Finding the right method to acquire new, valuable customers for your business is hard work.
For this coming year the industry sees marketing leaders turning to personalizing customer journeys, and adopting machine learningto reach new consumers. However the proven tactic that continues to bring in loyal customers for web-behemoths like Dropbox, Slack, and AirBNB is referral marketing.
Referral programs have helped each of these leading online businesses grow by engaging and leveraging their brand’s biggest assets: their customers. What started as great ideas for growing their business became well-executed programs that catapulted their customer growth.
Like all marketing programs, referral marketing is most effective when managed efficiently and optimized to attract the right customers. Building an attractive referral marketing program is only half the battle; ensuring that your marketing actively encourages the referrals — meaning that your loyal customers recommend your business to their friends and family — is the real challenge. Like other marketing programs, you can build it, but that doesn’t necessarily mean that they will come.
Here’s Who Got it Right: Notable Referral Program Examples
These brands have tapped into the perfect blend of understanding their audience, offering rewards that their customers will value, and streamlined user experiences.
Though Koodo Mobile was voted “Highest customer satisfaction rate” for a wireless provider by JD Power & Associates in 2016, the telecommunications company was facing increasing rates to acquire new customers. Koodo needed a way to bring in new customers at less cost, all the while keeping their current member base satisfied and happy. They decided to build a “double-sided” referral program:
Referrer Rewards: $25 off your tab
Referee Rewards: $25 off your first bill
Result: Through their program, Koodo reduced their cost of customer acquisition (CPA) by 167% and brought in almost 75,000 new customers over the past two years.
Note: When Koodo tested doubling their program rewards from $25 to $50, the average number of referrals quintupled overnight.
What they did right: Koodo was able to provide a seamless program experience for their customers through single-sign on and kept their fun, bright branding consistent throughout their program design.
Elon Musk and Tesla Motors are rarely out of the news these days. Tesla is a ubiquitous name in tech and energy circles. Like their namesake, Nikola Tesla, Tesla Motors is futurist, forward thinking and divisive. Though critics have labeled their methods as aggressive and controversial, Tesla’s satisfaction rate is staggering with 97% of Tesla owners saying that their next motor purchase will also be a Tesla. In 2016, Musk capitalized on his customers’ loyalty and launched a referral program which provides a great example of how to reward referrals with something other than pure product discounts.
Referrer Rewards: Ranked by amount of qualifying referrals, Tesla owners are able to obtain an invite to tour Tesla’s factory and attend the grand opening party (5 QRs), then the right to purchase a Founder Series Model X, which is not available to the public (10 QRs). The first owner to achieve 10 orders in North America, Europe, and Asia receive a free Model X SVU.
Referee Rewards: Each Tesla owner can give friends up to 10 $1000 discounts
Result: By Tesla’s second referral program, they were making a return multiple in excess of 42x on every dollar spent towards their referral program, with 25% of their sales in Q4 2015 coming from their referral program.
What they did right: Tesla has spawned a spirit of evangelism around their vehicles. The referral program targeted Tesla owners – who are already ecstatic with the brand and their vehicle’s performance – with rewards that their clientele would find truly valuable: access to their limited edition vehicles and unique experiences.
Musk is now running the electric car giant’s 8th referral program, in each case upping the stakes and rewards for the last run of participants as referrers.
Image via W Concept
W Concept is a leading online retailer for luxury Korean fashion. With a heavy social following, the brand focuses on word-of-mouth referrals through their affiliate, influencer and referral programs to draw in new trendy clientele.
Referrer Rewards: 10% off their next purchase
Referee Rewards: 10% off their first purchase
Results: Within their first month, W Concept’s program generated $20 000 in new sales. Their program is still running, earning thousands of sales from referrals each month.
What they did right: W Concept promoted their program front and center on their homepage, on their newsletter and on their social streams, giving their customers steady exposure to join and make referrals.
Harry’s Refer a Friend
Image via Four Hour Work Week
Harry’s isn’t your average shaving brand. The shave accessory giant boasts a billion dollar subscription service through their e-commerce store and a barber shop in Manhattan. A large part of that 7-figure success has their referral program to thank.
