Your Customers Are More Influential Than You Think: How to Create a Winning Customer Referral Program in 2023
So, you’ve been brainstorming marketing strategies to attract new customers for 2023. You might be considering influencer marketing, brand ambassador programs or even affiliate strategies. But, have you ever considered you might have a whole community of top lead generators right under your nose…? That’s right – your existing customer base!
Many global brands are achieving great success from building customer referral programs into their customer marketing campaigns. Tesla generated an average 40x ROI from one of its early customer referral programs, and men’s care brand Harry’s saw a staggering 100,000 new subscribers just a week after its own program launch.
These results aren’t surprising when we look at the statistics supporting referral traffic. ThinkImpact research suggests that 65% of new customer business is generated from
referrals. With this in mind, it makes sense that brands are actively developing online customer referral programs to attract these lucrative and highly motivated sales leads.
How to get it right? Here’s everything you need to know about creating a winning customer referral program in 2023.
So, what is a customer referral program?
Customer referral programs are purposely designed to activate your existing customer base by turning them into new sales lead generators. This low-cost marketing strategy helps to incentivize loyal brand consumers to provide trusted recommendations to their friends, family, and co-workers.
Sometimes known as ‘refer-a-friend’ programs, they promote your products and services to an entirely new customer base. In return, brands reward advocates with incentives that can include:
· Gifted Products
· Gift Cards
· Product Discounts
· Service Upgrades
· Mystery Prizes
Although customer referral programs have existed for decades, the online boom and increasing usage of social media platforms have made it easier, faster, and cheaper for brands to harness these programs to improve sales revenues. Referral programs provide brands a chance to motivate an existing fanbase to promote their products and services to like-minded connections, with little to no brand input.
Why are customer referral programs so effective?
Customers who spread the word about your brands’ products and services provide a valuable form of social proof to their friends, family, and colleagues. By promoting directly to these connections, customers validate a product or service's effectiveness to like-minded potential consumers of the brand.
In addition, these recommendations have been proven to influence people’s potential future purchase decisions. According to a recent Nielsen study, 92% of respondents said they trusted referrals from people they know, and were four times more likely to buy when they are referred by a friend…
Ultimately, it’s impossible to ignore the advantage of brands reaching out for a customer referral. This form of word-of-mouth promotion provides several additional benefits, including:
· Strengthening bonds with existing loyal customers
· Expanding brand awareness to a pool of new potential consumers
· Generating good-fit customer sales leads and increased conversation rates
A recent study at the Wharton Business School at the University of Pennsylvania concluded that referred customers were about 18% more likely to stay rather than other customers. With these impressive customer retention rates, you can see why successful brands actively pursue online referral programs.
Customer referral program ideas
Brands looking to create an effective customer referral program have to keep two primary things top of mind: 1) Create an offer compelling enough that will get customers excited to share with friends and 2) Make it easy for said customers to share that offer.
There are dozens of ways to create a referral program that excites your customers, below are just a few. For the purposes of this article we will talk about the influence of customers, however these referral techniques can also be adopted for other influential groups of people, including social media influencers, employees, and industry experts.
Refer a friend, get a credit or gift for yourself
The simplest of schemes can be the most effective! Perhaps the most common customer referral scheme model: customers who tell a friend get a store credit or gift to enjoy. One example of this scheme is run by fintech company Wise, who offer $50 for every referral.
Refer a friend, get a credit or gift for them
The friend/family member being referred is incentivized to take action when they know they will be rewarded with a discount code or free gift.
Tiered rewards
Allows loyal customers to unlock new levels of reward each time they refer a friend. Refer 1 friend for 25% off, refer 5 for a free product, and so on. The Sephora Beauty Affiliate Programme is a partnership programme that offers consumers a chance to get rewarded for sharing their purchases online.
Gamified refer a friend schemes
Allows top referrers to unlock rewards that aren’t available otherwise. For example, app-based bank Monzo announced their new neon coloured bank cards in Summer 2022, but customers could only get their hands on one of the limited edition cards if they referred 2 friends to join.
Review and customer feedback programs
Some brands invite their top customers to provide real reviews, authentic content and - importantly - word-of-mouth referrals, in exchange for discounted products or gifts from the brand. This can take the shape of a product seeding campaign or brand ambassador program.
Hosted in-person events
Product launches and community events are leveled-up when attendees are brand evangelists. Invite top customers to an Instagram-worthy event to make a splash about a new product. You could also suggest they invite a friend to further spread the word amongst your target audience.
Creating a customer referral program that works
Did you know that 83% of consumers are willing to refer a brand after a positive experience… yet only 29% actually do. With such a vast untapped market of potential referrals, it’s worth planning ahead and creating a referral program you know will convert.
With a handle on some of the most popular customer referral techniques, here are the five key steps to creating and running a winning customer referral program in 2023.
1. Set your goals
Referral programs come with a wealth of commercial benefits for both short term and long term sales. They promote brand advocacy, new customer acquisition, as well as nurture existing customers. Before you kick off, make sure you are clear on what your goal is, because this will shape what your referral campaign looks like.
