How to get more referrals in 2018
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Naturally, something we're asked about a lot is how to get more referrals. Referrals are key to growing any business, regardless of size, industry, location, or market. While buying patterns have changed dramatically, what hasn't changed are the basic principles of human psychology: people are more likely to buy from people that they like and trust.
The stats about referral marketing only validate this long-held belief: people are 4 times more likely to buy when referred by a friend, the lifetime value of referred customers is 16% higher, and 14% (yes 14%!) of customers who visit a referral page take an action.
But with all this knowledge about the value of referrals, only 30% of companies have a formalized referral program. This means that the majority of brands have a significant untapped growth opportunity sitting right in front of them.
In this article, we’ll dive into everything you need to know for how to get more referrals 2018.
What’s changed in 2018?
The rise of on-demand services like Uber and AirBnB, that rely largely on referrals to grow, have introduced millions of consumers to a new breed of referral programs. It’s become much simpler for consumers to refer and be referred to products and services… and the incentives are better.
We’ve been working closely in the referral space for more than 6 years and have seen a ton of change during that time. Here’s a couple of the big things we’ve noticed in 2018.
Consumer expectations are higher: It’s no secret that buyers are more informed in 2018 than they ever have been, and there are also more choices available than ever before.
With access to information always at the tip of our fingers, the power has shifted to buyers at unprecedented rates. The expectations of your customers and potential customers are only getting higher. A majority of buyers are most of the way through the buying process before they even interact with your company in a meaningful way.
Growth automation: When we consider the rise in consumer expectations, it’s obvious that marketers need to re-frame how they think about referral programs. We’re seeing an increased desire for more than just give/get referrals. Companies want A/B testing, tiered rewards, detailed analytics, and programs for affiliates and partners.
How to get referrals is no longer just about the top of the sales funnel; it’s about increasing revenue per customer from acquisition through to retention.
An example of growth automation might be something like an acquisition program where you’re targeting customers based upon a characteristic like where they’re located, what time of year it is, or how they interacted with your website in the past. It would include revenue optimization programs, referral programs, and win-back programs.
Know how to measure your referral programs
Before we get to the good stuff - how to get referrals - you need to start with the end in mind. We can’t stress enough how important it is to understand what success looks like before kicking off any referral programs. After all, you can’t improve what you don’t measure.
When it comes to referral programs, there are a few key KPIs you should be watching closely (hint: they’re not that different than the marketing metrics you’re already measuring). Setting benchmarks for these metrics is difficult. Businesses across all sizes and industries run referral programs with varying levels of success.
Our recommendation is to align your expected referral results with those of your other marketing efforts. If you’re seeing a 10% conversion rate with other digital efforts, it’s fair to expect conversion rates in your referral programs to be similar.
With that in mind, here are the key metrics you need to measure for all your programs:
Marketers are used to measuring all sorts of conversion rates, so this one should be easy. When looking at your referral programs, you want to measure conversion rates at different points throughout the process so you can understand where there’s room for improvement.
Not only do you want to know the rate that everyone in your program is sending referrals, you want to know how many of the sent offers are accepted, as well as how many of the accepted referrals turn into paying customers.
Lifetime customer value (LTV)
The lifetime value of your customers is critical: it informs how much you can spend to acquire, onboard, support, and retain customers. If you’re doing referral programs right, you should be seeing an increase in LTV.
Referrals don’t just help you acquire new customers, they incentivize the referrers to spend more and interact more with your product or service.
Customer acquisition cost
Just as it’s more cost effective to market to existing customers and gain a larger share of wallet, it’s more cost effective to acquire new customers via your happy, engaged users than it is to try to convince a completely cold prospect to buy.
The data required to properly monitor these metrics typically lives in multiple systems at most companies. Most organizations we deal with house key customer data in their CRM, engagement details and touchpoints in their marketing automation or email program, and sales history in their billing system.
This means that you need an integrated solution for running and measuring your referral programs to help you realize better results and understand when adjustments need to be made.
Organizations who have locked down how to get referrals are able to lower their customer acquisition cost significantly. We hear about the importance of social proof all the time, and it’s significant. It takes more effort and money for you to convince someone of the value of your product than it does a trusted friend or colleague.
How to get more referrals: 6 strategies to drive growth in 2018
1. Create a killer customer experience
This one may seem obvious, but it’s critical to being successful with referrals. We know the old adage that someone is far more likely to tell friends and family about a poor experience than they are a good one.
This means the bar is even higher. If customers are more likely to share bad experiences than good ones, you need to create an amazing customer experience. This means that everything from your product experience to order processing to customer support needs to be consistent and exceptional.
As a customer, I want to be wowed. And wowed means different things depending on the business you’re in. If I go to an expensive restaurant, my definition of wowed is much different than if I go to a McDonalds.
The expectations of your customers will vary depending on your business, so if you're wondering how to get referrals, be sure to understand what's required to provide an exceptional experience. You need to create an experience so good that everyone wants to tell their friends about it.
2. Remove friction
This one stresses on an earlier point: customer expectations are higher than they’ve ever been. Our tolerance for inefficiency is continually diminishing, so if you want to run successful referral programs, they need to be seamless for both the referrer and referee.