To accumulate buzz about their brand’s launch, Harry’s executed a week-long pre-launch referral program designed to collect the email addresses of as many potential qualified customers as possible. In this great example of a referral program that incorporates other elements of a digital marketing strategy, they offered incremental tangible rewards to those who were willing to refer their friends through email, Facebook or Twitter.
Referrer Rewards: Accumulating rewards: Refer five friends, earn free shave cream. Refer 10 friends, earn a free razor. Refer 25 friends, earn a free premium razor. Refer 50 friends, earn free shaving for a year.
Referee Rewards: 10% off their first purchase.
Results: As the week-long campaign wrapped up, the results surpassed all expectations. They generated 100,000 leads within the first week.
Image via Four Hour Work Week
What they did right: Harry’s being the only non-purchase based reward referral program on the list, it wasn’t difficult to find internet cruisers who were willing to share the brand with their friends in exchange for free product. There’s also something to be said about tangible rewards; in Sujan Patel’s post he notes that “physical product rewards can provide an opportunity to create a concrete connection to your online experience”.
Image via Evernote
Evernote has come a long way since their launch in 2008. The note-taking app has collected over 100 billion users worldwide and a $1 billion valuation with a modest $0 budget for user acquisition. Evernote’s focus has been on creating a great product that their customers love, knowing that word-of-mouth would be their greatest marketing asset. Without spending on SEO or advertising, Evernote’s referral program is primarily responsible for the company’s sizeable growth and financial success.
Referrer Rewards: Earn 10 points for your first three referrals – enough for three months of Premium or 3 GB of additional monthly upload, then whenever a referred friend buys Premium, earn 5 points.
Referee Rewards: A free month of Premium.
Results: Out of the billion users of Evernote, 13% were referred by other users.
What they did right: The freemium model has been successful for referral programs like Dropbox’s, Uber’s and AirBNB’s, and now Evernote’s. Their simply designed program also encourages customers to keep making referrals to sustain their free trial of Premium.
T-Mobile “Stock” Rewards (now T-Mobile Referral Program)
Image via Phone Arena
In 2016, wireless carrier T-Mobile decided to break the referral program mold and offer actual shares in the company in return for referrals. While the program has been quietly discontinued since then, and T-Mobile have returned to offering a more standard $50 MasterCard, the stock reward program generated massive amounts of press for T-Mobile and presented an opportunity for their CEO to promote their referral program example as something truly differentiated and groundbreaking across the wireless industry. Referrers could earn up to 100 shares in T-Mobile. And customers who had been with T-Mobile for more than five years were offered two T-Mobile Shares for every successful referral.
Referrer Rewards: Earn one T-Mobile share for every successful newly activated T-Mobile Line.
Referee Rewards: >One T-Mobile stock after being referred and staying with T-Mobile for at least 15 days.
Results: T-Mobile hasn’t shared the results but the share price has risen from the low $40US range to over $60US in early 2018, resulting in a nice little additional bonus for successful recipients of share rewards.
What they did right: The highly-differentiated program generated millions of dollars worth in free marketing as a result of the extensive press coverage.
The Strategies you can Steal
So you have a great product/service and you’re ready to get started with referral marketing. Learning from the success stories above, here are five ways to ensure that your referral marketing program will be effective in both the short and long term.
The Top 5 Ways to Make Your Referral Marketing Program More Effective
1. Analyze Your Customer
Before you start acquiring new customers, you need to make sure you’re targeting and attracting the right type of customer. Over 65% of marketers say that referral marketing attracts loyal, satisfied and profitable customers. This is most likely to occur when you encourage referrals from your existing loyal, satisfied and profitable customers. Make these customers the primary target of your program that promotes referrals. Targeting profitable customers brings a higher likelihood that you’ll attract more of the same.
