Referral Marketing Best Practice (Part 1)

Referral Marketing Best Practice Part 1

When you’ve powered referral marketing programmes for over a hundred of the World’s leading brands and retailers, it’s really difficult to distill all you learned into a short document. That’s why our Referral Marketing Best Practice Guide, at 18 pages, might seem a little daunting. So, to offer you a lighter read, we have distilled some of the key elements into a series of three blog posts, starting here.

As you will see, a lot of what we have written below is common sense, but you might be surprised just how often these principles are forgotten.

Choosing the right software

The first thing to say is that success in referral marketing isn’t just about the software. While choosing the right software is very important, you must also support the programme with the appropriate marketing tactics and assign the right people to look after and nurture your programme, both from launch and throughout its whole lifetime. Otherwise, it may just wither on the vine and be consigned to the graveyard of other good marketing ideas that never got the support and attention they needed.

Despite having just said that it isn’t just about the software, if you don’t have the right referral marketing software to start with, then you’re unlikely to be successful. So, as a first step, these are some of the the key factors you need to consider when choosing your referral marketing solution:

  1. Can you track all different kinds of referrals?
  2. Can you track both online and offline? Particularly, if you want to drive online traffic in-store. Or maybe you don’t want to drive sales immediately, but instead want to track sign ups to mailing lists, app downloads, free trials or other actions? As referral marketing can be used in a number of different ways, your referral marketing software should be capable of tracking all of these actions.

  3. Does your software allow customers to share in all the ways they want to, while complying with all relevant legal requirements?
  4. If your software limits the number of sharing channels that can be used, you’ll likely get less referrals from your programme. Also, if you force your customers to type in their friends’ personally identifiable data, like email addresses, in order to share, then you could be in breach of personal data protection laws like the EU’s GDPR, California’s CCPA, Brazil’s General Data Protection Law and other relevant regulations. So make sure your software allows your customers to share using all their favourite apps and sharing channels while complying with all applicable laws.

  5. Does your software allow you to identify and treat top referrers differently?
  6. Why would you treat all referrers the same way, when often less than 20% of sharers will bring you over 80% of all referred new customers? Your software should be able to identify your super advocates and offer them extra incentives to share again and again.

  7. Are you protected against fraud and self referral?
  8. Unless your software can protect against you against fraud or self referral, you could be literally throwing money out of the window; paying out rewards for products that are later returned, or for bank accounts that are opened but never used etc.

  9. Can you keep your programme fresh?
  10. Unless you update your referral programme from time to time, it’s likely to become stale and boring, and performance will start to drop off. So, being able to update your rewards, incentives, copy and imagery quickly and without fuss, and be able to keep it in line with the look and feel of your website and your other marketing campaigns, is essential.

    Vodafone Refer a Friend

  11. Can you test every element of your programme?
  12. If you are not constantly testing, learning and iterating then you will just be running your referral programme based on assumptions and hunches, probably those of your HIPPO. Make sure your software lets you test different ideas and hypotheses, so you can base decisions on data and evidence.

  13. Can you internationalise your programme?
  14. Even if you are not selling outside your home country today, who’s to say that won’t change in a few years? So your software should be able to cope with different currencies and languages, and even right-to-left writing.

  15. Is your programme responsive on mobile?
  16. When more than half of the sharing can be expected to take place on a mobile phone, it simply isn’t an option to have a programme that isn’t fully responsive across all devices. You can’t compromise on this.

  17. Is it fun?

  18. Does your software allow you to introduce fun elements like gamification, milestone rewards and visualisations of completion? If not there’s a risk that the entire process quickly becomes cold and dry. So, make sure your software allows you to add in some fun elements and gamify to drive increased referrals.

Hopefully you answered yes to all or almost all of the above questions. But if not, we’d love to have a chat with you on how Buyapowa deals with each of these elements.

Amara referral scheme

Think about the incentives and rewards

Once you’ve decided that you’ve the right tools for the job, then you need to think about the incentives and rewards you should offer.

The best place to start is by working backwards from your desired outcome and plot everything out from there. Ask yourself what you really want people’s friends to do. Do you want them to:

  • Make their first purchase?
  • Spend over a certain amount?
  • Purchase specific brands or product types?
  • Purchase in a physical store?
  • Or, where your product is more of a considered purchase, simply get people into your sales funnel by signing up for emails, downloading an app or signing up for a free trial?

Obviously, your software must be able to track all these actions. But, once you’ve decided what you want referred-in customers to do, you can think about the value of that action compared to the effort and/or expense required from your customer and the referred-in friend.

As highlighted by recent research from the Universities of Yale and UC Berkeley, referral rewards are designed to overcome the psychological barriers your customers have; namely that there are other things they could do with their time, and the fear of losing social currency if a recommendation turns out to be bad. So the benefit or reward for your customer must ‘outweigh the cost of talking’. Research from Harvard also found that the incentive for the friend is also important for your customer due to the reputational benefits of rewarding social connections. The Yale research, mentioned above, also pointed out that offering a discounted price or gift with purchase means that there is an opportunity cost of not referring your friend.

Of course, you should also look at what your competition is offering, and also pay attention to what you are offering in different channels. Your refer-a-friend offer is unlikely to be very successful if, for example, it is widely known that you currently have a better deal on offer on a voucher code site.

Overall, we tend to see that almost two thirds of our retail clients use percentage discounts to incentivise new customers to shop. This avoids them having to apply a minimum spend (which sometimes looks ungenerous), and it’s simple to implement with their existing ecommerce technology. Meanwhile, 55% of our clients reward referrers with store credit. Again, it’s easy and practical, plus it has the added benefit of driving repeat purchases from existing customers.

Outside of retail, we see that often cash or cash equivalents, such as Amazon vouchers, are often offered as rewards and incentives by banks, insurers and telecoms companies. Although telecoms and streaming businesses often offer a free month of subscription or an extra month’s free SIM card.

If you’d like to know more about rewards and incentives, we dive more deeply into the subject here.

As we’ll see in the next blog articles, the only sure-fire way to find out what rewards and incentives work is just to keep on testing with your customer base. So be sure to use a platform that lets you test, measure and iterate until you get it right.

So what next?

Well now you’ve made sure you have the right software and have thought about rewards and incentives, next you need to consider eliminating friction points and how you will market your programme, which we look at in Part 2.

If you would like to talk more about any of the topics above, just drop us a line and we will be happy to share what we know.

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