This means a few things:
- Make it as simple as possible to send a referral. Don’t make people jump through hoops to send links to their friends and family or they won’t do it. The more seamless it is, the more likely your customers will be to share.
- Clarity, clarity, clarity. Nothing is more frustrating than being misinformed about what’s required to send a referral and receive your incentive. Be sure that it’s obvious what people need to do to take advantage of the offer, and don’t hide important details in fine print. The last thing you want to do is create a crappy experience at the point a customer is about to refer your product or service to a friend.
- Provide visibility throughout. Similar to ambiguous details, a lack of visibility can make for a poor experience. You want to ensure that both referrers and referees always understand where they’re at in the process.
3. Reach your customers everywhere they are
Gone are the days of either reaching people via phone or email. If you’re like me, you belong to a ton of different platforms that brands can reach you on. In fact, if a brand wanted to connect with me they have upwards of 12 places they can find me online.
This means there are a many ways customers and potential customers will interact with you, and everyone uses each platform a little bit different. Some prefer email for communicating with companies and Facebook messenger for family and friends. Some text friends and family, but like interacting with brands on Twitter. The bottom line is that you need to understand where your customers spend their time online.
If you're thinking about how to get referrals in 2018, you need to be reaching your customers and potential customers everywhere they are. The experience to offer and accept referrals must be consistent across social media, email, and in your products.
4. Get granular with your targeting
We hear marketers talk about the importance of personalization A TON. For too many, this still means simply pulling dynamic fields into emails (e.g. Hi <first name>). When we talk about personalization, we mean getting granular with your referral program targeting.
It’s about understanding your customers and business. If you offer ride sharing, you may know that certain events or festivals are a great time to offer referrals. You’re more likely to reach people that need transportation, so offering a targeted ride discount referral should result in higher conversions.
Again, it goes back to having an intimate understanding of how you generate business and the characteristics of your users. Getting granular with targeting will allow you to drive higher conversion rates and provide a stronger, more tailored experience.
Take the ride share example: if a successful referrer also gets $10 off a ride, it makes their night out that much better.
5. Tiered rewards
The reality is that not everyone loves your product or service as much as you do. Customers come in all shapes and sizes, and have varying levels of interest or engagement with what you’re offering.
This is where reward tiering comes into play. If conversion rates are low in your referral programs, you may not be offering rewards to the right customers.
For example, you’ll probably want include people who have purchased in the last 30/60/90 days, exclude trial customers, and include your customers with the highest LTV. You may even want to offer an exclusive incentive to “VIP” customers (however you define that for your business).
6. Be creative with your incentives
Being creative with the incentives you offer for referrals can not only improve conversions and LTV, it can make for a unique customer experience. While discounts and credits may be great for most cases, they don’t work for every scenario. It may come as a surprise, but non-cash incentives are 24% more effective.
Think about ancillary products that your customers might be interested in. If you were exploring how to get referrals for on online tutoring platform, such as Varisty Tutors, you might want to think about incentives that would benefit students outside of the platform. Perhaps it’s in the form of a credit for books on Amazon. Or an incentive for the parents if you’re dealing with students outside post secondary.
A great example of where you need to get creative with incentives is in the B2B space. While you might be selling to businesses, you’re ultimately dealing with a person. And a discount on a product their company purchases is not likely to excite them. This is why in a B2B situation, digital gift card rewards are a great option.
If you want me to refer your B2B offering, offer me an Amazon gift card… but only if you’re delivering a killer customer experience.
3 brands that are killing it with referrals
Most of us who have used Uber have experienced their referral program: refer a friend with your code and you both get a free $10 ride. And a $10 ride is nothing trivial with Uber.
I remember the first time I used Uber and how excited I was about the referral program. We were in Seattle and our hotel concierge provided a discount code for me to use. It was extremely easy to use and paid for our transportation to a Mariners game that night.
Not only was the referral program ridiculously simple, it provided a ton of value. I not only saved on that one ride, it introduced me to their exceptional customer experience. I’ve used Uber as my exclusive transportation method when travelling ever since.
Typeform is an online tool that lets you build questionnaires, forms, lists, and simple apps with ease using templates and tools. They've been able to drive strong growth with fairly simple in-app referral marketing.
For each referred customer that upgrades from a BASIC version of the software to a PRO or PRO+ account using discount codes sent from your Typeform account, you’ll receive 10% off your bill.
And referrals are limited to users with a PRO or PRO+ account, which helps ensure they’re leveraging customers who are engaged and actively using their product. I.e. they’re targeting the right customers.
Dropbox’s referral program is an excellent example of being creative with your incentives. For each successful referral, you get a boost in your available storage and so does the person who accepts the referral.
What makes this brilliant is that it adds to the value you derive (what’s better than more storage for a cloud file hosting system?), but it also drives use of their product. If you have more storage for the same cost, you’re likely going to use the tool more.
Making your customers work for you
Happy customers are one of the best marketing tools at your disposal. It's great if you can paint a strong vision, but nothing instills confidence like validation from similar customers that are realizing success with your product.
We encourage you to advantage of the strategies outlined above to help grow your business this year. Let us know what you think in the comments. If you like what you read, be sure to share on Twitter, LinkedIn, and Facebook