2. Design and User Experience is Important
If you have ever tried to sign up for a complicated referral program, you’ll know how important design and user experience is. Simplicity is key and if your referral program is too complex it might falter right out of the gate. To guarantee success, the program must be easy to use; it must be crystal clear to your customers how the program works and what’s in it for them. The most successful referral marketing programs include the following:
- Easy-to-understand rules
- Appropriate benefits and rewards for both the referrer and the referee (see below)
- Simple sign-up methods
- Simple eligibility criteria
- Fast reward payout
3. Select rewards that your customers will value – and that you can afford
Not all businesses can afford cash rewards in return for customer referrals. If you don’t quite yet have the margins that can justify a dollar or percentage discount off your list price, then consider offering different types of “currency” as rewards. Dropbox and Evernote both offered online storage space in return for referrals: a lot cheaper than cash discounts. Tesla offered branded experiences and entries into competitions. If your brand has high-affinity (your customers love you!) then consider sending marketing swag (promotional items). Rob Wormley puts it simply in this Wise Pops post: ask yourself “What are your customers motivated by? What incentives would make them more likely to share your ecommerce store with their communities online?”. Take a look through your inventory to see if there are low-selling items that could be used as promotional give-aways. Not all rewards have to eat into your bottom line.
4. Promote Your Referral Marketing Program
Effective referral marketing programs provide a program that is easy for your best customers to find and discover. All the key touch-points that your customers have with your brand should feature information about the referral program. Your customer-facing staff members can be the most important means to communicate the program, and effective training for these key team members is very important.
In this short post from Gillian Smith, you can learn about how a retail store (in this case – a credit union) can prepare its staff to ensure the greatest success for its referral program.
Integrate mention of the program into your call center scripts and don’t forget to promote your referral program internally; your employees should be your biggest advocates! Be sure to include information about your referral program on the following:
- Website: Promote your referral program on your homepage (including your top navigation and even your footer), customer account page and check-out page.
- Email Communications: Email your customer list and your ambassador list the “refer a friend” offer and include information about your referral program on all email communication.
- Blog: Create a blog and link to the offer. Also look for guest blog opportunities and opportunities to promote the program.
- Newsletters: Don’t forget to include program information in company newsletters and correspondence including receipts, invoices and support tickets.
- Facebook, Twitter and LinkedIn: Announce your program on social media – share and link back to the referral program page.
- PR: Create and issue a press release, and promote the program in conjunction with a newsworthy item.
5. Remarket Your Program
Once your customers have demonstrated an interest in the referral marketing program, and have signed up to participate, it’s important to ensure that they are reminded and engaged. It’s important to look for opportunities to generate additional reminders about the program, and it’s also valuable to periodically run promotions to offer additional incentives for referrers — perhaps adding incremental rewards for referring different product lines or add-ons. Some opportunities to engage brand advocates are:
- When a customer signs up with you and they are excited about working with you
- When a customer starts using your product and/or service, and they look forward to seeing results
- When a customer gets amazing results from your product or service
- When a customer signs up to refer, but hasn’t sent a referral yet
- When a customer has made a referral
- When a customer has had a positive experience with the brand, and has perhaps shared that experience online
- When a customer hasn’t made a referral in a few months
- When a new customer has signed up as a result of the referral program
- When a customer says nice things about your brand
6. Measure and Tweak
As the adage goes, “If it ain’t worth measuring, it ain’t worth doing.” Along with the measurement, comes action. Effective referral marketing systems provide metrics throughout the lifecycle of the program. These metrics report on the program’s performance, providing opportunities for you to fine-tune certain elements of the system to improve your conversion rates. When measuring your referral marketing program, you should look at the following:
- How effective your outbound marketing has been at attracting new members to the program
- How many of your site visitors sign up to become referrers
- How many visitors make referrals, how many referrals they make and through what channels
- How many new customers sign up as a result of your program
- How many members continue to refer over time
- The cost per acquisition of your program
When you set out to plan your referral marketing strategy, the single most important thing to remember is to make it easy for people to share your content and easy for people to refer your product and/or service.
Did we miss any of your favorite referral program examples? Let us know what you learned from the referral marketing greats.