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What is a Referral Program? and Why You Need One

Published on July 30, 2019
Marketing |

People influence people. It’s just what happens.

Similarly, marketing is all about people.

Refer-a-friend initiatives work so well because they allow customers to engage with a brand together with their friends. Referral programs are essentially people-based marketing ventures.

Not convinced?

Well how about this for a stat: people are actually 4 times as likely to make a purchase after being referred by a friend.

You can take advantage of the social bonds that exist among friends and family through referral programs.

Before we go any deeper, a definition of terms is necessary.

What is a referral program?

In simple language, a referral program is the manner in which you prime and reward your customers for sharing information about your brand.

Importantly, you need to create the right conditions for this to happen.

Providing real value to your clients usually works well.

That said, there’s plenty more that needs to happen. Offering incentives to your customers is a great way to encourage them to tell others about your brand.

A good demonstration of this is billing companies.

Most of them like giving discounted prices to customers on their monthly bill. This usually goes down well with their client base. If you run such a business, you can take things a notch higher by offering new customers the same benefits.

Having shared his, you need to note that even the best-formulated referral strategies are moot if you don’t have a happy customer base. As such, you need to first ensure that the products and/or services you provide are able to meet the needs of your customers.

The power of word of mouth

Word of mouth marketing is one of the most effective forms of promotion. Many businesses who were in the cold with regards to this fact have actually taken the necessary steps to remedy the situation.

Still, one issue persists.

Many entrepreneurs are in the dark when it comes to measuring word-of-mouth communication.

As you set to prepare to launch a referral program built on a firm foundation, you need to be aware that this is a strategy that has all the potential to bring huge rewards.

A well-drafted referral strategy facilitates easy sharing of information.

The best referral marketing initiatives ensure that there are easily identifiable share buttons for customers. This usually has a positive impact on their business since the set up guarantees stress-free sharing of information.

Referral programs also bring out the very best in word-of-mouth marketing because it injects a fresh dose of measurability. By tracking the interactions users have with your product in online spaces, you’re able to understand their preferences and get ideas on how to land new leads for your business.

How to run a referral program

Referral-Program

Very few marketers know how to ask for referrals.

Asking late for referrals is where many business people go wrong. While being patient has its perks, you need to pitch the deal while the iron is still hot. Waiting until the customer relationship has long been established, and then deciding to contact them later on, is the wrong way to do it.

Being timely in your approach is necessary since there’s still a sense of enthusiasm that exists among your customers.

If you wait too long, they may no longer have the same excitement that they once had as you were starting out. Because zeal is a necessary ingredient in referrals, you don’t want the magic to fade.

Here’s how to can steady the ship:

1. Enquire about referrals from the get-go

You need not wait until customers are used to a product or service you’re selling. Instead, ask immediately after the sale is made.

Admittedly, this may feel weird at first.

That said, it’s an incredibly smart move to make. Right after a sale, most customers are excited about how your product is going to solve their problems. Since they believe that you’re providing real value, they’re much more receptive to your sales pitch.

2. Ask twice

Even after you pitch early enough, you shouldn’t give up after the first try.

Taking “no” for an answer is not the best way to run a referral program.

Most salespersons dread rejections and stalling clients. Still, selling would not be an art if there were no difficulties that exist.

Having already successfully the sale, you should view referral programs as the icing on the cake, not the centerpiece of the deal.

Importantly, even after the rejection, you need not shy away from asking again. Weird as it may feel, you may find that a couple of “noes” quickly transform into shared referrals.

If you decide to go down this road, ensure that you don’t sound pushy.

Being courteous sounds professional and really lets you shine in your best colors.

3. Incorporate an email referral template

Your referral program needs to be silky smooth and easy for your clients to digest. You need to remember that you’re asking customers to do you a solid by endorsing your products to others. As such, you need to chip in every instance you’re able to help.

An example of an email template to use:

Hello Mary!

I would like to connect you with John, his company, Close, has successfully developed a fantastic CRM that makes good use of email automation and predictive dialing to enhance productivity levels. As someone who is highly valued by us, we thought you would be interested in getting to learn more about it. I’ll leave it to you take charge from here.

Best,

Ian

Once you forward them an email template, point out that they can use it in their pitch. This gets their minds racing and they may just decide to put it to good use as they share their referrals. As always, the end goal is to get in contact with a warm lead.

4. Close the loop

Getting a single referral from a customer is awesome. Getting many more is where the real value lies.

