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Referral Rewards & Incentives: The Ultimate Guide
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Well, here’s everything we know. And, now, you do too! “You’re rewarding referrals, but referring isn’t the action rewards should be designed to trigger.” In an ideal world, everyone would walk down the high street with a sandwich board strapped to their shoulders, proclaiming their love for the hot new Brand X they’ve discovered. But, in this world, a little inertia-zapping goes an awfully long way – and that’s where rewards come in.
Try to make the value of your reward concomitant with the value of the acquisition. If someone refers a big-spending friend, give them a bigger reward than someone who introduces a friend with less deep pockets. You can even automate this, as the mobile network VOXI does – awarding different grades of reward depending on the value of the contract the referred-in friend purchases. “We’ve seen brands achieve tremendous success by running exclusive referral programs for the friends and family of their own staff, or for their most valued customers / most successful referrers.” Friend incentives are there to do one thing: ensure that, when a friend clicks through from a referral, they continue their journey and, ultimately, shop. For that reason, in retail, incentives often take the form of money off the friend’s imminent spend or a gift with purchase etc. But in other industries, like telecommunications, insurance, energy etc., it’s more common to give cash, bill credits or third party vouchers. In either case, don’t underestimate the importance of the friend incentive as our Reward Revolution research also found that almost 70% of people reported that they wouldn’t act on a referral from a friend without an incentive. And, interestingly, research from Harvard found that, when given a choice or keeping, sharing or giving all the reward to the friend, the majority of respondents chose to give all the reward to the friend. The explanation being that a referrer doesn’t just want to give their friends a good recommendation but a good deal as well.
There’s a secondary benefit that’s almost as important: rewards foster loyalty – in two ways. First, emotionally or, more particularly via the psychological principle of reciprocity. The customer scratches your back, you scratch theirs and, the next time they go shopping, you’re more likely to be destination number one. And, secondly, practically. More often than not, rewards take the form of money off subsequent purchases, gift cards or loyalty points, and these foster loyalty as they can only be used to purchase again from your brand. Alternatively, a reward can be a complimentary product or experience that helps a referrer get more value from the product or service, such as a free mobile for a SIM-Only telecoms brand or a free month of premium sports added to an OTT subscription. (see below). “But, generally speaking, they tend to fall into the following five categories: Money off subsequent purchases Third-party gift cards and vouchers Gifts with purchase Account credit Loyalty points Cash rewards” So, what rewards work best when it comes to motivating people to share with their friends? Well, this might sound obvious but, besides the sheer feel-good sensation of introducing your friends to something you hope they’re going to love, the best rewards are rewards people want. Not rewards people think they might want someday in the future. Not rewards people think other people might want. But rewards they themselves want – right there, right then. So if you don’t know what kind of rewards your customers would like, why not ask them via a survey? And, given that our Reward Revolution research found that, on average, consumers expect to receive a choice of between 3 to 4 rewards for making a referral, why not give them a choice of 3 to 4 different rewards? You can learn which ones appeal to customers, remove the unpopular ones and try new ones etc. No one’s going to refer a friend in the hope of getting something back six months down the line, and that’s why money off subsequent purchases, account credit and loyalty points are a bad idea if your average customer only occasionally shops with you. If, for example, you sell cars or mortgages or lengthy mobile phone contracts, it’s significantly more effective to offer something which referrers can get their hands on and use more immediately, such as cash rewards, third-party gift cards or vouchers redeemable at marketplace retailers like Amazon or media stores such as iTunes and Google Play. Our Reward revolution research compared the attractiveness of different types of rewards across different countries and demographics – it’s an interesting read!
That’s where testing comes in. Run a series of A/B tests, so that you can identify the perfect balance between engagement and cost efficiency. You may find that lowering the reward barely decreases the number of people sharing with their friends. Alternatively, you might find that a small increase in your referral rewards has a minimal effect on your bottom line but greatly improves participation. “Whatever you’re offering, it’s critical that it’s unique and special – that it actually has value.” Try to make the value of your reward concomitant with the value of the acquisition. If someone refers a big-spending friend, give them a bigger reward than someone who introduces a friend with less deep pockets. You can even automate this, as the mobile network VOXI does – awarding different grades of reward depending on the value of the contract the referred-in friend purchases.
Friend incentives are there to do one thing: ensure that, when a friend clicks through from a referral, they continue their journey and, ultimately, shop. For that reason, in retail, incentives often take the form of money off the friend’s imminent spend or a gift with purchase etc. But in other industries, like telecommunications, insurance, energy etc., it’s more common to give cash, bill credits or third party vouchers. In either case, don’t underestimate the importance of the friend incentive as our Reward Revolution research also found that almost 70% of people reported that they wouldn’t act on a referral from a friend without an incentive. And, interestingly, research from Harvard found that, when given a choice or keeping, sharing or giving all the reward to the friend, the majority of respondents chose to give all the reward to the friend. The explanation being that a referrer doesn’t just want to give their friends a good recommendation but a good deal as well. “It’s also because you need something referrers are going to be prepared to share with their friends.” Are you running a referral program to boost your sales or your acquisitions? If it’s the former, you may not be so concerned about lapsed customers returning to your site and shopping, and that may be worth incentivizing. But, if it’s the latter – and it’s crucial to you that all referrals are brand new customers – be sure to cross-reference the friend against your existing database before handing out incentives. Often a good referral platform will automate this process for you and may even assign different incentives depending on the nature of the referred-in customer (new / lapsed / frequent, or any other relevant segments).
Well, here’s everything we know. And, now, you do too! “You’re rewarding referrals, but referring isn’t the action rewards should be designed to trigger.” In an ideal world, everyone would walk down the high street with a sandwich board strapped to their shoulders, proclaiming their love for the hot new Brand X they’ve discovered. But, in this world, a little inertia-zapping goes an awfully long way – and that’s where rewards come in.