How to develop a winning referral marketing strategy

Just about any business can develop and deploy a referral marketing strategy that will generate new business and grow consumer advocacy.

This article will take you through a quick introduction to referral marketing, what makes it work so well, why your referral schemes might have failed before, and how you can get started with referral marketing yourself.

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What is referral marketing?

Referral marketing is incentivised word-of-mouth. You use existing customers to introduce friends and family to your brand.

Alternatively, you might ask influential figures whose audience mirrors your own customer profile, and ask them to drive referrals to your brand.

In return, the person doing the referring gets a reward. Depending on the details of the scheme, the new customer may also get a reward when they convert.

Referral marketing is a powerful, effective technique when used properly. It taps into the good reputation you already have with existing customers, and uses that reputation to recruit new customers that come to you with the trust and confidence of a referral from a friend.

Why is referral marketing so powerful?

As we discussed earlier, referral marketing uses existing relationships.

For centuries, word of mouth has been one of the most powerful and effective ways to find new customers. Customers who have good experiences tell their friends about your work, and they come to you for business.

Because those customers come through a referral from a trusted friend, family member, or influential celebrity, it’s easier to build a trusting, emotional connection with those customers.

The power of referral marketing is shown in the stats:

• 83% of consumers trust recommendations from family, colleagues and friends about products and services.
• 74% of consumers identify referrals as a key influence in their spending behaviour.
• 91% of B2B customers are influenced by word-of-mouth and referrals when making choices on spending.

While the benefits are clear for anyone to see, it’s just a question of how to get the most out of them.

 

What’s the problem with most referral marketing strategies?

When companies do implement their referral marketing campaign and it still fails, there are some common failure-points. We’ve listed a few here, and how you can approach them with a hot-fix.

1. Customers aren’t getting motivated by your prize

Your reward value could be too low, your reward choice be poor, or you may need to improve communication of your sign-up reward.

2. Pulling the plug on a new scheme without troubleshooting the teething problems.

If a referral scheme doesn’t hit the ground running, be proactive about tweaks and fixes to improve performance. This preempts skeptical leadership from moving to pull the plug too quickly.

3. Broken links in the new customer process.

A poor new-customer experience will be a big roadblock to getting new business in, regardless of your rewards. Consider a “mystery shopper” approach to your company and watch someone new to your business navigate the processes.

Combined with data on page abandons, figure out where the roadblocks are in your new-customers processes and find a way to alleviate them.

4. You don’t have the referral base to get started

Referral marketing works best for companies with the customer base to ask for referrals. If you don’t have that base yet, then you need to be more aggressive about actually earning the referrals.

That could either mean increasing reward value, or reaching out individually to new customers after they’ve been with you for a while and asking how they’re feeling, and if they’d like to offer a referral.

5. Users don’t trust your brand

If there’s an issue of trust coming from referred customers, try to include user testimonials in the marketing material that goes out to a new customer. If you don’t have any approved user testimonials to hand, consider checking any review sites that you might have been featured on.

Customers leaving reviews have volunteered them to the public domain, which lets you make use of them (as long as that use doesn’t violate any terms of service with a provider).

That said, if you’re a B2B business with a strong client focus, it’s worth a courtesy call before featuring someone’s review on your website as an endorsement.

Dealing with internal objections to referral marketing

In addition to these issues above, a lot of businesses that would benefit from a referral marketing scheme end up letting the idea die on the vine. And it’s often because their leadership doesn’t make it a priority.

When we talk to our clients about developing a referral marketing scheme, we often hear some common objections from skeptical leadership. They include objections like:

• The tech is too difficult to implement
• Paying for referrals puts them off
• The time spent building it is better spent on other activities
• These aren’t complaints unique to referral schemes. At their core, a lot of rejections are

As with many other strategies, an initial difficulty, or even failure, shouldn’t be fatal for a good idea. A lot of great referral marketing schemes also never leave the draft page they’re written on.

Many more aren’t given the time to breathe and mature before being dismantled and sold for parts.

Good planning, good research, and good advice are often the difference between schemes that struggle and schemes that succeed.

Focus on fundamentals of customer experience first

No matter how good your referral marketing strategy and approach are, they need to be underpinned by fundamentals.

These fundamentals make it a no-brainer for existing customers to recommend you to their friends and family, and make it easy for the new customers to stay once referred.

Before you decide to start using referral marketing, make sure your fundamentals of customer experience, product quality, and customer service are top-notch.

When you ask customers to stake their reputation, either professionally or personally, on referring your business, you have to make sure your have these areas well-covered.

How to implement a simple referral marketing scheme

This section will take you through some simple to design, and easy to implement referral marketing strategies that any business can think about putting into practice.

