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Get any group of marketers together and ask them what they think about customer referral programs. The chances are extremely good that you’ll hear a universal chorus of approval.
What’s not to love about customer referrals? They’re a free way to generate leads. Even if you offer an incentive for referrals, you’ll probably end up paying less for them than you would for advertising.
There’s a reason that so many companies offer referral programs…
But what you may not know is that most of them are actually failures.
That might surprise you, but it shouldn’t.
Referral programs fail because companies just set them up without thinking about them. They don’t consider the three big questions:
- What makes customers refer their friends and acquaintances to a company?
- What are the benefits customers receive from your products?
- When and how should you promote your referral program?
If you’re shaking your head and realizing that you’ve made this mistake too, don’t worry. We’re here to help you figure out how to make your referral program a big success.
Why Do Referrals Happen?
Let’s start with question number one: What makes a customer want to refer a friend to a particular company?
That’s a big question and an important one. If you don’t understand it, you might just end up spinning your wheels with a referral program that appeals to nobody.
According to Jonah Berger, who wrote a book called Contagious: Why Things Catch On, there are six potential factors that might make your customers want to give you a referral:
- Social currency comes first. Will a referral make your customer look good on their own or in comparison to other people?
- Emotions play a big role in decision making. If your referral program engages customers’ emotions, they’ll be more likely to refer.
- Virality is up next. When an idea or concept is easy to remember, it’s also more likely to spread. That’s just as true of referrals as it is of cat videos.
- Stories are important to people. If your referral request comes disguised as a story, then it’s more likely that people will want to share it.
- Practicality is really at the core of referrals. Is your product practical? Is the incentive to refer it practical too?
- Publicity is the final factor. People tend to follow what others do, but only if they can see that they’re doing it.
The good news is that you don’t have to engage all six of these factors to make your referral program a success. You just need to use the ones that make sense in the best possible way to inspire referrals from your existing customers.
How can you optimize the “why” of your referral program? The key is making it clear that your product aligns with your customers’ core concerns, beliefs, and values.
For example, Apple sells its products by talking about their desire to challenge the status quo. They encourage their customers to think of themselves in a certain way that tells a story and taps into their emotions.
Keep in mind that this aspect isn’t about what you offer in return for a referral – although it’s a good idea if you can connect it to those same values.
What Benefits Does Your Product Provide?
Next, let’s talk about the benefits that existing customers can gain if they refer their friends to you.
This question relates most closely to the issues of practicality and social currency. If someone is going to give you a referral, they want to know:
- Will it make me look good?
- Will it help my friend?
- What’s in it for me?
To understand how this might work, let’s look at an example.
Cloud storage company Dropbox increased their sign-up rate by 60% in 2010 by using a simple referral proposition that hit all three of these points perfectly.
The specific offer was that for every friend who signed up for Dropbox, the customer making the referral would receive 500 MB of free storage – and so would their friend. They placed of 16 GB on the referral program.
This offer makes the referrer look good because they’re offering their friend a practical and valuable solution for cloud storage along with a freebie. The benefits to their friends are obvious – and then the person making the referral gets a freebie too.
Think about what you can do to highlight the practical benefits of participating in your referral program. The more obvious they are, the easier it will be for people to make the leap and take part.
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When and How Should You Promote Your Referral Program?
The last step is knowing when and how to promote your referral program. Where do you advertise it?
The key is making sure that your customers see it (there’s no point in showing it to non-customers) at the time when they are most likely to take action.
A lot of companies make the mistake of putting information about their referral program in the footer of their website or on their home page.
That does nothing to speak to the emotions of your customers, or to trigger them to take part.
Instead, a better bet is to consider the best way to reach out directly to your customers when they are at their most emotional – and most likely to be enamored of the practicality and value of your products.
In case you were wondering, that’s right after they make a purchase!
The best way to get it to them is to use an email autoresponder. Most customers expect to see a follow-up email after they make an online purchase, and it’s the perfect opportunity for you to outline the benefits of your referral program.
If you want referrals to pour in like rain…
Don’t just dump your referral program in some out of the way corner of your home page.
Instead, make it clear why people should give you referrals and what they (and their friends) can gain from doing so.
Then, hit them with the information about it at exactly the same time – and sit back and collect the referrals that result.