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Referral Marketing’s Golden Rules

  • Written by  Matt Roche, Extole

1extoleFor many marketers, referral marketing (not to be confused with advocate marketing) is an afterthought not worth doing if they’re not going to hit the viral growth of Airbnb and Paypal.

That’s a huge mistake.

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Referrals reach people you otherwise couldn’t, but it only works if you give it the attention it deserves. The key is to look at your referral marketing program from the customer’s perspective and ask how you can make referrals a no-brainer.

1. Introduce Referral Early and Often

Refer-a-friend programs aren’t a state secret. If you have one landing page and a small button on your home page, don’t be shocked when people don’t share. You need to present the referral opportunity early and often in the customer journey if you want your customers to actually share.

Uber has one of the strongest referral marketing programs out there, helping fuel the company's aggressive expansion. Their strategy is simple: place the referral program front and center. Every subsequent time you open the app, you see the opportunity to refer right there on the main menu. Customers have to know they can share and be reminded frequently before they actually do it. Referral is part of the Uber brand promise.

2. Design Referrals to be Seamless and Easy

Too many referral programs make customers jump through unnecessary hoops. They force customers to type in referral codes by hand, or create an online account. Those extra steps are where it’s easy to lose people.

Think about how Amazon revolutionized online shopping. They made it possible to buy online with a single click and have it delivered two days later. There’s nothing easier than that, and ease builds customer loyalty.

Affiliate referral programs are so powerful because when customers refer friends, it taps into the implicit trust of word-of-mouth recommendations. A well-designed referral program needs to be geared toward making the action of sharing as easy as talking to a friend.

3. Make Referral Happen Everywhere

There are many ways consumers can engage with your brand — laptops, tablets, smartphones, etc. The one constant is that they demand immediate gratification. It’s not just a nice-to-have — it’s the bare minimum expectation.

People need to be able to refer whenever the mood strikes. They could be at home, on the bus, at a bar — wherever. It’s your job to meet them wherever they might be.

4. Test Different Reward Structures

The most effective tests are ones that focus on things that motivate people. We learned this in the early days of online testing when I led Offermatica. With refer-a-friend programs, the rewards are what sparks the engine, and should be focus of your tests.

Which of these rewards do you think would prompt advocates to share the most referrals: $20, $15, or $10?

You probably wouldn’t hesitate to say $20. But you’d be wrong. In testing by an online marketplace, the $10 reward actually outperformed both.

This shoots down the common myth that people only advocate for rewards. The fact is, no one will refer a subpar product just for the reward. But the right incentive can create a sense of urgency, making them want to refer right now, lest they miss out.

Optimizing your rewards is all about finding the tipping point that makes referrals most appealing. Too high, and advocates feel like you’re trying to pay them to share a referral they otherwise wouldn’t. Too low, and they don’t think it’s worth their time. You need to test different structures and find the one that drives the growth your business needs, and lets you acquire customers at a reasonable cost.

5. Give Personalized Context

The personalized aspect of a referral message is the most important part, and it’s what converts friends into loyal customers. Too many referral programs fall into the trap of letting these messages look just like any other marketing email, with overblown graphics and canned copy.

Personalization isn’t hard — in emails, include the email of the advocate sending the message, so it rises to the top of the friend’s inbox. Stick the advocate’s face in the referral email to add that personal flair. Encourage advocates to write a personalized message along with the referral.

With your referral program, you need to always let customers know who sent them your way — put your customers front-and-center, and let them speak on your behalf.

Referrals don’t stop when someone accepts one. Referred customers advocate at more than 3x the rate of other customers. In other words, referrals lead to more customers, who in turn become advocates and refer more customers. It’s a classic example of the flywheel effect, and you can tap into it if you put in the work to make it happen.


 

Matt Roche is the CEO and Founder of Extole. He has started and run Internet marketing software companies since 1997, and has led successful companies in e-Commerce, dynamic display advertising, curation, and optimization. Roche was a founder and the CEO of Offermatica, a landing page optimization and testing infrastructure company. Acquired by Omniture in 2007, it is now known as Adobe Test and Target and serves billions of optimized experiences every week. In 1996 he co-founded Fort Point Partners, an e-Commerce systems integrator responsible for building Egghead.com, the first web site to sell $1,000,000 in one day, as well as Bestbuy.com, Nike.com and others.

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