Every day we get asked this question at Extole – how do I know if a customer referral program makes sense for my company? Here are a few things to think about…
First of all, do you have a brand or product that your customers are passionate about? If people love your stuff, they are going to be willing to tell their friends and family about it – making a customer referral program a perfect way to get them sharing. Here are a couple examples:
Health and weight loss enthusiasts are passionate about their BodyMedia monitoring systems and, by nature, they love to share their success stories. What’s more, when it comes to weight loss solutions, people look to their friends and families for trusted recommendations about what has worked for them. When BodyMedia looked at its marketing mix, they knew a referral program made sense to foster word of mouth (WOM) and gain new customers.
TV watchers love their Roku streaming TV players. Roku knew that 25% of its customers bought Roku players based on referrals from friends or family members. It made perfect sense for them to add a referral program into its customer lifecycle to encourage happy customers to spread the word. Roku also knew that new customers were most excited about their new players right around 45 days after purchase, so Roku targets an email encouraging customers to share with friends at their peak excitement.
Second, do your customers know other people that could be good prospective new customers? If your customers have friends, families or communities that are hot potential customers for your brand, they are going to be much more effective at reaching these people than you’ll be through mass marketing messages. Here are some examples:
People who make a lot of international calls are huge fans of Vonage’s services. Chances are, if you do a lot of international calling, you have friends and family that do the same. For example, my friend’s husband is Danish. He uses Vonage to keep in touch with his friends and family back in Denmark. He also has a close-knit group of Danish friends here in the states that would be prime new customers for Vonage. Vonage’s refer-a-friend program is perfect to get someone like him telling his friends and family about the benefits of using Vonage and he benefits with a discount for helping them acquire new customers.
Traders know other traders, so when OptionsHouse looked at customer acquisition, they knew a referral program would help them more efficiently reach this audience than they could via paid media.
So…how do you find out if customers are willing to share referrals about your brand? There are a few easy ways – use the conversations that are already going on online about your brand. Or, simply ask them.
Folica turned to the customer reviews on its online haircare site to find the answer. From reading reviews, Folica discovered that many people found out about its site through friends and family. A referral program helped them harness the WOM already taking place to get more people spreading the word.
BodyMedia and Roku both did customer-base surveys to ask people how they found out about their brands, as well as whether they were willing to refer the brands to their friends and family. From the surveys, they learned that people were already sharing WOM recommendations and decided to implement referral programs to amplify the sharing to drive more customer acquisition.
If you know your customers love your brand, product or service and if you know your customers friends could be potential new customers, then a referral program is right for you. In order to find new customers, many brands tap out their SEM and display spends, but are neglecting a large untapped audience – the friends of their customers. By adding a referral program to their marketing mix, brands can tap into an efficient and reliable acquisition channel via their existing customers. After all, we know people trust their friends and family over any other form of advertising. To learn more about why WOM really works, check out our A to Z WOM Series.