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It’s estimated that word-of-mouth influences as much as 90% of all purchases and is directly responsible for 19% of them.
That means you can’t afford to ignore customer referrals when it comes to your digital marketing strategy.
So how does referral marketing work? And how do you build a successful referral program?
To get you started with this valuable marketing channel, here are five ways to build a referral marketing strategy into your business to gain new customers (and even boost the loyalty of current customers too).
Be a business worth referring
The best referral program in the world won’t help if your business isn’t worth sharing.
This goes well beyond just marketing – you need quality to be baked into every aspect of the business. Things like:
- High product quality
- Friendly customer service
- Quick response times on phones, social media etc.
It might seem obvious, but if your business isn’t up to standard, you will struggle to get traction with referral marketing, no matter how good your marketing strategy is on paper.
Every engagement with your brand needs to be effective, streamlined, and simply a joy. It might sound like a lot of work, but that’s just table stakes when it comes to word-of-mouth marketing.
People focus on the negative. If an otherwise happy customer referring you says something like:
“It’s a great product! My only complaint is that when I tried to update my address the form didn’t work so I had to be on hold with support for twenty minutes to get them to update it manually. But the product is excellent.”
All that the potential customer will focus on is the negative.
So work as hard as possible to make sure customers have nothing bad to say. Then brag about all the good things they do say.
Example: Nectar Sleep
When you look at Nectar Sleep’s website, straight on the main nav bar at the top they have “Reviews” immediately showing customer reviews, expert reviews, and the awards they’ve received over the years.
Is every single customer going to have nothing but glowing things to say about them? Of course not.
But they’re showing who they work for by showing off who they’ve worked for.
Tell a story worth sharing
People are more likely to engage with your referral program if they feel an emotional attachment to you as a business – your goals, your ethos and your general identity.
If you can tap into a customer’s sense of identity, and help them to say something about themselves when recommending you, then you can turn that customer into a brand advocate.
There are plenty of stories that could boost your brand awareness, but common ones are:
The underdog
Pitch yourself as someone taking on the big players.
You’re a new entrant to the market who’s trying to take down the established order for the benefit of the consumers. And invite people in to help make that happen.
The leader
Or flip that around – you’re the original and the best, for good reason.
Other people have come along and tried to replicate what you do, but they’ve never combined everything you offer in a way that even comes close.
Get you customers to associate themselves with your history, your quality, and the future you’re going to bring too.
The community
Sell yourself as more than just a product or service – you’re somewhere like-minded people can go to be part of something bigger.
You’re a space offering a shared outlook or ethos, a badge of honor that people want to brag about being part of in any way possible – including by inviting their friends.
The cutting edge
Demonstrate that you are at the very top of innovation and expertise.
The old way of doing things was great, For a while. But now’s time for something new. Something better. And that’s exactly what you’re bringing.
Those who know about you are ahead of the curve. And they can show off that fact to their friends by offering a referral…
Example: Green Mountain Energy
Green Mountain Energy is an energy supplier – a utility usually focused heavily on pricing. But instead of the usual method of focusing on being the cheapest supplier and offering the best introductory deals, their story is built around their green credentials.
They offer lots of information on going green, information about their sustainability commitment and non-profit, and an entire section on their mission.
In particular, their referral marketing page has a nice touch in the form of the live ticker. Not only will the existing customer feel good about their contribution to the amount of CO2 saved, but they will naturally think about how much more of an impact they’ll have if they invite friends to be part of it too. Suddenly it’s not sharing a utility supplier. It’s inviting friends to be part of something bigger.
Make your referral program incredibly easy to use
People are busy, and while your business is the thing you think about day in, day out, your customers have other things fighting for their attention.
That means you need to make the entire referral marketing process as simple and effortless for them as possible.
You should do things like:
- Offer everything in one place – a single page on your website where people can go to quickly learn how referrals work, and to complete the process. No complex user journeys or workflows, just everything they need in one place.
- Use simple language – don’t complicate matters with long, complicated terms and conditions that people will inevitably click away from rather than wade through.
