Referral Program FAQs Answered by an Expert

Referral Marketing Stats That Get Everyone Talking

You’ve seen the stats and success stories of how start-ups turn into monster brands simply by asking customers to refer friends using their referral programs. From Dropbox to Tesla, PayPal, Uber, and Revolut. We know that referred customers are 18% more loyal,  generate 16% more revenue, and spend up to 13% more just because they were referred by a friend. We also know that one happy customer can result in up to nine customer referrals. 

And yet, with a proven track record in delivering some of the most impactful results for businesses around the world,  it’s still surprising that not more companies have referral programs.  Studies show that over 70% of start-ups aren’t currently using referral marketing to grow their business. And marketers aren’t incorporating referral campaigns into their marketing strategies. 

So, we did some research and found out why?

While referral marketing is not a new concept, it is new to a number of marketers that didn’t catch on to the idea with some of the earlier adopters. And while most marketers know just how well referral programs work, there are still a few misconceptions about referral programs that we can help explain. 

Referral marketing expert and founder of a top referral software company, we asked Kirsty Sharman,  to answer some of your most commonly asked questions about referral marketing programs.

Covering questions like how to run an effective referral program, getting more referrals, and what rewards work best. For industry-leading advice and insights from tried and tested Referral Factory campaigns, find expert answers to frequently asked referral program questions. 


Referral Program FAQs Answered by Experts:


Are referral programs really technical, expensive, and complex to build?

No, not with referral software. Historically, building referral programs were costly, time-consuming, and admin intensive. Together with a list of technical barriers including the need for a developer (and often a full technical team) to help build and integrate. Along with these technical barriers was the matter of cost, a constraint any marketer will know is the very first question a client will ask.  

But luckily for modern-day marketers, referral software can help solve all of these problems: Referral marketing software eliminates these obstacles that can often prevent marketers from launching effective referral marketing strategies. Making it possible for any marketer anywhere to create their

own customer referral programs, in-house and in just a few minutes. Referral software now makes it easy for anyone to build, launch and manage effective referral programs with no code needed.


How Easy Is It To Manage And Track Your Referral Program? 

Referral software that integrates with your CRM makes referral marketing easy by offering a more streamlined way to track and manage your referrals. Connecting customer data with your referral program also creates a customer-centric experience that encourages more of your customers to join. Referral apps that integrate with your CRM keep campaign admin to a minimum, reduce your workload, produce fast results, and generate the best quality customer leads. So, if you are planning to launch your own referral software choose one that integrates seamlessly with your business. Integrating your referral software with your CRM will reduce the time and effort it takes to significantly increase your sales and see real results. 


What Referral Program Is Best  - A Single Sided Or Double Sided Referral?

A single sided referral program will reward only one user in the referral process. A double sided referral program will reward both users that complete the desired call to action. Whether a single or double sided referral program works best depends entirely on your business and objectives. But one thing the experts do say is that referral programs that perform the best are those that are driven by a mutual incentive that encourages both parties to participate. People like to “give” as much as they “get”.  Referral rewards split between the person referring and the person referred can result in the maximum adoption of your referral program. 


Which type of referral reward is best?

The best referral reward to offer as part of your referral program is one that makes the most commercial sense for your company. A referral reward can be given in many different ways including, cashback, gift cards, free gifts, credits, loyalty points, discounts, or vouchers. Every referral program will have a different set of goals that will shape the type of reward you offer. But the best rewards are typically those that encourage new leads to convert, get old customers buying again, increase customer retention and bring new customers into your business. Rewards offered in the same currency as your business, that get customers “spending” their reward back into your business are the most effective in helping to accomplish these goals.   


What Value Should My Reward Be

Modern marketers know that customer data is everything when it comes to effectively marketing any brand. And as part of the job, basic customer calculations that help you work out the value of your customer are key to running a successful referral program. Calculating the value of your referral reward largely depends on the lifetime value of your customer. Provided that the value of your reward is not more than the lifetime value of your customer you are off to a great start. 

  • Work out the value of your customer using their average purchase value multiplied by the average number of purchases.

Customer Value = Average Purchase Value * Average Number of Purchases

  • The lifetime value of your customer can now be calculated using the customer value multiplied by the average customer lifespan. 

Customer Lifetime Value = Customer Value * Average Customer Lifespan

The value of your referral reward should make commercial sense to your business, and your referral program should be profitable. Finding just the right balance between a referral reward that is too high and one that is too low may take some trial and error before settling on an amount that works best for your business.  


How Do I Market My Referral Program?

Marketing your referral program is key to getting as many people to join as possible. Kirsty Sharman recently wrote this post covering 30 ways to get users referring fast, in a nutshell, it explains that the more people that join your referral program the more friends they will invite - so it’s important to think about all the many ways you can tell your customers about your referral program. From sending out blast mailers, texts, and instant messages to adding a call to action to your website. Include a link to your referral program on your email signatures and print the QR code to be positioned in-store, on your packaging, stationery, and till slips. Some of the most successful referral marketers go as far as creating a dedicated landing page on a brand’s website just to promote their referral program. Creating the perfect opportunity to explain the referral program in more detail, how it works, when users can expect to receive their rewards, how to redeem their incentives, and of course, a link to join.

