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A successful business is built on killer marketing.
When I set out on my entrepreneurial journey, I knew this was the case.
Only 33% of consumers still trust traditional marketing tactics, so doing things the way it’s always been done is NOT an option.
However, as you shift to a more innovative approach like referrals, you’ll want to make sure you’re set up for success.
This means having the best rewards, the best referral codes, and the best platform to monitor it all.
Through years of research, trial and error, and luck, I’ve been able to perfect my referral reward strategy, and I want to pass that knowledge on to you.
What is a Referral Reward?
When you start a referral program, you’re basically recruiting brand ambassadors.
You want your customers to be as passionate about growing your business as you are!
But let’s face it; nothing comes for free.
83% of people are willing to refer a business to a friend, but only 29% will follow through.
That means your customer base could be 3x the size if people actually bought into your referral program!
One of the best ways to get those feet on the ground is to offer a spectacular reward.
People will be thrilled to share your business once you answer the age-old question - What’s in it for them?
Common Misconceptions about Referral Rewards
Everyone has ideas about the best way to reward referrals.
This has led to quite a few myths popping up over the years.
I’ll walk you through a few of the most common ones and give you the lowdown on why they’re not as well-thought-out as you might think.
Myth One: It’s All About the Ambassador
While rewarding the person who’s out there telling people about your business is important, it’s not the only thing to consider.
Having an incentive in place for both the ambassador and the potential new customer is drastically more effective.
This is because, while having a friend tell you about a business is enticing, knowing that you can get something for checking them out is even better!
Myth Two: Cash is King
While simply giving out money to anyone who brings in a referral might sound enticing, in the long run, it won’t be as effective.
Not only does this become cost prohibitive, but it doesn’t make a lasting impression.
Chances are, your customers are going to use cash for everyday expenses.
That means eventually they’ll forget about the reward altogether.
Offering a non-cash reward like a discount or prize creates a lasting impression.
Myth Three: Scaling is Simple
You might think that with a plan in place and a unique referral code for everyone, you’ll be able to stay on top of referrals no matter how many come up.
This isn’t always true.
There are tons of stories out there about businesses, big and small, losing track of who is meant to get rewards and when.
All it takes is one or two people slipping through the cracks for your brand trust and loyalty to plummet.
That’s why having a system in place and a partner like ReferralHero is so important.
ReferralHero can handle all the tracking for you so that you can focus on connecting with customers and making the biggest impression possible.
Myth Four: Size Always Matters
While having a hugely generous incentive program will likely get people excited, it’s not always the most effective way.
Having an air of exclusivity, or offering something memorable, will keep people invested longer than a huge discount.
If you can get people talking about their exclusive merch or interactions with your brand, it’s an instant win-win.
You don’t want to get caught paying more in rewards than you get in profits.
Choosing the Right Referral Reward
So if simply throwing money at people who send referrals your way isn’t going to be effective, what will be?
You know your business, employees, and customers better than anyone else.
Knowing what will get them excited relies on understanding why they’re invested in your company in the first place.
What works for a bank isn’t the same as what will work for a hair care product.
Whether you’re looking to reward customers for bringing in friends or employees for finding the perfect fit for a role, you need to know what’s interesting to them.
Here are some things to consider.
Where The Reward Goes
As I mentioned earlier, simply rewarding the person giving the referral isn’t always the best plan.
There are three ways you can split up rewards:
- The existing customer gets rewarded
- The new customer gets rewarded
- Both customers get rewarded
Remember, whoever gets a reward is going to be more invested in making this new sale happen.
Types of Rewards
There are so many different options for rewards - don’t get stuck using the first thing that comes to mind.
- Discounts - This is a great option for anything that your customers are likely to buy more than once. However, if you’re offering a large purchase like a car or furniture, they aren’t going to want a discount code for referrals.
- Cash/Cashback - While it doesn’t stand out, cash is a great incentive if your company centers money like Paypal or a product that people likely won’t want two of.
- Store Credit - Store credit is a great way to give customers something they can use more than once. It also encourages them to keep coming back to your store!
- Free Products - This will not only get people excited to share your business, but it will act as another way to get your products in front of people.
- Branded Merch - If you can choose an item or a logo that people will use and will spark conversation, this reward can help create even more buzz
- Gift Cards - Offering a gift card sidesteps the chance that people will buy something they won’t remember. It also offers the opportunity for people to choose what they’re more likely to use.
- Subscriptions - a free subscription period is a great incentive for both the new and returning customer. It encourages long-time, repeat engagement.
- Donations - If your company is focused on pushing values over profit, making donations in an ambassador’s honor can have a lasting effect both on the world and on your brand loyalty.
No matter what, make sure the type of reward you choose sticks out in your customer’s mind. If they remember it, they’re more likely to want it again!
Reward Triggers
It’s SUPER important that you’re smart about when and how often you offer rewards.
You want to make sure that the company is getting value out of the referral and that there is enough incentive for people to continue inviting friends to come along.
Is simply clicking a link enough to get a reward, or does the new customer have to make a purchase?
Does the size of the purchase have any effect on the rewards?
Are the rewards the same every time?
All these questions will help you shape your reward structure. Some options to consider are:
- Tiered Reward Structure - This is a great way to keep customers invested in getting more and more referrals for you. It can get complicated, so make sure you have a foolproof way to keep track of how many referrals are coming in.
- Multi-step Rewards Structure - If you’re worried about handing out too big of a reward for bringing in customers that don’t make big purchases, this is perfect. You can give out a smaller reward when the referral comes in and a larger one when they spend a certain amount of money.
- Contests or Drawings - to drum up lots of excitement and momentum around your referral program, consider entering customers into a draw or competition that rewards bringing in more people than anyone else
- Customer of the Month - continuing with a bit of competition, naming a customer of the month helps people feel noticed and appreciated. It also turns referrals into more of a game.
Whatever you end up doing, make sure it fits with your customer base and how likely they are to engage with your program.
The Bottom Line
Everyone gets excited about a prize! Your customers are no different.
As you start fleshing out your referral program, don’t underestimate the value of the perfect rewards system.
With the right reward, trigger, and tracking system in place, you’ll have referrals rolling in in no time - and maybe even give your customers something they’ll talk about for a long time.
Ready to double your business? Leverage the power of word-of-mouth and use the same referral program platform used to scale 1000s of businesses. Start your ReferralHero free trial today.
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