Social Referral Model Drives Customer Acquisition

By Vijay Sundaram, CMO, SocialTwist

When the Internet first started picking up steam and becoming a regular part of our everyday lives, people had the luxury of trying new marketing ideas/technologies that they didn’t know much about, hoping that they would work out. They could afford to do this because the Internet was still an in its infancy and the potential for return on investment was huge. Today, such luxuries don’t exist because the Internet has become a regular part of our lives. It is our reality. With that being the case, marketers need to know the results they can expect before jumping in with a new marketing technology.

One way to improve projections is to implement a social referral model that can be used by brands and businesses to drive customer acquisition through the referrals of their existing customers. One application of this technology has consumer product companies tie coupons to customer referrals, thereby driving awareness, engagement, and conversion. 

The following example is one approach to measuring the impact of a social coupon program (numbers are averages and will vary across programs).

Imagine you have a coupon budget of $50,000 and want to run a two-tier coupon offer. A two-tier coupon presents two consumer offers: a regular coupon and a special coupon (of higher value) that may be earned if the offer is shared with others. We call these two tiers A/B tests. Let’s assume that the campaign was available on the brand’s Facebook page and through email drops to opt-in lists, resulting in 330,000 visitors. Based on hundreds of similar programs that I’ve seen, on average, 30% of visitors take the regular coupon, 50% take the special coupon, and 20% drop off. Here is what all of that looks like in a table:

So in this example above you can expect 264,000 coupons to be distributed and 56,100 to be redeemed for a total coupon redemption cost of $48,675 (just under your $50,000 budget).

The most important factor here is value gained. In order quantify this, there needs to be a combination of sales and marketing. Calculating actual sales can be determined by the price per product and the amount of coupons that were redeemed. In terms of determining marketing value, that would be the awareness and engagement that was caused by sharing. With the information available to us, calculating this number is relatively simple, since we know exactly which visitors shared offers, the engagement those shares created (clicks), and conversions. CPM and CPC metrics can be used to assign value to these interactions. ROI follows this and you have exactly what you were looking for all along.

Of course, using coupons is just one way to project ROI prior to beginning a marketing campaign, but the thing that is so enticing about it, is that it provides value for the consumers and the marketers. On one end, the more a consumer shares, the more money they save, and on the other hand, the more a consumer shares, the more information a marketer receives. With this influx of information over time, marketers can begin to see trends and gain valuable insight that can help them make accurate projections before jumping into a brand new marketing campaign.

Vijay Sundaram is the CMO at SocialTwist (www.socialtwist.com), a social referral marketing platform that transforms the way businesses and brands recognize, reach, acquire, retain and activate their customers with social connections. A founder of three companies, Vijay has worked to build and grow successful social, mobile and enterprise software businesses including GT Nexus (www.gtnexus.com), which is among the world’s largest supply chain and trade logistics portals with thousands of participating global companies. Previously, Vijay was a strategy management consultant with Marakon Associates in the U.S. and Europe where he worked with CEOs and business heads in financial services, consumer products and other industries.