’ cutting-edge referral marketing programmes drive down CPAs by an average of 80%, swinging the overall customer journey right back into the black. If you’re finding that new customers cost more to acquire than they’re worth, you absolutely need to catch up with the likes of Vodafone, boohoo and Expedia by launching a referral programme. And fast.
- Those old acquisition channels? They’re bringing in entirely the wrong kind of customer: disloyal deal-hunters who’ll happily checkout with you one time, but never answer your calls (or CRM emails) when you try to turn that one-night-stand into a long-lasting relationship. But that’s completely reversed when it comes to referral: because it’s not a banner ad or a short-term deal that gets the customer interested – it’s one of their actual friends – loyalty comes as part of the package. In fact, referred-in friends tend to shop 1.5x as often, while the customers who introduce them are themselves 32% more likely to shop in the first six months after making a successful referral.
- And loyalty’s not the only benefit. Referred-in customers are also much more likely to convert and, when they do, they tend to spend significantly more than customers acquired by more traditional channels. Here at Buyapowa, our clients – including the likes of Zalando, L’Occitane and Sprint – enjoy an average boost of 7.7x when it comes to conversion rates, while their average order values are boosted by approximately 50%.
- Your customers are demanding it. According to the Ivy League data-scientists at the Wharton School of Business, 83% of customers want to refer their friends to their favourite brands and services. But, incredibly, 87% of brands still don’t let them. That’s a risky strategy because, when a customer who’s full of goodwill and energy is denied the opportunity to refer their friends, all that advocacy and potential new business is quickly turned into bitterness and disappointment.
- Referral marketing’s come a long, long way from the days of Uber and Dropbox – whose once-defining programmes are beginning to look sorely out of date. Advances in technology mean its now possible to offer omnichannel referrals, so your customers’ friends can transact online, on mobile, over the phone or even in person – all while maintaining the vital tracking that underpins the referral process. Meanwhile, next gen features like intelligent rewards are becoming increasingly commonplace, allowing smart brands like The AA, Three and BT to offer different rewards and incentives depending on the type of product or service purchased, or even the demographic / behavioural segments of the referrer and their friends. So, even if you are running a referral programme, it’s time to ask yourself whether it’s doing everything it possibly can… and, if not, why not?
- Don’t tell our CFO, but referral can be incredibly inexpensive – providing you do it properly. Some brands make the critical error of trying to develop the necessary technology in-house. Airbnb, for example, poured thousands of man-hours and 30,000 lines of code into building their programme, only to see it become embarrassingly out-dated and legally suspect within a few years (we’re guessing they haven’t gotten round to reading the GDPR legislation yet). Meanwhile, brands who think smart and outsource their programmes to the experts typically achieve a 10x ROI within the first six months – making it something of a no-brainer.
And that final point is key: there’s a load of reasons why you need to start doing referral marketing. Seriously. You need to. But there’s just as many reasons why you need to do it properly. Because, just like SEO, PPC, affiliate and social – the tools you’ve been using but are starting to fail – referral only yields scalable results if you do it right. And the quickest, most affordable way to do that is to work with people who know this stuff inside out. No names, but we’ll just leave this get in touch link right here…