The trick lies in mastering how to achieve this.

To get started, you need to communicate that the referrals your clients share are much appreciated. It would not hurt you to include a simple “thanks” message at the end of every correspondence.

While it may not seem like much, this step can be instrumental to your referral initiative. Once someone understands that their referral does wonders not just for your company, but also their friends, they’ll feel likely motivated to keep doing it.

Referral program examples

Having talked at length about the theory aspect of referrals, it’s time to get practical.

As you think about coming up with your own referral program, it’s best to first check out a couple of great programs and get inspired by them.

Since all the programs are unique in their own way, we’ll be pinpointing the shining attributes that made the companies involved successful.

1. Dropbox

Dropbox has one of the most impressive referral programs in the market today.

Dropbox referral programs

There’s plenty of chatter about their model in business circles. This is because right after they implemented their program, they were able to double their user base after every 3 months.

More specifically, most of the new entrants through the door came as a result of their program.

It’s worth noting that while the program was instrumental to their success, it wasn’t the only attribute that made them shine. The management made a point of listening to customers views and continually made a point of enhancing their product.

Why the program is successful

Their incentive is something that a majority of their users want. Sharing is also relatively easy since you don’t need to go away from the app in order to share links. All the sharing controls are right there on the user dashboard.

People also feel motivated to share because the more they do, the more storage space they’re able to unlock.

2. Trendy Butler

Trendy Butler’s Ambassador Program gives members the luxury of enjoying exclusive services. Their subscription-based model is an invite-only affair. Despite this, they’ve been able to witness great success in their marketing ventures.

Trendy Butler-Referral-Program

The straightforward nature of the program also halts users from struggling with the details about how the program works. It’s simple and intuitive enough to appeal to the masses without trying too much.

To ensure that the numbers keep rising, Trendy Butler usually reminds users to refer their friends by making use of newsletters and customer emails.

Why their venture works

Trendy Butler rewards their clients with a reward which suits their subscription model. This makes it great because it gets people excited and eager to refer friends and family.

They also seem to have invested plenty of time fine-tuning their visual cues.

Their landing page looks professional and is a model for what e-commerce businesses are supposed to look like.

3. Spokes Marketing Charity

Spokes Marketing Charity referral initiative is rather unorthodox. Still, they managed to stay true to themselves as they were developing their program.

Spokes Marketing Charity Referral Program

While the marketers at the company felt that they needed to come up with a solid referral strategy, they also wanted to showcase just how passionate about the community they were.

Instead of offering cash incentives to their customers for referring their friends and family, Spoke Marketing decided to offer donations on their clients’ behalf.

Interestingly, customers have the luxury of deciding which charities should benefit from their contributions.

Why the program works

Spokes Marketing referral campaign is a masterstroke because it allows their clients to feel good about their efforts. It’s a win-win situation because the company is able to land a referral while the customers are able to feel a sense of joy donating some reasonable amounts to a charity.

4. Tesla

Elon Musk is almost always in the news.

The revolutionary billionaire is a forward-thinking entrepreneur who draws both love and contempt in equal amounts from different quarters of society.

Tesla-Referral-Program

Having spotted an opportunity to break into the automobile market, Musk decided to develop a brand that capitalizes on their customers’ loyalty to the company. The referral program developed sought to reward clients with something bigger than just pure product discounts.

Why the program worked

The initiative targeted Tesla owners who were already thrilled with the work being done by the company. Their clientele benefitted from the direct access they were afforded to limited edition vehicles and one-of-a-kind experiences.

5. Evernote

Having been established in 2008. Evernote has steadily progressed over the years. With their emphasis on developing amazing products that are hits among their followers, they tapped into the word-of-mouth strategy as their key selling point.

Evernote-Referral-Program

Amazingly, they were able to rise through the ranks without having to spend obscene amounts on advertising or SEO.

Some of the incentives offered include a free month of Premium. Customers were also able to earn points depending on the number of referrals they were able to bring.

What they did right

They designed a system that was able to motivate customers to keep making referrals in order to maintain their Premium status.

Conclusion

Referral programs work.

As highlighted already, a good number of companies have been able to achieve success using the marketing model.

The key reason behind why they work so great is because people don’t really trust advertisements as much as they trust referrals from friends and family.

From a brand perspective, referrals are of the essence because they are cost-effective compared to various other modes of marketing. To really execute the strategy, you need to first work on enhancing the customer experience.

Which is your favorite referral example? Why do you think the companies were able to achieve success?

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