Think Referral System … not Referral Automation

Referral Systems

What’s a Referral System?

A Referral System is the means by which you get existing happy customers to advocate on behalf of your brand and encourage their friends, family and colleagues to also become customers. The difference between a simple referral and referral system, is that by planning how you can identify and use each contact point with happy customers to get them referring again and again, you can create a virtuous cycle of referrals.

In this article, we explain why you need to think about creating a Referral System for your business, which shouldn’t be confused with Referral Automation, as we explain below. In other words, this is how you engineer your business to ensure that each new customer can bring additional value to your brand beyond just the initial purchase price.

As explained in the image below from General Assembly, based on the well known McKinsey Consumer Decision Journey, the customer loyalty loop consists of not just getting your customers to buy again, but to get them to advocate for your brand and help bring you new customers, directly or indirectly.

Loyalty Loop
So it’s critical to think about not just about how you can create the best possible customer experience for your customers, but to think of all the touch points where you could turn them into brand ambassadors by getting them to leave reviews, share user generated content, mention your brand favourably in social media and, ultimately refer your brand to their friends, family and colleagues.

In this article we will discuss how you can create a system to drive referrals.

Why you can’t afford not to do this

As we have discussed in detail in other articles, marketers are faced with ever rising acquisition costs due to the constantly spiralling costs of paid search and paid social which, according to Wordstream, has seen the costs of clicks in Google Search reach these eye-watering levels in certain categories:

  • US$54.92 in gas and electricity;
  • US$54.91 in insurance;
  • US$44.28 in loans;
  • US$36.05 in credit; and
  • US$35.29 in software.

And, remember these are just for clicks! Your brand might need quite a few clicks before each customer converts. And with Google constantly making Google Ads look more and more like natural search, as well as allowing competitors to bid on your brand, perhaps forcing you to defend your brand searches, you can’t rely on Google Ads to drive generic search traffic to your brand and then pick up free brand search any more. In fact, you’re likely to be paying Google even for clicks from existing customers looking for your customer support pages!

And that’s if you’re actually paying for clicks and not paying for impressions for banners that aren’t seen due to banner blindness or being served under the fold.

As a result, many brands no longer make any money from the initial customer acquisition online and rely on repeat purchases or subscription renewals to break even. And that’s before factoring in for product returns, credit card chargebacks or fraud.

All this means that brands must not only do everything they can to encourage repeat purchases but ensure that each customer brings them more than just the purchase price for each sale. We discussed in previous articles how to free yourself from the GAFA tax (admittedly it doesn’t sound as great with the new names of Alphabet and Meta!) by implementing Organic Discovery like Airbnb. However, in this article we’ll focus on how you can ensure that each customer will bring one or more new customers via recommendations or referrals by creating a Referral System.

A Referral System doesn’t mean Referral Automation

A common misconception about referral marketing is that it’s marketing automation in that all you need to do is set it up and it’ll work all by itself and you can sit back, and just listen to the cash register ring. That’s because, while there are things you can do that you need only do once, like adding permanent navigation to your website, app and newsletter to link to the referral program, you do need to undertake regular marketing actions to promote it.

We have summarised all the steps you need to take to promote your referral program here in our document Activation and Discovery: the buyapowa guide to promoting your referral program.

How to create a Referral System

Creating a Referral System involves thinking about all the touchpoints you have with your customers and how each of those can be an opportunity to promote your referral program by asking your customers to refer. These include:

  • After purchase, particularly after a repeat purchase. Here you can include a reference to your referral program, even if it is a small link at the end, in:
    • The post purchase confirmation pop-up;
    • The post purchase confirmation email or text message;
    • The email or text message confirming when the delivery will be made;
    • The email or text message confirming that the delivery was made.
  • In the thank you message you send to any customer who has:
    • Rated the product or service;
    • Rated the delivery;
    • Given you a review on a review site; or
    • Responded to an NPS survey request.
  • If you send a physical product or a confirmation letter, you can include a leaflet or mention your referral program in the covering or confirmation letter.
  • If you have a store where customers can come to collect or return an online purchase, use posters and leaflets to promote the program;
  • If your customers come to your website for product information or to consult billing details etc., then you can use floating CTAs (or pop ups) to promote your referral program and include prominent links in the customer area;
  • If your customers come to your website FAQs, call customer service or consult customer help via chat or chat bot, all of these offer opportunities to mention your referral program;
  • Ideally you will find as many opportunities as possible to promote your referral program to your customer base in regular dedicated or SOLAS emails, newsletters, text messages and in-app messages;
  • Regular posts on social media, including via paid social, can help increase awareness of your program;
  • You should also send personalized messages and texts to your customers on occasions such as birthdays, customer anniversaries, renewals, upgrades and other customer milestones; and
  • Finally, where possible, you can refer to your referral program in ATL marketing, such as television ads, press and OOH.

By tapping into all of these touch points with each new customer (including referred-in customers), you can ensure that you create a Referral System where each customer touch point is an opportunity to generate a new customer referral.

If you want to know how to create a referral system for your business, please get in touch.

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