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2 Crucial Steps You Need to Take Before Launching a Referral Program

Referral marketing is a powerful way to increase traffic to your website and awareness of your brand. It’s more cost-effective than traditional advertising and brings in higher quality leads to your business.

But it’s not enough to simply install a give $20, get $20 program and hope that customers will use it. In order to unlock the full benefits of a referral marketing program, you need to do two things first:

  • Evaluate your customer relationships
  • Plan a promotional strategy that drives specific KPIs

These two steps will help you identify which incentives will most appeal to your customers and which levers to test to create successful adoption of your program.

Evaluate Customer Relationships

Define Your Best Customers

Your best customers are the most likely to share your brand with their friends. Understanding your best customers will help you deliver a more personalized customer experience to them and encourage similar behaviors in other customer segments.

There are a number of ways to identify your best customers. If you want to cast a wide net, you can conduct a simple NPS (Net Promoter Score) survey on your ecommerce site or email newsletter. NPS is based on one question: “How likely would you be to recommend [this company or product] to a friend or colleague?”

While straight-forward, NPS remains an industry standard for measuring customer loyalty and does not require too much time or effort from customers.

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Source: Qualtrics

Once you identify your promoters (customers who gave a 9 or 10), you can start to see patterns in their behaviors. Perhaps they all were acquired through a certain channel, purchased a certain type of product, or received a certain level of support. It’s just as important to identify what behaviors make a customer a detractor (customers who gave a 0 to 6) and seek to minimize these experiences.

If you don’t have a rich trove of customer data, you can add more to your NPS survey and ask customers about their behaviors. This will require more time from customers, but will can make data collection and analysis easier. You may want to offer a reward for the survey if it takes more than 5-10 minutes to complete.

If you want to cast an even smaller net or already know a handful of “best customers,” you can reach out to them directly and ask them to fill out a customized survey or hop on a phone interview. Offer a gift card as a thank you, especially if you’re asking for a phone interview.

As you’re surveying customers and/or analyzing customer data, here are some helpful things to look for:

  • How did they hear about your brand?
  • What are their job roles, responsibilities, and challenges?
  • How do they identify your brand?
  • What products do they typically buy?
  • How frequently do they make purchases from your business?
  • How do they hear about new products?
  • What social media platforms do they use regularly?
  • What do they like and dislike about your brand?

Look out for trends that can help you identify your best customers and distinguish them from “bad” customers.

Understand Your Customers’ Motivations

Once you understand who your best customers are, dig into their motivations and what they would most want in a referral program.

Referral programs do not all look the same. Some customers may prefer direct discounts they can use immediately, while others are motivated by the chance to build up points for a greater reward.

Again, don’t be afraid to reach out to your best customers and accept feedback. Customers who feel they have a say in your brand are even more likely to be high value customers and be more invested in your brand further down the line.

Plan a Promotional Strategy that Drives Specific KPIs

Like other sales and marketing processes, a referral program can be seen in terms of a funnel, and every step of the funnel can be optimized.

The main steps in a referral program are:

  1. Referral link is shared
  2. Referral link is clicked
  3. Purchase is made

Before launching a referral program, plan a promotional strategy to target and improve each of these conversion points.

Total Link Shares

Total link shares is the number of times customers share a referral link, regardless of the impression (it might reach one friend—through an individual email or message—or it may reach thousands—through social media or a public blog).

First, make sure that customers understand how the program works. By properly teaching customers how to use your referral program, they are more likely to share their links with relevant audiences.

Once customers understand the benefits, make it as easy as possible for them to share through different channels. Ensure that customers can easily:

  • Copy and paste referral links
  • Generate a personalized email complete with subject, body, referral link, and benefits
  • Generate a social media message that requires just one or two clicks to share

A dedicated rewards page is the best way to help customers access their referrals easily and keep track of what they’ve earned. Scotch Porter’s rewards page is simple but effective. Customers can easily share referral links any time they want, and access to their points history can make earning points more fun and addicting.

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Finally, optimize how you promote the referral program on your website and through email campaigns. Test different CTAs and copy on different places on your site and carefully track what converts best. Consider general email blasts and post-purchase email targeting.

Chase Sapphire’s promotional email is colorful and explains the referral program clearly and succinctly. The structure of the program (“earn up to 50,000 bonus points through referrals”) is also unique and catches attention. People who use the Reserve card are well versed in the value of 50,000 points because that happens to match the value of the initial sign up bonus. Rather than explain new metrics to customers, Chase establishes a sense of familiarity and looks to capitalize on it. 

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Share to Click Ratio

Share to click ratio is how many people click on a link to how many links were shared. The higher the share to click ratio, the more enticing your referral program appears to a new referral. Factors that affect the share to click ratio include the copy on the referral message, the incentive offered, and the channel.

ClassPass sends referred customers a motivating message that lets them know what the reward is, who referred them, and why they should join ClassPass. All of these components can be tested vigorously to increase the share to click ratio.

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Click to Purchase Ratio

The click to purchase ratio is how many people click on a referral link and make a purchase to the total number of people who click the referral link.

If referred customers bounce immediately after clicking a link, focus more on testing different landing pages and copy when referred customers click on a shared link. Test including their name or their friend’s name. Remind them of the offer and the value proposition. If there are any restrictions, let them know.

Robin Hood’s landing page for referral links promises a free stock and includes a bit of intrigue and personalization. They include the friend’s name and show a sample of stocks new users could get if they join. The “mystery prize” tactic works well with stocks, but it might not make sense with other products that depend more on customers’ tastes. Robin Hood’s landing page also includes an alternative CTA to “Learn More.” While this could be distracting for other companies, it makes sense for financial products that may be perceived as riskier.

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If referred customers browse a few pages and then leave, focus more on subsequent email campaigns and retargeting efforts to get them back. Uber’s referral outreach email warmly welcomes new customers and lets them know how the product works.

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Source: Really Good Emails

Launching a Referral Program

A referral program can boost your customer experience and make customers really love your brand. Taking the time to understand customer relationships and develop a promotional strategy is crucial to the success of a referral program and will save you a lot of time once the program is up and running.
When you’re ready to launch your referral program, check out our tips for designing programs that get results.

Nikhil Naidu • December 15, 2017


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