Just as you might market any other promotional campaign, market your referral program with the same approach to increasing its visibility.


How Can I Get More Referrals?

Make it as easy as possible for your customers to invite their friends, and just as easy for their friends to sign up. Upload your existing customer base to your referral program and send them their unique referral link. That way customers can start inviting their friends without having to sign up in the first step of your referral program. Offer the option for referrers to invite their friends on channels of their preference. The more convenient it is for users to forward their referral link to their friends, the more friends they will refer.


Keep Talking about Your Referral Program 

The more hands-on in launching, promoting, and managing your referral program the better. Call your customers to explain to them in person what your referral program is about. Give your customers a head start on what it's all about, offer them the opportunity to ask questions and share a glimpse of what it will look like so they know exactly what to do when they see it for the first time.  Make sure the marketing message and call to action are clear and uncomplicated. Set up automated mailers to keep talking to your customers about your referral program. Remind them how they will be rewarded for referring their friends, and what's in it for their friends when they sign up. People feel good when they receive a reward and even better when they give one to their friends so be explicit in how your referral program will work. 


How Have Other Brands Used Referral Programs to Growth Their Business 

Having a look at how other brands have used referral programs to help grow their business is a great way to start if you need a little inspiration. Always remember that no two businesses are the same and what might work for some might not work for others. But shared best practice is one of the fastest ways to get started.

PayPal

 PayPal is possibly one of the most well-known referral program success stories. As a financial tech start-up offering an online payment system, PayPal quite literally gave money away to get new users. PayPal started with a double sided reward giving $20 to new users that signed up and $20 to anyone that user referred. It was soon after, following a staggering response, that they had to reduce the value of their referral reward to  $10 and later even further to $5. According to @elonmusk, PayPal spent roughly $60m on their referral incentives. For PayPal, the daily growth rate was 7 to 10%. Plus, the user base surpassed 100m users. Musk compared it to bacteria in a Petri dish. Your referral program needs to expand quickly, and it has to happen fast. Free money makes that happen.


Tesla

Much like what they did at PayPal, the Technokings of Tesla gave away $1000, access to exclusive events, and a “founder series” Model X.  The primary Tesla referral program gave $1000 to Tesla owners that successfully referred their friends that would go on to purchase the Tesla Model S. Plus, the friend that made a purchase would also get $1000. To further incentivize referring costumes, those that successfully referred five friends in total would receive an invite to the Gigafactory grand opening party and 10 success referrals the right to purchase a special “founder series” Model X.


DropBox

Following in the footsteps of PayPal, DropBox created a double sided referral program that rewarded and incentivized both the referrer and the person being referred. Customers that signed up to the cloud storage and successfully referred a friend would receive 500MB of free storage. The friend that got referred would also get 500MB of free storage. Both users would continue to receive 500MB of free storage for every friend they successfully referred until they reached a maximum of 16GB in free storage. The referral program resulted in a customer base that started with 100k users in September 2008 to 4m users by December  2009. Which worked out to be 3900% growth in 15 months and 2x its user base every 3 months for 15 months.


Google

With an objective to get more customers using their Google Apps, the Google referral program was created using 3 easy to navigate panels explaining how users could participate.  For every user to sign up using a referrer's unique link, the referrer would get $20 until reaching a maximum of $2000. Added to the incentive a few days after signing up, users would receive an additional  20% off for the first year of Google Apps, the perfect way to seal the deal. 

Helping you build cost-effective, no-code referral programs that reward existing customers for referring their friends. Referral marketing software is the biggest win-win in the marketing business.  Choosing the very best referral software is the one that gets you started. Uncomplicated, easy to use, and quick to learn, the sooner you start your referral marketing journey the faster you can benefit from the results. 

To sum up - if you’re a marketer looking for a tool that gives you flexibility, does not require you to have a developer in-house, and offers clear tracking of who referred who - then we suggest Referral Factory as the tool for marketers to use.  To see how you can launch a referral program like the one below, in just a few minutes, start a free trial here.

Author Bio:

ABOUT THE AUTHOR

Kirsty Sharman

Serial entrepreneur Kirsty Sharman is the Founder of Referral Factory. She boasts an impressive career with over a decade of experience in technology and marketing. Prior to her current venture, she Co-Founded and built what is now Africa’s largest influencer marketing platform, Webfluential. In 2015 she was nominated by M&G as one of the top 200 young South Africans to watch. She also Co-Founded Johannesburg's first edition of Girl Geek Dinners, an NGO focussed on empowering women in IT. Kirsty’s expertise as a trendspotter in the marketing and technology spaces has seen her featured by Adweek, the BBC, The Drum, The Next Web, Social Media Today and more.

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