For example, if your brand is looking to increase customer retention, you might choose a reward based referral program where they get product gifts the more people they invite, as users are more likely to remain loyal when there’s an incentive to do so.
If you are looking to grow an online following, your brand might encourage users to refer a friend via social media, which could help increase follower numbers, and build trust among your target audience. To enrich this, offer advice, tips, and solutions to the known audience problem as part of the referral campaign.
Careful planning allows brands to target these different commercial goals by tweaking elements within the referral program’s promotion.
2. Identify loyal customers
Because your loyal customers are often the most vocal about promoting your brand to others, it's essential to prioritize attracting them to participate in your referral scheme.
Your first stop should be to find these passionate customers. Through social listening, you can search to see who is already talking about you online. After all, if they’re already promoting your brand to an online audience, they are a prime candidate for your customer referral program.
Additionally, targeting your most frequent and highest spenders is another valued channel for a referral scheme participant. Aspire’s ecommerce integrations can help pinpoint your most active customers and allow you to directly invite them to your lead referral program.
While devoted customers will often enthusiastically recommend you to people for free, it’s crucial never to underestimate the power of a reward or incentive…
3. Choose how to reward referrals
Of course, if you’re offering a first-class product or service, your customer base may already be referring your brand to others without the need for an incentive. However, sometimes people need a little encouragement… you just need to know what that trigger might be.
Financial rewards will almost always capture someone’s attention and energize them to act, but understanding the wants and needs of your audience base can dramatically reduce your campaign costs.
For example, offering customers a free product or even a discount on their next purchase could be the nudge they need. Alternatively, offering a product upgrade, a free subscription, or even a store card can be a low-cost incentive to encourage them to participate.
To demonstrate the simplicity of their referral program, type: A deodorant’s dedicated referral page promotes its 25% discount incentive as being a quick three-click process. Advertising a fast-track referral scheme encourages new referrals, allowing both the referrer and their friend to earn a quick discount off their next order.
Successful brands don’t just mention their referral programs; they also get customers excited about participating. As a professor and international best-selling author of ‘Contagious,’ Jonah Berger explains, “energizing people is all part of the science involved in getting people to recommend brands through word-of-mouth and influencer marketing”.
4. Make contact
Remember, while your customers may frequently buy your products and services, there is a chance they’ve never interacted with you as a brand. That is why it's vital to ensure the first point of contact is always personable and clearly explains the benefits and ease of your referral programs.
After all, the simpler the process, the higher the likely referral conversion rates will be. Good practice dictates that your reach-out messages are easy to understand, and they all have a clear call-to-action (CTA). After all, people are busy, and you will want to highlight your customer referral program when you first grab their attention.
Also, take advantage of every opportunity to highlight the incentives you are offering for referrals. Great brands do this by raising awareness of your referral scheme at every point of customer engagement. For example, highlighting referral incentives at the point of sale (POS) or in your monthly branded newsletters can help amplify the opportunities to energize your referral program.
5. Track and measure referral traffic
Studying your customer referral campaign analytics can provide several key advantages when pursuing referred lead generation. There are a few different ways to share referrals, whether simple promo or QR codes, or affiliate links which contain unique data and require minimal form-filling by the person being referred.
Having more data available makes it easier to establish if your referral program resonates with your existing customer base AND those being referred. Resolving any kinks in these communications can help boost referral activity levels immediately.
Using a link method opens up tracking systems data metrics, helping to trace details for each referral by recording:
· Who initiated the customer referral
· The date they were referred
· New customer sign-ups and sales conversion rates
· Lapsed referrals and follow-up opportunities
Additional traffic measurement systems can also detect if your referral system is driving traffic to a desired ecommerce or landing page. Aspire has a range of ROI tools to precisely track referral program promo codes and affiliate links.
Identifying successful influencers and referrers allows brands to focus on these higher-volume participants to drive further involvement in the referral program and lead generation.
Examples of brands that have excelled at building customer referral campaigns
Today, more and more brands have identified the lucrative benefits of using an existing customer base to promote their products and services to new good-fit consumers. There are numerous examples of brands that have created a winning customer referral program to encourage new revenue lead generation.
Uber is a prime example. The company is consistently recognized as one of the most successful brands to have adopted customer referrals as a marketing strategy. If you’re unfamiliar with how it works, every Uber customer can share an invitation code from within the app to invite new users to join.
Existing customers can send out as many referral codes as they want, and upon downloading the Uber app, the new referral is tracked and accredited to their customer account. Uber then begins to pay customers once the new user completes the required number of trips and other certain conditions.
Another excellent example of incentivized referral scheme is from the wellness and skincare brand Prima. Prima’s ‘Share the Love’ campaign rewards customers and those being introduced with a financial incentive upon their first transaction.
When customers tell their friends about Prima, referred customers will receive $20 off their first purchase over $50, and they will receive a $20 reward for introducing them to the brand. This is a fantastic way to motivate both parties to participate in Prima’s referral scheme.
Enhance your new sales lead generation with a customer referral program
Book a demo today to learn more about how Aspire’s influencer marketing platform has been helping brands to build successful customer referral programs.