Today’s topic of discussion is referral programs, which include a discussion about their definition, functioning, and their relevance to your needs.
Referral programs are increasingly employed by businesses as a component of their customer success strategies. The market for such programs is expanding rapidly, which can be easily understood when considering that leads obtained through referrals exhibit a conversion rate up to 30% greater than those acquired through alternative marketing channels.
In addition, 86% of companies that have implemented a strong referral strategy have experienced evident revenue growth in the past two years. By obtaining trustworthy brand advocates, customer trust is established, resulting in contented customers who will further promote your products or services through word-of-mouth referrals.
Are you prepared to commence your own referral marketing program? Unsure of where to begin? Worry not. We will guide you through the entire process, step by step.
What is a referral program?
The concept of a referral program involves utilizing word-of-mouth advocacy as an ecommerce marketing strategy. There are various methods to generate referrals, such as customer recommendations and official ecommerce marketing partnerships, all aimed at enhancing brand visibility and driving sales.
Referral programs depend on customers, influencers, and business advocates who share their firsthand experience of your products and services with their network of friends and partners.
The ultimate goal is to generate targeted, high-quality leads that directly benefit your business. By receiving referrals, these leads are more likely to closely match your customer profile and already have a positive perception of your business, as they have been recommended by individuals and trusted brands they value.
Why are referrals important?
In the United States, a significant number of shoppers, 49%, discover new brands by way of recommendations from family and friends. These referrals hold special significance, particularly for businesses in the early stages of growth, as they not only increase visibility but also establish trust and credibility within the industry.
Referrals serve to strengthen your marketing endeavors and promote higher customer retention, trust, and loyalty. Interestingly, referral marketing ranks among the top strategies for retaining customers, along with email, social media, and content marketing. What do these tactics share in common? They all focus on personalization and adaptability to keep up with evolving market trends.
Referral programs have the potential to effectively cater to your specific customer demographic. Additionally, a successful referral can generate a ripple effect as satisfied customers and partners share positive information about your business through word-of-mouth.
Moreover, referral marketing exhibits great flexibility and adaptability to technology, and currently, there is an abundance of excellent referral marketing software options available for selection.
How does a referral program work?
In what specific way does referral marketing operate?
The process begins with advocacy, which involves your brand advocate (such as a customer, influencer, industry authority, etc.) sharing a positive recommendation or offer with their friends, family, or relevant audience.
Once the recipient receives the referral, they proceed to examine the brand by accessing an offer link or by being directed to the company landing page. Ideally, at this point, the referred customer will redeem an offer or make their initial purchase. Subsequently, these customers become the subsequent generation of brand advocates and share their positive referral with their own friends or appropriate audience.
Follow These Eight Steps On Building A Referral Program
Step 1: Define Your Referral Program Goals
In order to create a referral program, it is crucial to first establish your objectives. What are your intended outcomes for the program? Are you looking to boost sales, generate fresh leads, or simply acknowledge and incentivize customers who are already referring their friends?
After setting your goals, you can create a program that corresponds with them. For instance, if your aim is to boost sales, you can provide a discount to customers who refer a friend and complete a purchase. Alternatively, if your objective is to generate more leads, you can incorporate a mechanic into your referral program where the highest referrer each month receives a prize in addition to the regular rewards they earn for each referral.
Step 2: Design Your Referral Program
The subsequent step involves planning your referral program. You will have to determine the kind of referral program you want to create – whether it should be a single-sided program that only rewards the referrer or a double-sided program that rewards both the referrer and the referred friend. Generally, double-sided programs are more effective as both parties benefit from the referral. After finalizing the type of referral program you will implement, it is important to ensure it has a captivating headline that catches people’s attention and motivates them to participate.
Step 3: Choose Your Rewards And Incentives
The success of your program relies heavily on the rewards you provide for referrals. It is important to find a middle ground where you offer enough incentive to motivate customers to refer their friends, while also ensuring that the rewards do not impact your profits. A practical method to determine the value of your reward is to divide your total average marketing budget per month by the total number of converted leads per month. This effectively sets the reward value at the same level as your current cost per converted lead.
Step 4: Make sure you have a killer offer!
To truly succeed in referral marketing, it is necessary to go beyond the rewards and incentives discussed earlier. This crucial element, often overlooked by marketers, is the key ingredient for success.
When planning your double sided referral program, the most crucial decision is selecting the proper “incentive” rather than the reward itself. The incentive refers to what is provided to the invitee.
Step 5: Build Your Referral Program
Once you have completed all the planning, it is time to construct and initiate your referral program. You have two options for accomplishing this task.
1. Take the step of hiring a developer to construct your very own personalized referral system.
2. Utilize referral software that provides a ready-to-use solution.
If you choose to build your own custom referral system, you will have the advantage of maximum flexibility. However, this decision also entails a significant amount of additional effort in order to establish and sustain your program. It is crucial to take into account various hidden aspects including the process of generating a referral link, enabling users to track their referrals, implementing automated rewards and incentives, configuring diverse email notifications, and more.
Step 6: Connect Your Referral Program To Your CRM
In order to guarantee the success of your referral campaign, it is essential to connect your referral program to your Customer Relationship Management (CRM) system. This connection enables you to conveniently monitor and handle all your referrals, and directly input them into the workflows you currently utilize. By automating this procedure, you can save both time and resources, while ensuring that your leads are promptly and efficiently pursued.
Step 7: Promote Your Referral Program
After creating and launching your referral program, the next step is to promote it. Spreading the word about your business by asking your customers is easier than you may believe; you just need to be brave and take action.
To promote your referral program to your customers, you have several channels at your disposal. These include direct emailing, social media promotion, running paid advertisements to a dedicated page for joining the referral program, installing widgets and pop-ups on your website, and more. For a comprehensive list of methods to promote your referral program to your customers, refer to this guide.
Step 8: Setup Referral Tracking (And Optimize Your Referral Program)
Once your program is launched, it is important to consistently monitor its performance. By analyzing the data, you can assess the number of referrals, identify the individuals who generate the most referrals, determine the social or direct channels people utilize to refer friends, and evaluate the effectiveness of various rewards.
Step by step, you can rephrase the text while keeping the same meaning as follows: Employ this information to consistently improve your program. You have the option to modify your incentive, fine-tune your messaging, or explore different promotional channels to encourage a greater number of individuals to begin referring.
Summary
Referral marketing is an economical approach to enhance the acquisition of customers and the value they bring over a lifetime.
Referral programs are not solely focused on acquiring new clients. Instead, they are equally, if not more, successful in cultivating existing customers and motivating them to become loyal brand advocates through the offering of rewards, bonuses, or incentives.
Now is the perfect moment to begin implementing a referral marketing strategy in your business if you haven’t already done so.
