Finding the right method to acquire new, valuable customers for your business is hard work. That’s where referral marketing companies come into their own.
More marketing leaders are turning to conversational, trust-based marketing, and continuing to adopt new marketing technology to reach new customers. However, the proven tactic that continues to bring in loyal customers for titans like Dropbox, Slack, Uber and so many more is referral marketing.
Referral programs have helped each of these leading 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 supercharged customer acquisition and growth with the right referral program software and strategy.
Like all marketing programs, referral marketing is most effective when managed efficiently and optimized to attract the right customers. But 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.
(Image source: Buyapowa
Though Koodo Mobile was voted three years in a row the wireless provider with the “Highest customer satisfaction rate” by JD Power & Associates, the telecommunications company’s decision to look at referral marketing was driven by the fact that it was facing ever increasing acquisition costs per new customer. Koodo needed a way to bring in new customers at less cost, all the while keeping their current member base satisfied and happy. So they decided to build a referral program which offered:
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 a return on investment (ROI) of more than 10X in 2019 alone.
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. It worked so well, in fact, that Koodo made referral an integral part of their marketing mix; rolling out regional campaigns across Canada and making it available in different languages to maximize accessibility and engagement.
More about Koodo’s referral program and other telecoms referral schemes can be found here.
(Image source: Buyapowa)
To this day, Elon Musk and Tesla Motors are rarely out of the news. 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 customer satisfaction rate is a staggering 89 out of 100, putting it ahead of all other car manufacturers around the globe. 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. With its resounding success, Tesla closed out Phase 9 of their referral program and introduced a new referral program in March 2019; continuing to make referral a key part of their growth strategy.
Referrer Rewards: Ranked by amount of qualifying referrals (“QRs”), the car manufacturers early referral program ensured Tesla owners were 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 wasn’t available to the public (10 QRs). The first owner to achieve 10 orders in North America, Europe, and Asia received a free Model X SVU.
Referee Rewards: Each Tesla owner can give friends up to 10 US$1,000 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. Since 2019, Tesla’s switched up their referral program to allow successful referrers to earn 1,000 miles (1,500 kilometres) of free Supercharging with the purchase of a new Tesla car by anyone using their referral code. But, if that wasn’t tantalizing enough, Tesla is also giving successful referrers a chance to win a Model Y every month or Roadster supercar every quarter based on the number of successful referrals.
What they did right: Tesla has generated a relentless 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. Their current program not only offers a meaningful reward for each successful referral in the form of free Supercharging, but they cleverly use tiered rewards that drive repeat referrals.
(Image source: Buyapowa)
It’s difficult to find someone who hasn’t heard of Airbnb or even used them themselves. The internet lodging titan that we know today as Airbnb started out when the founders rented out an air mattress in their living room and the rest is history. Now, Airbnb is one of the defacto examples people cite when they think about a startup unicorn.
Referrer Rewards: US$18 per qualifying stay and US$10 per qualifying experience
Referee Rewards: Up to US$46 account credit
Results: In some cases, Airbnb’s referral program increased bookings by over 25%, and their latest version came in even stronger than before, boosting referrals by more than 300%.
What they did right: Their approach was successful for two key reasons: they streamlined the sharing and shopping experience, and leaned into their users’ desire to help, using A/B testing to prove that positioning the reward as a gift to a friend produced better results than a message emphasizing receiving a reward for yourself.
If you want to know more about how using prosocial or friend benefiting rewards can improve the performance of your referral program, then this recent research from Harvard Business School, Olin Business School and the University of California should interest you.
Harry’s Refer a Friend
(Image source: Buyapowa)
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 barbershop in Manhattan. A large part of that 10-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. Supported by a stellar referral program, Harry’s grew into a billion-dollar unicorn and became a household name. More recently, though, they’ve dialed back their referral program to a simple $5 credit each way, abandoning their more high reward program of old for a more stripped version.
(Image source: Buyapowa)
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 products. 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”. While their latest referral program lacks the aggressiveness of that initial scheme; their venture into the world of referral was undoubtedly a fruitful one.
(Image source: Buyapowa)
Evernote has come a long way since their launch in 2008. The note-taking app has collected over 100 million 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.
What they did right: The freemium model, which we’ve talked about before, has been a big success factor for referral programs like Dropbox’s, Uber’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 source: Buyapowa)
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 has 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 rose from US$40 range to over US$60 in early 2018, resulting in an added bonus for successful recipients of share rewards, making the program a win-win for T-Mobile and their referral program’s participants.
What they did right: The highly-differentiated program generated millions of dollars worth in free marketing as a result of the extensive press coverage. And, by diversifying the rewards offered to include actual company stock, rather than a financial incentive, credit or discount; T-Mobile was able to offer something with more unique and special for their referrers and their friends.
The Strategies you can Steal
So you have a great product or 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. A whopping 92% of customers trust recommendations from friends and family above all else, and referral has been shown to reduce the time to close, achieve greater customer lifetime value and improve conversion rates. But these kinds of results are most likely to happen 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 [brand] with their communities online?”. Take a look through your inventory to see if there are low-selling items that could be used as promotional giveaways. 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 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.
First and foremost, however, you should 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, Instagram, 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.
- Internal: 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!
Now, it’s one thing to offer advice on what to do, it’s also crucial to make sure you understand what not to do. In our breakdown of the common pitfalls in referral marketing, we walk you through some of the most common things to watch out for when building and launching a referral program. Consider it essential reading.
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 makes a purchase or signs up with you and they’re excited about what they’ve bought/subscribed to
- 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 (reengagement)
- 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.
Are you interested in launching your own referral program and supercharging your customer acquisition? Reach out to one of our referral experts today.