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How to build a strong customer referral program [ideas ...
HubSpot Sales Blog
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Additionally, lining up a giveaway or contest with the release of a new product is a great way to create hype and gain new leads who might buy your product anyway if they don’t win. 2. Social Gifting Social gifting is a referral strategy that rewards customers for sharing a gift with their friends, rather than just prompting them for sign-ups. It’s also known as a dual-sided reward structure, and the idea is that both you and the person you refer receive a reward. Source Take Our Place’s referral program, for example. Instead of just offering you a bonus when your friend signs up, Our Place lets you gift a friend a $20 discount off their first purchase. If they take advantage of it, you get reward points. Win-win. Why It’s Effective Social gifting turns the referral into an act of genuine generosity. As the referrer, I feel good about helping out a friend with a discount, and I get rewarded for my efforts. It minimizes the icky feeling that comes with selfishly hunting for a referral. Instead of selling something to a friend, I’m gifting them a genuinely good deal, and we both win. Who It’s Best For Social gifting is an ideal strategy for almost all brands. In my view, most referral structures should reward both participants, and those that offer single-sided rewards are less common in today’s referral marketing environment. If you have a brand that doesn’t typically run sales, a social gifting referral program can be especially effective, since the referral program may be one of the few opportunities to receive a discount. How to Measure the Program’s Success Track referrals with unique coupon codes and referral links. With that tracking information, you can calculate your Referral Conversion Rate, which compares the number of times a referral link is shared or clicked with the frequency at which it’s actually redeemed. “(Number of Referral Link Conversions / Number of Referral Link Shares or Clicks) x 100” Instead, I recommend the following metrics: Referred Customer Lifetime Value (CLV). If your referred customers (brought in by shared values) spend more, churn less, and stick around longer than other customers, that is a huge success. Brand Sentiment. Monitor brand mentions online to gauge the goodwill your charitable referral campaign is generating. If the public perception of your brand improves as a result of your donation-based referral program, that’s a clear win. When to Implement It Donation-based referral programs are effective year-round, but it’s worth giving it a push during the holidays when people are feeling generous (and maximizing tax deductions). 4. Tiered Referral Program So far, I’ve discussed referral programs that offer a flat, transactional reward for an individual referral. It’s a gear strategy, and it can even encourage customers to refer multiple friends. However, I’ve discovered that tiered referral programs are even more effective at encouraging numerous referrals. Similar to a traditional customer loyalty program, a tiered referral program rewards individuals successively as they refer more people, allowing them to unlock increasingly valuable rewards and status as they climb the loyalty ladder. Take Morning Brew, for example: Source Morning Brew is a daily business newsletter that I read every morning, and the success of their Refer-a-Friend program is legendary. They employ a tiered referral program structure based on the number of successful sign-ups you generate. Three referrals get you some free stickers, but 25 referrals earn you a custom Morning Brew backpack, and 1,000 referrals get you a free trip to Brew HQ. Why It’s Effective Tier-based referral programs are effective because they appeal to human psychology: Gamification. Loyalty tiers transform the referral system into a game, where customers can “level up” and progress toward increasingly valuable prizes. Status and Exclusivity.
Additionally, lining up a giveaway or contest with the release of a new product is a great way to create hype and gain new leads who might buy your product anyway if they don’t win. 2. Social Gifting Social gifting is a referral strategy that rewards customers for sharing a gift with their friends, rather than just prompting them for sign-ups. It’s also known as a dual-sided reward structure, and the idea is that both you and the person you refer receive a reward. Source Take Our Place’s referral program, for example. Instead of just offering you a bonus when your friend signs up, Our Place lets you gift a friend a $20 discount off their first purchase. If they take advantage of it, you get reward points. Win-win. Why It’s Effective Social gifting turns the referral into an act of genuine generosity. As the referrer, I feel good about helping out a friend with a discount, and I get rewarded for my efforts. It minimizes the icky feeling that comes with selfishly hunting for a referral. Instead of selling something to a friend, I’m gifting them a genuinely good deal, and we both win. Who It’s Best For Social gifting is an ideal strategy for almost all brands. In my view, most referral structures should reward both participants, and those that offer single-sided rewards are less common in today’s referral marketing environment. If you have a brand that doesn’t typically run sales, a social gifting referral program can be especially effective, since the referral program may be one of the few opportunities to receive a discount. How to Measure the Program’s Success Track referrals with unique coupon codes and referral links. With that tracking information, you can calculate your Referral Conversion Rate, which compares the number of times a referral link is shared or clicked with the frequency at which it’s actually redeemed. “A high conversion rate indicates that your incentive is valuable and that there is minimal friction in your conversion process.” Instead, I recommend the following metrics: Referred Customer Lifetime Value (CLV). If your referred customers (brought in by shared values) spend more, churn less, and stick around longer than other customers, that is a huge success. Brand Sentiment. Monitor brand mentions online to gauge the goodwill your charitable referral campaign is generating. If the public perception of your brand improves as a result of your donation-based referral program, that’s a clear win. When to Implement It Donation-based referral programs are effective year-round, but it’s worth giving it a push during the holidays when people are feeling generous (and maximizing tax deductions). 