Referral marketing leverages a simple tried-and-tested principle: your most loyal customers are also your biggest promoters. People love to share recommendations and stories about brands with which they’ve had good experiences, and the impact can be more powerful than any traditional campaign.
As a marketer, your primary goal with a referral program is to design an ecosystem that will drive continued engagement with your brand. But where to begin?
Choose your initial referrals
If you want your referral program to succeed, it’s crucial to have the right people in your initial referral pool. It’s not enough to lump your most valuable customers into one segment — you want to focus on potential advocates for your brand. This process will vary by industry, but here are some key considerations to keep in mind:
- Your customers may be referring friends or family to your brand already, particularly in our age of social media sharing. Keep an eye on social media channels for existing referral potential you can optimize. Survey new customers to find out how they learned about your service.
- Start with a broad list of advocates drawn from past and current customer groups, or even vendors with whom you have a strong relationship. Narrow this list down to your most valuable referrals. If your remaining segment consists of customers who would advocate for you without incentives, you’re in the right place!
- You can further segment your referrals based on groups you’d like to target, such as by age or income bracket. Make sure your program includes different strategies for each group.
- Consider which rewards will best incentivize the program. Cash-based compensations or discounts may seem like an obvious choice, but most research on the topic suggests that tangible, non-cash rewards can go much further. Find out which rewards best reflect your target audience, and don’t forget to include incentives for your core referral group as well!
Use multiple channels to alert your referrals
Referral programs are still a type of marketing campaign, even if they’re primarily customer-driven. That means you’ll need to dedicate resources to alerting customers about the program, especially in the early stages. A limited-time email promotion that describes your program and incentives to your referral group is an excellent place to start. Don’t forget to write additional emails if you have multiple referral segments!
Like any marketing campaign, it’s unrealistic to expect that these emails will reach 100% of recipients. For that reason, your next step is to spread the word across multiple channels. Mention the referral program in blog posts, newsletters, product updates — even in the CTA of your email signature! And if this process attracts customers to the program who weren’t even on your referral list, all the better.
Set up referral tracking
A user-driven referral program should still be optimized, which means you’ll need tracking options wherever possible. The goal should be to trace the connections between your initial referrals and anyone they contacted about the program. In terms of data points, you’ll need to know details such as:
- Who referred prospective customers
- Whether the prospect converted
- When the referral took place
With this information at hand, you can optimize the program to serve referrals and new customers alike. For example, if a prospect hasn’t fully converted but is engaging with the service, you can reach out with a targeted nurture campaign.
Referral marketing is no replacement for traditional campaigns, but its benefits shouldn’t be understated. A successful program can attract many new customers to your brand while elevating the engagement of loyal fans. When you optimize those relationship dynamics, it’s possible to acquire and retain customers for years to follow.
