150 years after the American Civil War, there’s another showdown brewing in the US of A. But this time, it’s not being fought with bowie knives and Colt revolvers, it’s being fought with tweets and hashtags.
“#Jerks”, says John Legere, CEO of T-Mobile - firing a broadside at AT&T. “We’re coming for your spot,” he snarls, menacing top dogs, Verizon. “Crap network,” he sneers, lobbing a hand grenade at Sprint.
So far, his opposite numbers have largely remained above the fray. But this response - and its accompanying image - from Sprint’s newbie CEO, Marcelo Claure, is more than telling:
“I just finished my second week as CEO of @sprint and all these were my assignments. All completed!!!”
Which referral gimmicks does he mean? I’m pretty sure he’s talking about T-Mo’s “Refer-a-Friend” programme, which offers unlimited 4G data plus a $25 voucher to anyone recruiting a pal.
Now, there’s nothing unusual about the campaign - referral programmes are ten a penny - but the tone is unapologetically aggressive. And Legere’s rhetoric which surrounded its launch was doubly so. Having previously accused his rivals of “raping” their customers (casually adding that “these f*ers hate you”), he was careful to stress that this referral programme was all about “rescuing a friend from Sprint, AT&T or Verizon” and helping to “set them free”. In a sense, it’s a shrewd tactic - and I’ll explain why. But I’ll also explain how it’s a flawed one because, despite all the yo-mamma-ing and the fruity language, it’s actually not aggressive enough.
Let’s start with the plusses; there are three of them. First, Legere has realised that the carrier business is absolutely all about acquisition. He can talk all he likes about treating customers well and offering your best deals to existing users as well as newcomers, but the game is the game and, when churn comes a-calling, recruitment is your number one friend. So, it’s not enough simply to offer great service, great features and great prices - unless you actively recruit, you run the risk that your rivals’ marketing messages will catch the customers’ eyes before your ones do.
Secondly, Legere’s twigged that the best marketing isn’t billboards or banners or mailshots or TV spots at all, it’s word of mouth. It’s friends, talking to friends, getting s* done. And there’s good reasons for that. According to Forrester, only 10% of people believe a word that brands say in advertising, but 70% of people trust their friends. That’s a huge stat, and it’s exactly why T-Mobile are deploying user-get-user as the bedrock of their recruitment strategy.
Finally, T-Mobile’s intention isn’t simply to mop up the tiny number of people who are out there looking to switch contracts. It’s to actively steal business away from their competitors. And that’s absolutely the right strategy, because that’s where the numbers are: 77% of Americans are on phone contracts, 23% are pre-pay; you do the math.
But that’s exactly where the plusses end. Because this kind of referral scheme simply doesn’t work. Sure, it looks good on paper (Dave’s going to sidle up to Maggie, whisper in her ear and convert her to the wonders of unlimited data on the world’s most magenta network) but, in reality, here’s what actually happens:
Maggie: Hey, office. Forgive me for shouting out like this, but I’m thinking of signing up with T-Mobile. Anyone got any experience using them?
Dave: Maggie, Magster, Mag-neto! How you doin’? I’m with T-Mo and they’re pretty good. Oh, and hey - when you sign up, be sure to namedrop Big Dave as your referrer. You’ll get unlimited data. I’ll get unlimited data. And we can split the $25 when I take you out for a drink.
Maggie: You know I’ve been seeing Peter for five years, Dave. Creepy.
That’s how it plays out, every single time (give or take the workplace harassment). People don’t actively recruit (let alone poach) new users with these refer-a-friend schemes. They hang out on the sidelines, wait to hear that someone they know is already planning on signing up, then jump in at the last minute. Or, to put it another way: the brand does the recruitment, the customer takes the margin. Which doesn’t look so clever, after all. If you want to get refer-a-friend schemes working, you can’t simply wait for potential customers to nominate themselves, you need to incentivise your existing customers to go out and hunt on your behalf. And the best time to do that is when they’re when they’re at their most hungry - in other words, when they’re buying from you themselves.
A 2013 study of over 6,000 UK shoppers showed that more than half of them spent over four hours researching £200+ purchases, while an extrapolated 3m Brits dedicate a massive 24 hours before putting their hands in their pockets. People will work for deals. But try to get them working after they’ve parted with their money and it’s another story entirely. Worse still, it depends once again on marketing - if your existing customer doesn’t hear about your referral scheme, they’re not going to take part in it. And, if you’re spending that much money on marketing in the first place, you’re better off targeting new recruits direct.
So, instead of copying the same old, tried-tested-and-regretted tactics, try tweaking your referral message to capitalise on people’s passion for achieving deals. Make it personal, make it timely, make it fun: "Buy this handset today for £500 but, for every other person you get to buy before 5pm, we'll refund you a further £50. Now... go!" Make it communal: “If you, our Facebook fans, can get 10,000 people to sign up today, we’ll give everyone unlimited data for life.” Or offer them an extra-special reward for bringing in more other customers than anyone else within a certain timeframe: maybe their product for free, or a premium-boost for their subscription. By activating the seed customer at their moment of peak engagement and by gamifying their purchase, you're turning promotion into a pasttime. It's not a chore, it's a challenge.
This works, and Buyapowa help leading brands around the world achieve incredible results every single day - from retail giants like Tesco to CPG powerhouses like L’Oreal, Sony and Pepsi. We’ve even got a telco up our sleeves who are planning very exciting things. They may not be quite as sweary as John Legere and his crazy T-mob, but they’re going to get to a whole load more new customers.