4. Tiered Referral Program So far, I’ve discussed referral programs that offer a flat, transactional reward for an individual referral. It’s a gear strategy, and it can even encourage customers to refer multiple friends. However, I’ve discovered that tiered referral programs are even more effective at encouraging numerous referrals. Similar to a traditional customer loyalty program, a tiered referral program rewards individuals successively as they refer more people, allowing them to unlock increasingly valuable rewards and status as they climb the loyalty ladder. Take Morning Brew, for example: Source Morning Brew is a daily business newsletter that I read every morning, and the success of their Refer-a-Friend program is legendary. They employ a tiered referral program structure based on the number of successful sign-ups you generate. Three referrals get you some free stickers, but 25 referrals earn you a custom Morning Brew backpack, and 1,000 referrals get you a free trip to Brew HQ. Why It’s Effective Tier-based referral programs are effective because they appeal to human psychology: Gamification. Loyalty tiers transform the referral system into a game, where customers can “level up” and progress toward increasingly valuable prizes. Status and Exclusivity.
Even the best referral program in the world will fall flat without proper execution. You can’t just go live with a referral program and hope for the best; you need to make a plan for who to ask, and when. I start with who. For my band, I look first to our most loyal customers, the superfans who run our fan pages and travel hundreds of miles to see us live. I know they are primed to advocate for us, and when I ask for their help, they usually follow through. For your business, consider starting with your happiest, most engaged customers. They’re likely already advocating for you, and when you ask them for a referral and sweeten the deal with incentives, they will surely follow through. When you ask is also essential. You don’t want to bother people by constantly nagging them for referrals. Time your ask at natural moments. Try popping the question after a positive support interaction, product milestone, or successful purchase for your best chance at referral success. Pro tip: Make a list of your ten happiest customers and schedule a time to reach out for a referral. 9. Create resources to alert your customers. If no one can find your referral program, it might as well just not exist. To maximize success, your referral program needs to be discoverable and easy to share. For me, that means leaning into socials. I post about our program on Instagram and other channels leading up to shows so that fans are always aware of how to claim their perks. The best resources for promoting your referral program depend on the channels you and your customer already use, but here are some assets you should definitely consider: A dedicated landing page that explains your referral program and how to join. Emails and newsletters. Social media posts and graphics. Scripts for sales and customer support teams to use when promoting the program. Blog posts that highlight success stories and promote your referral program. “You can see where customers came from, what platform they converted on, and who referred them.” Your referral incentives are a way of thanking customers, but I think it’s still important to offer a genuine thank you to show how much you value them, whether they are new or old customers. For me, “Thank you” is usually the first thing out of my mouth when I meet a fan of the band. Without them, none of what we do is possible, and I think it’s crucial that they feel that through our words and actions. Showing appreciation builds trust with your customer base and demonstrates to new customers that they made the right choice, which encourages them to continue referring others. 13. Improve your referral program. A referral program isn’t a set-it-and-forget-it type of thing. It should be an evolving program that you tune up and refine over time. I started small with my band’s referral program, and specifically took note of which incentives were the most impactful. Initially, I thought that free stuff like stickers, guitar picks, and other small items would be the most popular. However, I discovered over time that access to exclusive merch was by far the most popular incentive, even though they still had to buy the T-shirt. We now lean heavily into designing limited-edition merchandise items to commemorate individual shows and tours, which are only accessible through our referral program. You should apply the same type of analysis and iteration to your referral program. Here are some ideas to consider: Track results to determine which incentives and channels are most effective in converting customers. Collect customer feedback to learn what they like and what they want to see in the future. Experiment with new incentives and fresh messaging over time. Your referral program is a living system that should evolve in tandem with your business, your product, and, most importantly, your customers’ needs and desires. Pro tip: Schedule a quarterly review of your referral program to analyze results and discuss new incentives, strategies, and initiatives.