 

Email customer referral marketing schemes

Simple email referral marketing

Email your customers to ask for referrals, offering rewards for successful referral marketing. These schemes are a boilerplate, entry-level approach that many companies depend on to generate new business.

They’re standard because they’re simple to design and execute. You can put together a simple email referral scheme that (almost) runs itself with basic email marketing software. Start by sitting down and having a look at:

• The amount of customers you have
• How many customers you expect to sign up
• How much you expect a new customer to be worth

On the back of that, establish what value  reward you want to pass on your referring customers. Ideally you’d split your incentive across the referring customer and the new customer.

Then build your campaign. The process itself isn’t complicated if you’re familiar with email marketing software.

1. Start by generating a web form

They’re forms that take details, and trigger an action. In this case, you’re triggering an email. Most email marketing platforms let you generate them as part of a standard package.

2. Create a landing page

Take this web form for your referral scheme and host it on a landing page. Use the landing page to really sell the referral. Outline the reward your referring user will enjoy if their friend or family member becomes a customer.

If possible, offer the referring user the chance to send a personal message to the person they’re referring. Referral schemes are a variation of word-of-mouth, so letting your existing customers talk will personalise the message.

3. Send the link out

Then send a link to your existing customers promoting your referral scheme and linking them to your new landing page. You can do that with the same email marketing software.

4. Triggered emails

That landing page’s web form should trigger two emails. One email goes to your existing customer to express your sincere gratitude for taking the time to refer your company. The second goes to the person your customer referred.

In the second email, introduce your company and make it clear you’re in touch because a friend referred them. Go over your selling point and invite them to sign up. Also, if you can, include that personal message of recommendation from your existing customer.

Link through to a second landing page promoting your product, and driving home the reward they’ll receive.

On this second landing page, include another web form. This web form is the start of their user journey. Here you’ll gather their details, ask their permission to use those details, and take the name of the person that referred them.

5. Query your data

Run a query on your database for the new customers that came in through those web forms. This is usually a yes/no process. Match up the existing users with those that referred them and distribute rewards.

If you’re a dab hand with your databases, you can automate the last part. But like we say: a good scheme that exists is better than the perfect scheme that never goes live. Don’t be afraid to go manual while you learn.

Refine your audience to get more

Filter your audience down to generate quality leads for your referral scheme. Find recent happy customers, customers with glowing Trustpilot reviews, or clients with a successful recent project delivery. Asking them to refer increases the chance you’ll get quality customers, not just reward-chasers.

And why does that matter? Because…

Better referrals make for better clients

The advanced ideas revolve around generating higher quality new business. While they all pay you the same, the reality is not every client or customer is equal.

Better customers understand and value your product. That means they need less support from your team. It also means they get the most out of what your company does. This improves your reputation as a provider when other consumers or companies interact with them. Quality customers mean less stress, a better reputation, and a higher likelihood your existing business will recommend you to others.

Social media referral marketing

A simple social word of mouth referral marketing scheme

The most simple approach to a social media referral marketing scheme is to take the links to your referral scheme page and push them to your audience on social media.

If you can spare the budget, considering promoting the referral marketing scheme to your existing network. On today’s most popular social networks it’s difficult to reach your entire audience, and paying to make sure your content reaches your fans has become more normal.

Go further by tapping into existing online audiences

A referral scheme is, essentially, word of mouth. But in 2021, we have another layer of complexity to word of mouth – online influencers and content creators.

Good influencers, working in a quality partnership with your brand, can elevate the profile and sentiment of your company among an enthusiastic user base.

Rather than rely on lots of your existing customers to make referrals, rely on one influential customer to reach lots of them at once.

You will still a need reward budget, but in this case the reward budget will partly go to your influencer as the referring partner. You track referrals from the influencer back onto your site using tracked URLs and custom referral codes.

How to get started

Use a media monitoring service to find customers talking about your brand or products on social media. If they’re positive, speaking to a significant audience, and represent your brand well, reach out.

Establish a quid-pro-quo arrangement. Equip them with the products and resources needed to improve their content around your brand. And be sure to promote their content through your own channels where possible, too.

The arrangement puts you in front of an audience with implicit endorsement of someone whose opinion they value. To encourage your customer’s audience to become customers, include discount codes or rewards for any conversions that come from their content.

Can’t find anyone talking about you?

Alternatively, if you don’t know who’s talking about your brand, or you need to get the conversation started, reach out to an influencer service. They work as a go-between to find the right people and get them talking about your brand.

You work with them to put great content together that reflects your brand in the right light, and they push that content out to existing, enthused audiences.