- Focus on the benefits – The person referring should get something from the referral, even if it’s just something like credibility, respect, or a warm, fuzzy feeling inside. And the same should go for the person being referred. Put those benefits front and center.
- Make it timely – the referral should be instant – for both the customer and the referred customer – rather than being added to a list for someone to process. Delays mean people forget, or worse, feel frustrated. You want to capture people while they’re excited, and reward that excitement, rather than leave them feeling let down.
Doing all that will help customers to engage with your referral program straight away, rather than putting it off until later (and never coming back).
Example – Metromile
The Metromile referral marketing page is a great example of how clean a referral page can be.
They don’t waste space telling people what the company does – this is for customers, they should know that already by the time they’re here.
Instead, it’s a form with a single field – right at the top (so customers don’t even need to scroll) with the benefit to the reader clearly spelled out.
Even the FAQs at the bottom are only two questions, with simple, human-sounding answers.
Actively ask for referrals
There’s no point in having a passive system in place – you need to think about how to promote your referral program.
People aren’t going to go hunting for it.
Instead, they’ll either refer people without using the scheme (and then get annoyed if they discover they missed out somehow later) or more likely they just won’t think to refer people.
It’s much more effective to simply ask.
You can share your referral program out on Facebook and other social networks,. You can even try to use social media to tap into a wider influencer marketing strategy and affiliate marketing.
But the most effective referral marketing campaign will be one that asks a satisfied customer for a referral at the point at which they’re most excited about you – maybe just after their unboxing, or when they’ve just finished their first demo call.
Worried about asking? Remember the Benjamin Franklin effect
Some people think that the way to build social capital with someone is to do them favors. Do them a favor, then they owe you one (like referring a friend).
But in actual fact, the opposite can be true. Asking for favors builds the social capital, rather than spending it.
Called the Benjamin Franklin Effect (named after the Founding Father who was a big believer in the power of the effect) is a pretty simple concept – if someone has done you a favor once, they’re more likely to do it again.
So instead of worrying that you might use up goodwill with customers by asking them to participate in a customer referral program, odds are you’ll actually generate even greater fondness for your business by doing so (while boosting customer acquisition, too).
Example: Constellation
When people sign up to Constellation, they’re sent a referral code directly in the Welcome Letter. There’s no waiting around there.
They know that at the point someone has decided to go with them, they are most likely to share that fact with others. And they offer a simple way for them to do just that.
Offer a referral incentive
It’s a matter of life that people respond to incentives, so you have to offer a referral reward to get people to send a new customer your way.
After all, they’re going out on a limb, so you can at least make it worth their while.
Better yet, incentivize the referrer and the person they’re referring – everyone should get something (not just you).
If you can give an offer that feels exclusive, and time-sensitive, you can tap into the fear of missing out – a powerful motivator for referrals.
How do you reward clients for referrals?
Well, the easiest way is often to use gift cards.
Example: All the previous examples, plus too many others to count
Free gift cards are standard practice for referral marketing, and for good reason.
They’re simple for you to send, flexible for customers to use, and they avoid any tax implications that might come from cash.
Of course, it can be a tricky thing to organize the logistics of sending gift cards, especially when you have huge volumes of people using your referral scheme.
Luckily, that’s where Runa can help.
We bring you a bunch of benefits, as our gift cards are:
- Instant – you can go from intro to inboxes in seconds
- Bulk – you can scale the system as fast as you need to
- Global – you can make sure there are suitable options, wherever your referrals are
- Customisable – you can even give people the option to choose where their gift card is from (from a list you’ve pre-approved, of course)
However you decide to send them – gift cards are a solid way to go.
New to incentive marketing? Download our free guide for starters here!
Building a referral program that can keep up with your business
A referral marketing program can be an effective (and cost-effective) way of generating new business. And it can even have the consequences of making the person referring happier too.
Building your referral campaign around the customer – taking the time to focus on them, offer them a story that they can share in a simple way, and simply asking them to share it can all have a noticeable impact on how effective your strategy is.
But of course, the biggest impact on your referral program will be from offering the right incentive. That will be how you turn your loyal customer base into an effective referral channel.
If you want a simple, effective way to use gift cards for referrals, get started with Runa – book a demo here.
