How to maximize the benefits of your referral program

This is how you maximize the benefits of your referral program

There are many more referral program benefits than you might think.

Often when people think of advocate and referral marketing, they think it just boils down to the economics – an influencer offers an incentive to someone they might influence and, when that person transacts, they receive a reward. But, as we’ve discussed in our three-part series on the psychology of referral, and again in our most recent webinar, there’s more going on with advocate and referral marketing than a simple exchange of incentives and rewards.

A lot more, in fact.

What are the key benefits of referral programmes?

Recently, the Keller Center for Research at Baylor University published research on maximizing the benefits of customer referrals. It’s a little dry, so the too-long-didn’t-read summary boils down to this: two specific phenomena work their magic during the referral process:

  • Better matching; and
  • Social enrichment

Let’s break these two concepts down, because what they mean for the efficacy of referral marketing is actually quite profound.

First, what is better matching?

No, it has nothing to do with Tinder. (Although you’d be forgiven for thinking that. Well, sort of forgiven. Wait, what are you doing on Tinder? Never mind, we’ll talk about that later.) Better matching in referral marketing – separated into active and passive – pertains to a referred-in customers’ tendency to match a brand and its offerings better than non-referred customers do.

Let’s drill down further. Active matching involves a deliberate and organized effort to bring in referrals. Conversely, passive matching derives from people’s tendency to connect with people like themselves.

Which makes a lot of sense, because we all tend to associate with people who share our tastes and interests. And these shared, deeply personal connections between the referrer and referee are a big contributing factor to the success of every advocate marketing program, resulting in that big 7.7x boost in conversation rates we rave about here at Buyapowa.

While you’re letting all that sink in, consider this, too: the better the relationship between the brand and the referrer, the better the match and likelihood of a referral. Once again, that makes sense, right? Because, when you’re a fan of a brand and you know the products inside-and-out, you’re more likely to refer the brand to your friends, family, colleagues and those strangers you keep meeting on Tinder.

Okay, that’s better matching, but what about social enrichment?

Referred-in customers are more loyal to a brand because the relationship they develop is deeply entwined with the relationship they already have with the referrer. This means that they can get support and guidance when it comes to the brand and its offerings, boosting their trust, attachment and satisfaction.

But there is a caveat. If the referrer suddenly leaves the brand or stops buying their products or services, then the benefit of that relationship is lost. And it can even go a step further – if either the referrer or referred-in customer abandons the brand, they can actually encourage the other to follow suit. Which, again, makes sense: if you have a bad experience with a brand, you’re likely to advise your friends, family and Tinder dates against that brand.

So how does this help you?

Well, today, referral marketing is the most cost-effective, reliable and powerful customer acquisition tool available. This is known. So the question isn’t should you do advocate marketing, it’s how should you do it. And here’s the answer: in order to maximize the benefits of an advocate marketing program, you need to focus your efforts on incentivizing your most loyal, evangelical customers to refer their friends. In so doing, you’ll be able to acquire more loyal and more profitable customers who are a better fit for your brand and offerings.

To do that, you need to dig into your data, revealing your most engaged customers via metrics like their net promoter scores. Then you need to target those customers with your advocate marketing program because they’re the people who will end up becoming your greatest asset. It’s not rocket science, it’s just good business.

If you want to learn more, check out our best practice guide which explores some of the advocate marketing programs we’ve powered for hundreds of brands around the world. And, if you have questions, don’t hesitate to reach out to us. We’re more than happy to discuss how you can put these principles to the test with a referral program of your own.

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