How to Design and Set up an Effective Referral Program

Getting a new customer on board takes a lot of energy and money. Creating a positive customer experience is equally challenging.

Rather than repeating the same cycle for each new customer, why not use the existing customer base to market your product on your behalf?

That’s where referral marketing comes in. Referrals help you spread the word about your company by empowering existing customers to do word-of-mouth marketing. In return, you can decide to give them an incentive for motivation.

Studies have shown that 92% of consumers trust referrals from people they know and are four times more likely to buy.

So if you’re not sure of how you can create a robust referral program to skyrocket your sales, you’re in the right place. 

Understand your customer

It’s pretty easy to get new customers after you’ve understood your current ones. Customer engagement data gives you an overview of who they are, how they want their products supplied, and other needs.

Some vital questions you can ask include: 

• What do they like about your business? 
• What keeps them coming back?
• What do they value most?

You don’t have to use a sophisticated system to get these answers. You may obtain information by just interacting with them. 

For example, if you have an email list, ask your subscribers a few relevant questions and encourage them to reply. 

You can make use of survey apps like survey monkey or survey bot. These tools help you reach and get responses from a larger portion of your subscribers.

The answers will give you ideas that will come in handy for the program. Listen to their responses carefully and reply sincerely.

Another approach is to survey your customers and followers on social media. You can set up a straightforward poll on Facebook or Instagram that will appear in their feed or timeline. Or, you can create cute, funny, or gamified FB or IG Stories using the poll or quiz stickers.

If you don’t have the time, you can use CRMs that generate customer analytics data. The tools give you insights into how customers interact with your website, the links they’re clicking, and the most popular page.

Understanding their wants, needs, and behaviors makes it easy to create a referral program that draws them in and encourages them to refer their friends.

Design Your Referral Campaign

Now that you’ve got an idea of your customer, it’s time to create a good referral campaign that 100% resonates with them.

A referral program design is the look and feel of your campaign and how you’ll communicate your message. The more specific you can be in your plan, the better you’ll be able to track the effectiveness of your program. Let’s take a look at the 3 key factors for outlining a successful referral campaign strategy:

Use compelling headlines

Headlines are meant to get attention. The words you choose determine if the customer will be interested or ignore your message.

The perfect headline should be simple, crispy, and straight to the point. For example, rather than using “we now have a referral program, claim yours today,” you can go for a more precise and more straightforward headline like “refer a friend and get $100 today.”

Create powerful referral messaging

Once your customers are sucked into your idea, your next step is creating a powerful referral message for their friends.You can opt for a pre-filled and ready-to-send message while still giving your customers the option to edit. 

Choosing the right referral program tool

The final thing you’ll consider is getting the perfect tool for your program. It should have many moving parts since you’ll also want to track each successful referral.

Consider checking out viral factors like pricing, free trials, customer service, and functionality to make things a lot easier.

Define the Perfect Incentives

Giving an attractive reward encourages customers to make as many referrals as possible. On your side, you get new customers, and your customers get something they’ll appreciate. So it’s a win-win.

But before you do that, ask yourself these two questions:

• What kind of incentives will your customers care about?
• Is the incentive profitable for you and desirable for your customers?

You’d also want to decide between these three types of incentives. 

One-sided incentive

This type of referral gives incentives to one party, either your customers or their referred friend. If you decide to provide an incentive to your customer, you’ll get many referrals since they’ll feel special and motivated. 

However, the referred friend won’t feel compelled to accept the referral and purchase your product.

On the other hand, if you opt to reward the referred friend, you’ll have a higher chance of getting a sale—though, you won’t get as many referrals.

Two-sided incentive

It is the most popular type of incentive and records the highest engagement. Both parties get rewarded—your customer and the referred friend. For example, your campaign headline can be “give $30 to your friends and get a free ticket in return.” 

The only downside of this approach is that you’ll have to give away twice the amount. It’s only applicable if you have a reasonable budget to sustain all the giveaways.

No-incentive

As the name hints, this type of referral doesn’t reward any party. It’s, therefore, very hard to get anyone to participate since it’s dependent on luck. Why? In every business transaction, people always ask what’s in it for them.

Create resources that alert your customers

You have to find a practical way of informing your customers about your program. 

Use multiple channels if you want an extensive campaign that reaches a big audience. Nevertheless, it’s critical to start with channels you’ve been successful with all along.

For example, if you have an active email list, it can be the perfect place to inform your subscribers. Send them regular emails about your referral program, with updates, special offers and promotions. Or, if you have a blog that receives enormous traffic, you can write a short blog post revealing what you’ll be doing.

The next thing to do is go on a promotion spree. Post on your social media pages and groups, make it part of your video marketing strategy, and include it in your newsletters.

Whatever channel you choose, make it a point to be consistent (but not overdoing it). It should be aligned with your goals, program revenue, and growth.

Start your campaign and track your promotion with referral software

Your promotion is now underway. Great job! You now have the task of monitoring how it’s fairing. This will help you not to miss any detail of any referred accounts. In addition, the insights you’ll get will come in handy when planning for your next referral campaign. 

Lucky for you, you already have a robust tracking tool that collects data and presents it in an organized and easy-to-read manner. Essentially, the tool you choose should be able to track the following:

• Who was referred, and who referred them?
• Did the referrals convert into sales?
• When did the referral take place?
• How will you nurture the referrals who bounced?

As you can see, the referral software you choose must have a strong background in CRM. It will allow you to keep track of customers and later help you individualize contacts with your customers. 

Say “Thank you” and follow up on your referrals

The final step is to thank your referrer for helping you out in the program. This is where the incentive comes in. Be true to your word. In addition, send them a heartfelt message, thanking them for their loyalty. 

Don’t leave your new customer referrals stranded. You need to swoop in quickly lest they get bored, change their minds, and go to your competitors.

The first thing to do is to send them a welcome email. If you opted for the two-sided incentive, send them a reward just after the welcome email. 

Avoid bombarding them with ads on that first contact. You don’t want to seem like you want them to spend more money.

In the meantime, look for new ways to improve your referral program based on the results you’ve got.

Conclusion

Building an effective referral program isn’t instant. There are a lot of things to do at the same time, which might make it a bit challenging. 

However, brands like Dropbox, Tesla, DoorDash and Google workspace use it to grow their customer base. And with the right referral program for your brand, you too can turn your customers into loyal advocates for your company to keep your flywheel spinning if you get it right.

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[Photo by Remy  Baudouin on Unsplash‍]

About the author

David Campbell is a digital marketing specialist at Ramp Ventures. He helps manage the content marketing team at Right Inbox. When he's not working, he enjoys traveling and trying to learn Spanish.