Incentive platforms for automated referral marketing

Specialised platforms make it easy to run more complicated incentive and referral marketing schemes by taking the need for complicated development work out of the equation.

This is ideal if you want to run a customer referral program when you don’t have someone in your company with the skills to put together the emails, web forms, databases, and landing pages required.

Platforms make incentives simple

Use a referral platform, like our own Engage platform, to send out a referral request to your email database.

Depending on the platform you use, the process will be different. The luxury of having the process taken care of by the platform is you can focus on the referral basics, like how you’re going to communicate the scheme to your audience, and how you’re going to reward them referring new customers for you.

Get your audience right, get your messaging right, and get your rewards right. Then let the scheme go and catch your new business.

Points banking changes the game

This one is taken straight from the handbook of our Engage platform. Instead of giving rewards for a referral, give points. The points are eventually traded for rewards, but it opens a unique possibility – doing another referral and banking the points over time for big rewards.

Or combine a purchase, a referral, and long-term loyalty, to bank even more points. You can choose to have points bank for any amount of time you like – it’s your platform, after all.

By banking points for every successful referral, your customers compete against themselves for a bigger reward. That makes the customer more invested in the referral marketing scheme and more likely to advocate for your business.

Introduce a leader board and a reward for the most referrals in a quarter, and your customers are competing against each other, too. The rewards will always get customers interested in referrals, but you can keep them hooked in with competitions and bigger rewards.

These are all modules you could activate in an incentive platform and enjoy.

Take advantage of reporting and data

Another advantage offered by your platform is capturing data. Right off the bat that gives you the power to do two things:

1. Identify and celebrate the super users that bring the most referrals, and the highest quality of referrals.
2. Take the guesswork out of your scheme. When you go to close a quarter’s worth of incentives, you have data and reports to reflect on. No more guessing.

For most companies this data just slips away. Not everyone has the knowledge or the skills to capture and use the data they generate. Platforms make it simple to find, house, and act on that information.

On-site referral marketing techniques

If you don’t ask, you don’t get. If you generate plenty of web traffic, lean into what’s already at your disposal and ask your users for referrals.

Simple on-site referral marketing

For a simple on-site referral scheme, use a similar process to the email scheme we mentioned earlier.

Build a web form in your email marketing software. The web form will trigger the referral emails we mentioned earlier.

Insert the web form on your site alongside a message prompting the user to make a referral, offering a reward for both parties when the referral spends money. When the user becomes new business, you marry their referral up to the referee and distribute rewards.

Simple enough when you know how, right?

The next level

Instead of offering a traditional reward or discount, offer free products. For instance, if you sell access to software, offer a free month for new customers.

Consider also offering a free month for customers that generate multiple referrals. For instance, if your customers can generate three successful referrals, their next month’s subscription is free.

How much you offer should be scaled against how much it costs you to administer the accounts for the referral clients. Unfortunately we can’t make that decision for you without learning more about your business.

Pick the right rewards for the deal

Gift cards and vouchers

We stock and sell cards and vouchers (and reward codes) because we know they work. And our thousands of clients agree.

They make it incredibly simple to incentivise a diverse user base to get involved in your referral marketing schemes. Let the audience pick their own rewards and they’ll always have a gift they’ll love.

When you’re trying to motivate someone to action, cards, codes and vouchers make a great bet.

Merchandise

Merchandise is a simple, but often an extremely effective approach. Desirable consumer goods like tech, design apparel and sporting equipment are cheap heat. They’re desirable enough to spring the right audience into action.

Or, as we pointed out earlier, if you sell software, that also makes a great reward. Particularly anything sold on a SaaS model – the easier it is for someone to get started, the more likely they are to stay.

Travel

Travel generates intense motivation. One of the most inspiring and tantalising prospects for anyone is a holiday. Especially when it’s a trip they couldn’t have arranged for themselves.

And you don’t have to book everything yourself. Just put the budget aside and a provider (like our Love2shop Holidays team) will take care of all the booking.

Big ticket prizes

If your business is in life’s biggest one-off purchases – property, cars, white goods – a £20 gift card just doesn’t feel like an adequate reward for bringing new customers in.

That’s where our big rewards excel. We can offer exclusive experiences like skydiving, travel or supercar driving. Or VIP events, like big sports events.

They’re the kind of rewards that make sense when your customers bring thousands of pounds of business to your company.

Summary

If you take away nothing else from this article, take these four points.

Referral marketing is:

• An effective customer acquisition tool.
• Under-utilised due to perceived technical hurdles.
• Easier to implement than many businesses think.
• Easily refined and improved over time.

If you have any specific questions, you’re welcome to get in touch and ask. You can call us or use the web chat on this page during working hours, or you’re always welcome to send us an email.