Referral programs have become prevalent in the promotional marketing space. Having your customers advocate for your brand seems obvious. According to research from Nielsen, 83% of consumers say they completely or somewhat trust the recommendations of friends and family.
However, we see a challenge in this ubiquity as everyone from your largest competitors to the local hairdresser has a referral program. Getting consumers’ attention and having them take action is becoming more difficult. Designing an effective referral program needs to thread the needle between simple and protected, generous and demotivating, and open and overly restrictive.
Experience designing referral programs for highly advocated brands has highlighted 5 key considerations to ensure an exciting and sustainable program:
- Make it worthwhile: A five dollar coupon to a retailer or $20 dollar reward for a service that consumers pay over $1,000 for each year is not going to motivate your customers to tell their friends and family about their great experience.
- Spread it around: Most referral programs only incent the current customer to provide the referral. The most effective programs provide an additional incentive to the potential customer to become a customer.
- Make it easy: It’s not just putting a form on your website and having consumers spam their friends. Ensure your customers actively opt into the program, but make that process take seconds and then provide them with a variety of methods for informing their community about your programs. Finally, validate referrals behind the scenes instead of forcing customers to jump through multiple requirements to keep it simple.
- Keep it legal: While spreading the word is important for your program’s goals, ensuring that it meets regulatory requirements will keep you protected. There are several potential pitfalls including: unclear terms and program requirements, failing to comply with opt ins for promotional messaging and CAN SPAM regulations, and not clearly disclosing the reward and how it can be used.
- Keep it fresh: Referral programs have a tendency to start out fast and then fade quickly. Programs are often forgotten by the same marketing teams that created them, so how do your customers feel about your referral program? Continue to message consumers throughout their lifecycle. Include referral in your content marketing plan. Offer special deals to drive referral at important acquisition times on the calendar, we recently implemented a creative use of this strategy with a client with positive results.
Creating a successful referral program takes planning, care and feeding. If done right it can boost sales and engage your best customers.
Kevin Palmstein is Vice President, Product, Marketing, and Alliances at YA. He works with clients everyday to design custom referral programs.