Welcome to ReferralHero, the most powerful star-cruiser in the galaxy! Strap in and get ready to visit the referral nebula in style. Don’t forget your space suit!
It should come as no surprise that I’m passionate about referral marketing. After all, it’s been around longer than any other type of marketing, and it’s still going strong.
With its low cost and high reward, there isn’t much to dislike about referrals. However, I still see many marketers both old and new making common mistakes when designing their referral campaigns.
I want to make 2024 the year of the referral, and that means pinpointing what can go wrong so that you can design your campaign to be the best it can be. Let’s get started!
What Is Referral Marketing
From the rumor mill to “I heard it through the grapevine” there’s no denying the power of word-of-mouth. Referral marketing takes this core human concept and turns it into a sharpened tool that cuts through potential customers' defenses and gets them invested in your product.
When someone sees that the people around them are enjoying something, they are far more likely to check it out. That’s social proof.
By encouraging your current customers to talk about your product and services, you’re able to tap into the power of this social proof to boost sales. Referral marketing incentivizes this sharing.
Companies might offer rewards for writing a review, posting about products on social media, or convincing a friend to make a purchase. Rewards can vary, but this system builds up excitement and investment around your brand no matter what.
What Makes Referral Marketing So Powerful?
With countless options for marketing, what makes referral programs rise to the top again and again?
I’ve never seen a well-planned referral strategy fail, and here are a few of the reasons why:
- It’s Super Effective - A whopping 88% of people trust recommendations from people more than any other kind of advertisement
- A Low-Cost Solution - When planned and implemented effectively, referral marketing can bring in new leads at a fraction of the cost of other streams
- Increases Brand Awareness - More people talking about your brand means more brand recognition going forward
- Higher Customer Lifetime Value - Studies have shown that customers brought in by referrals have, on average, a 16% higher value
- Boost Customer Loyalty - When your current customers have to explain to their friends what’s so great about your company, they are far more likely to remember those things for themselves!
- Moves People Down the Conversion Funnel - The hard work of convincing new customers that your product is worth checking out is already done for you, and they likely have some intention of buying right off the bat
- Lower Churn Rate - Referred customers are 18% less likely to leave than other customers
With this many benefits to launching a referral program, it’s obvious why so many marketing experts report it as the most effective marketing tactic, even when facing unstable market conditions.
Types of Referral Marketing
With referral marketing being around for so many years, it’s no surprise that different branches of it have arisen. Depending on your brand and target market, you might use any combination of the following.
This is the most basic iteration of a referral marketing campaign. It involves offering rewards to your customers in return for leads.
A great example of this is when Harry’s, a men's razor brand, offered free shaving cream, razors, and even shaving for a year to referrers who brought in a certain number of leads. They found that over 70% of their sign-ups came from referrals!
95% of customers look at reviews before making a purchase. If you leave those reviews entirely up to chance, you run the risk of underwhelming numbers and bad-faith reviews taking over the space.
Offering rewards for posting good reviews on different platforms leads to a boost in new customer trust, and leads to a faster conversion rate.
An example of this is Thompson and Morgan, who boost reviews on their site by offering entry into a contest for each review. The winner receives a gift card.
The average user spends years of their life scrolling on social media, and many consider things they’ve seen friends post there as good as things said in real life. Getting customers to post about your brand online and drive engagement and interest is a great way to make referrals even easier (if that were possible!)
Torrid has mastered this with quick and simple buttons showing up after every online purchase, allowing customers to share to any social media site what they bought with ease. Try-on haul anyone?
An extended version of referral programs is bringing on a brand ambassador. Hiring influencers and big names to use your products and share how wonderful they are is becoming more and more popular, and effective.
This system allows you to tap into the influence that content creators have, widening your reach to their entire network. Many influencers have their own rates and contracts for this kind of work, so make sure you set up a meeting to find out what they’re willing to do for you.
Common Issues With Referral Marketing
As successful as referral marketing tends to be, it isn’t without its challenges. If you’re serious about making a huge splash with your referral program, you’ll need to be aware and prepared for each of these.
Convincing your customers to talk to their network about your company can be tough. Usually, brands only come up in casual conversation when they are truly exceptional, or exceptionally terrible.
While your brand is, of course, the former of those two, it still helps to make the process as simple as possible for your users - and offer a sick reward!
A good software like ReferralHero will be able to ease potential referrers into the process with a user-friendly interface, easy sharing options, and automated tracking and rewards.
As much as we’d love people to share our brands because they love them so much, the basis for a referral program is the incentive you offer for this on-the-ground advertising. There are tons of possible rewards that you can offer for successful referrals, but choosing the wrong one will limit the kind of engagement your program gets.
Some rewards that have worked wonders for other companies include
- Cash Incentives
- Discounts and Vouchers
- Store Credit
- Free Gifts
- VIP Perks
- Tiered Rewards
- Charity Donations
- Contest Entries
The most important thing is understanding your core audience and what will get them excited. The time you put into choosing the perfect reward will ultimately put you over the edge for success.
If you’re going to lean into the give and take of a successful referral program, you need to make sure you’re keeping all your ducks in a row, so you can reward people correctly and on time.
If you try to keep track of everything manually, chances are you’ll be faced with a ton of errors, and even one person slipping through the cracks can lead to your program falling apart.
The best way to ensure your ducks stay lined up is with software like ReferralHero. They do all the heavy lifting with unique referral links, cookies, or codes that accurately track referrals and attribute them to the right customers.
Referral Marketing Best Practices
When you’re getting started with referral marketing, there are a few things that might fall through the cracks. When you’re setting up a tracking system, choosing rewards, and making sick marketing images, it makes sense that the basics get missed.
Here are my top three tips for setting your referral program up for success.
Tip One: Service Always Comes First
You could have the greatest rewards in the world and still not convince people to talk up your company if they have a bad customer service experience. Make sure your team is ready and available to answer any questions and concerns, whether that be about the referral program itself or any other aspect of your company.
These positive interactions will make people far more likely to speak well of your company and have strong and compelling reasons to bring their friends into the fold.
Tip Two: Content is King
Especially when you are leaning into the social or direct streams of referral marketing, you will need to give people something compelling to share. While many content creators will take your copy and run with it and make it approachable for their audience, they still need a strong copy to work from.
This is even more vital when you aren’t working with professional influencers. The average customer is far more likely to share a funny meme or an informative blog post about your brand than a text post about how cool you are. This compelling content will be more effective than leaving people up to their own devices.
Tip Three: Understand Your Target Audience
The more niche your product is, the more effective you can get with your referral marketing. From choosing the right influencers to picking the most compelling rewards, knowing your audience will affect every decision you make.
If you need to, you can run some A/B testing for different rewards, content, and influencers with software like ReferralHero. This will help you narrow in on exactly what works to mobilize your audience and lead to conversions.
The Bottom Line
Referrals can easily be the most powerful tool in your arsenal, but it takes careful planning and a little help from referral software to smooth everything out. If you work to find the hiccups in your system, you’ll find yourself launching your conversion rates and new leads into the stratosphere in no time.
Let’s agree, no more half-baked marketing schemes in 2024. This will be the year of streamlined processes, highly targeted content, and endless gains.
Ready to 10x your software platform, mobile app, or web3 company with our automated growth engine?
In just 14 days, we help you build the same waitlist, contest, or referral program used to launch and scale Airbnb, Uber, PayPal, and 1000s of other businesses. Start your ReferralHero free trial today.