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Three Powerful Referral Marketing Design Structures Guaranteed to Generate Buzz and Sales

Feb 2nd, 2017

Screw up and you'll almost certainly hear about it...

But do something great and customers are less likely to tell the world how fantastic your brand, product, or service are:

Image via: Marketing Charts

It may not be fair...

But the reality is that brands must work harder and smarter when it comes to inspiring existing customers to engage in the type of word of mouth buzz that results in positive social media sentiment and ultimately sales.

The Price of Silence

The old adage is no news is good news...

But no news, at least the kind your most satisfied and loyal customers have the potential to make, is costly.

In fact, there's a steep price to pay for the silence in which even your best customers are likely engaged in. Specifically, research suggests the vast majority of satisfied customers are willing to refer your products and services to those they influence though only a fraction actually do:

Image via: ReferralCandy

NOTE: Only Growth is a certified ReferralCandy expert and has helped dozens of brands successfully integrate with ReferralCandy.

The cost of passively sitting back and allowing this silence to persist is great. In fact, it can even undo costly branding efforts and erode your ROI.

Your job is to deliberately influence your customers...

Deliberately Inspiring Referrals

Just like a strong CTA on a landing page...

You have to ask for what you want in life and referrals are no different despite a handful of psychological headwinds that can leave you doubting whether you actually need to invest any time or treasure in prompting referrals:

  • Shouldn't customers who love my brand want to tell others about me?
  • Isn't asking customers to make referrals uncomfortable and potentially unbecoming of my brand?

Seeking referrals isn't selfish...

Nor is asking for them a danger to your brand reputation.

Especially when you generously offer incentives in return for referrals. In fact, offering incentives in return for referrals, or the exchange of something of value for something else of value, is nothing more than a transaction similar to a sale.

Importantly, referral marketing is unique in that it actually creates demand rather than simply harvesting it:

Image via: ShopSocially

Lifting conversions and shortening the sales cycle are just two of the myriad reasons why, according to vendors, you can expect to earn $9 for every $1 you spend on referral marketing. Other benefits include higher growth rates and margins:

Image via: ReferralCandy

***WARNING: Referrals Are Just One Component of a Robust Loyalty Program & Must Be Easy to Use

Implementing smart referral marketing techniques is an antidote...

Think of it as a type of medicine brands need to combat the overall decline in customer loyalty. Yes, consumer enrollment in loyalty programs has climbed to an all-time high, growing 26% to 3.3 billion:

Image via: COLLOQUY

However, a closer examination reveals that despite booming enrollment, active participation in rewards programs is declining:

Image via: COLLOQUY

Besides offering rewards that customers perceive as highly valuable, one key to ensuring loyalty programs work is to make them extremely easy to use. If referrals or any facet of a rewards program is difficult to use, it may be doomed. For instance, nearly one third of millennials say they've quit a restaurant rewards program because it was too complicated:

Image via: Software Advice

The idea is to remove as much friction as possible and make referrals a breeze not only to earn points from, but also to redeem. For instance, Swell Rewards, which creatively powers some of the best performing loyalty programs, advises merchants to create a Rewards page that makes it easy for customers to retrieve and share a referral code that may be shared online:

Image via: Perfect Locks

To further reduce friction and increase the effectiveness of referrals...

Users who share a Swell Rewards powered referral link on Facebook or Twitter are also offered an opportunity to share an automatically populated piece of content illustrating how others can earn rewards:

Image via: Rhone

Now that you know exactly how to make earning referrals easy for customers...

Here are three powerful referral marketing design structures you can use to generate buzz and sales:

#1: The Double Sided Referral

Instead of a single carrot...

You're dangling two carrots when you employ a double sided referral strategy; one to the referrer and one to the referral.

This design structure can be extremely effective because both parties, so long as the reward you offer is perceived as valuable, share an interest in doing exactly what you want. In other words, they have to work together to reap the reward you offer which can significantly lift the number of referrals you receive.

Two sided referrals work especially well for merchants who have created strong brands:

Image via: Lead Boxer

Online storage provider Dropbox is credited with executing one of the most successful double sided referral marketing programs. The program, which offers both the referrer and the referral additional free storage space, is responsible for accelerating the company's growth:

Image via: Dropbox

Note the outsized role referrals played in the 15-months Dropbox went from 100,000 to 4 million registered users, a growth rate of 3,900%:

Image via: Referral SaaSquatch

It's a company built on referrals as its AdWords CAC of $233-$388 simply wasn't economical for a service that costs $99 a year. However, implementing a double sided referral program significantly reduced CAC by resulting in the following:

  • Permanently increased sign ups by 60%
  • Resulted in 2.8 million direct referrals sent over a 30-day span
  • The referral program resulted in 35% of daily sign ups

NOTE: There are a myriad single sided incentive programs that have been successful though vendors argue double sided programs with their dual incentives often perform better.

#2: Cash For Referrals

It's hard to top offering cold hard cash...

It's why Shopify Plus merchant DapperTime, an online seller of unique mens timepieces, doesn't even try. Instead of discount coupons or points, the company rewards customers who make successful referrals with $10 cash:

Image via: ReferralCandy

Recently the company added a twist by allowing customers, at least in theory, to earn an unlimited amount of cash by offering them a percentage of whatever their friend orders:

Image via: DapperTime

The program has been such a success in generating successful referral purchases, one of DapperTime's biggest referrer's recently earned $1,000.

#3: The Customer Chooses The Reward

Respect isn't just a hit song sung by the iconic Aretha Franklin....

It's something ecommerce merchants are baking into their referral programs.

Customer satisfaction is on the decline. Regardless of whether customer service is performing sub-optimally or customer expectations have increased or a combination of the two is responsible for this trend, customers yearn to be respected.

What better way to show your respect than by offering them choice.

In the context of your referral program, this means allowing the customer to decide exactly how he or she would like to be rewarded for referring friends.

Cash, credits toward merchandise, or a commission?

It's up to iStockphoto's customers to decide:

Image via: Referral SaaSquatch

By offering customers a choice, you dramatically improve the odds that your rewards excite and inspire customers to make referrals. Providing customers a choice allows them to choose the reward type that best aligns with their sense of value and lifestyle.

NOTE: Consider adjusting the value of the rewards options you offer to see which options are most popular and how each option impacts your margins when considered in the contexts of AOV and CAC. This positions you to still offer customers choices while simultaneously steering customers to the choices that are better for your bottom line.

Just Remember...

Referrals are not likely to happen on their own, at least not at scale.

You must deliberately influence the process if you want referrals to drive growth and customer loyalty. Consider structuring your referral marketing programs in the following ways:

  • Double sided programs that offer incentives to both the referrer and referral
  • Incent referrals with cash or even a percentage of the referral sales they generate
  • Offer customers who make referrals choices regarding how they'd like to be rewarded

Your existing customers, or at least those who love you, want to tell those they influence about you, your brand, or offering.

Give 'em the nudge they need and create demand where once there was none.

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