Customers Can be Your Best Sales People
Customer referrals are taking place all of the time. Referrals are made at the family BBQ and by email; they’re made at staff meetings and on review sites; they’re made on LinkedIn and at conferences. In fact, there are probably people referring your product or service right now.
Honest referrals from real customers are the most influential form of marketing available. Most businesses overlook referral marketing as an acquisition strategy because they believe they lack the knowledge or ability to effectively influence referrals.
Why customer referrals?
When someone refers your products or services to a friend or colleague, they are implicitly entering into a social contract with both your company and their friend or colleague. Amazingly this social contract can help with both customer retention and customer acquisition.
When a customer recommends your product, they are telling their friends that your solution is the best. This means that if they were to switch to a different solution in the future, they would be admitting they were wrong and provided a friend bad advice.
People implicitly trust the recommendation of a friend. If you think about the last time a friend recommended a movie, restaurant or product, chances are that you tried it. Further, once people are referred to a product or service they tend to implicitly believe in its quality and are less likely to stop using it because they feel it’s the solution “everyone” is using.
These are the reasons why customer referral programs increase customer retention, reduce support issues and ultimately increase profit for your company.
What is customer referral marketing?
Customer referral marketing is a way of systematically encouraging recommendations between current customers and their friends or colleagues.
Unfortunately, due to the reputation of other forms of marketing, mainly affiliate programs; confusion has arisen around the term.
Affiliate programs are referral programs that reward third parties, typically with cash, when new customers sign up for a product or service as a result of the third party referral.
Partner programs are referral programs that reward certified third party vendors of your product or service with rewards such as cash, recognition and advertising.
Customer Referral Programs:
Customer Referral programs are referral programs designed to specifically motivate your existing customers to help you find new customers.
Great! So how do I create a customer referral program?
Depending on the size and type of your organization; you may simply need pen and paper to keep track of referrals, or you may need a fully automated sharing, tracking and fulfillment system for your customer referral program.
Regardless of the level of technical complexity required, every customer referral marketing strategy is made up of three core components: The Ask, The Reward and The Recommendation.
Ask – When it comes to customer referral programs, just like sales, the number one reason you don’t get a referral is because you didn’t ask. It may feel a little awkward to ask at first, but you will quickly discover that happy customers are excited to help.
Timing – You need to ask for referrals at the right time regardless of the type of business you run.
Finding the right time
- Newly Activated Customers: Customers who have just made a purchase, received your product, or enjoyed your service for the first time are very likely to make a referral. They are in a state of shopper’s euphoria which greatly increases their willingness to make a referral.
- Engaged customers: Customers who are actively using your product or services on a regular basis are more likely to make referrals. If you don’t have visibility into customer usage habits you can look at email open rates, loyalty program data and anything that indicates interest in your business.
- Happy Moments: Whenever your customers experience the ultimate value of your product first hand it’s a perfect time to ask for a referral. For financial planners this could be after a good quarter of returns. For a file sharing web app this could be after a user has shared their first file.
Make it count – Making a referral can feel risky and sometimes a time-consuming process. In essence, your customers are putting their social credibility on the line when they refer your product to a friend so it needs to be worth their time.
As a thank you and way to encourage them to make a referral, you want to offer your customers a reward; however, you want to avoid paying with cash. Cash makes customers feel like corrupted sales people instead of a friend giving honest referrals.
For bill payers these types of rewards may be appropriate:
For non-bill-paying customers these types of rewards may be appropriate:
• Gift cards,
• Charitable donations,
• VIP experiences can all work well.
Double Sided Incentives
By providing an incentive to both newly referred customers and the existing customer who referred them (double sided incentives), customers feel like they achieve all of the above goals.
Further, double-sided incentives have been proven to both increase referral rates and drive completion rates by the referred customers.
When a customer is ready to make a referral you don’t want anything to get in the way.
If you’re in a direct sales role, you want to make it easy for your customer to provide the contact information of their friend and colleague. Then you can contact the referred customers for account details after they have earned their reward.
If you have a self-serve / consumer sales process, you want to make it easy for customers send a message to a friend directly. Use tactics like prepared messages, pre-printed cards, forward-able emails and other communication tools to make it easy to make a referral. Further, avoid requiring users to create a new account just to log in to your referral program.
Get Your Customers Engaged
Are your customers aware of your referral program rewards?
Do you have a website or blog? Write about your referral program on your blog and make it easy for people to make referrals right from your website.
Do you have an email list? Your email list is filled with interested and engaged customers who like what you do. Let them know about your referral program and they will happily spread the word.
Do you have a brick & mortar location? Let visitors know about your referral program at checkout. You can ask for an email address to send them information later or ask them to have their friend mention their name at checkout.
Do you send invoices / statements? Let customers know about the referral program and how they can participate right on the invoice or statement.
Do you have a new customer on-boarding process? Do you have an education process for new customers? If so, make sure to let them know about the referral program after they are committed and believe in the value of your solution. The first 90 days is the most effective time to ask for a referral from a new customer.
Do you use social media? Regularly let users know about the referral program and how they can participate.
3 Must-Dos for a great customer referral program
• Let everyone know about the program. If people don’t know about your referral program they can’t make a referral. Feel free to personally ask for referrals as well as including program details inside your customer communications.
• Make it worth everyone’s time. Your existing customers are busy; ensure the reward you offer for referrals is valuable. Also, don’t forget to give newly referred customers a reason to convert and purchase from you.
• Make it easy for everyone to participate. If you have a low volume of customers there may be no need for automation. Just ask people to tell you who referred them and process it manually. However, if you have a high volume of customers, frictionless automation will be key. Make it as simple and uninhibited as possible for customers to make referrals.
Referral SaaSquatch is a Referral Marketing Automation platform for subscription services. With the Referral SaaSquatch platform both B2B and B2C subscription services can profitably run, optimize, and automate a best in class customer referral program.