Converting Customer Loyalty Into Referrals
- May 25th, 2009 by Steven Leung
We’ve all had those moments and that day was his. He told me about how he was going over his goals with the CEO and you could hear in his inflection that what he really wanted to say was, “April Fools, right?” But the growth he might have pulled in three extra headcount for in the past is something that became his goal for the upcoming six months.
“So how do you propose we grow our program?” he asked. Brute force using mass media was out of the question given the budget constraints. He wanted to leverage the channels they’d built through their blogs and email marketing.
“How is your program currently generating customer referrals?” I asked. “No cost marketing, I like it and we do get more than a few referrals.”
Most companies get referrals from their existing customers and his was no different. But he added, “I think there’s more we can do to get customers signing up their friends. Most of what we do today isn’t formal, we have a great program and they tell their friends.”
The challenge with this approach was: because there’s no call-to-action, his company has left it to chance that the customer will come up with the idea of referring a friend.
“They might not know you’re looking for referrals, or they’re busy, or —” and I paused for a second.
“One of my friends has this knack for picking the worst restaurants. One time, a place brought all of us a platter of rice that smelled and tasted like kerosene. We sent back the rice three times before the owner came to our table, hands in the air, protesting that he didn’t smell or taste anything wrong. We all looked at each other, settled on getting some flat bread instead, and we haven’t let my friend live it down to this day.”
“You’re obviously not saying our program is like kerosene rice…”
“Of course not, here’s the deal: we had to have been to at least a dozen good restaurants my friend’s recommended. But after a funny story or two, he’s now got a reputation for referring us to bad restaurants. For you, everyone knows they take a chance when they make a referral.”
“So step one is not making them look bad.”
“Right. The next step is getting them to overcome both their inertia and the risk they take, no matter how small.” So we went through a few of the most popular types of referral programs.
We talked about a typical affiliate referral system where a customer gets a reward or percentage for referring another person or business. Usually this is done with a referral code embedded in a link, from a website, blog or email campaign. That code identifies the referrer and lets your system know that a referral needs to be credited.
“The best practice here is to give both the referrer and the referral some sort of reward. If you only reward the referrer, then it looks like that person is trying to make a sale. If you only reward the referral, then the referrer doesn’t have a personal incentive to refer you.” I’ve summarized the basics; there are more nuances from this word-of-mouth communication study.
The reward doesn’t always have to be monetary, though. “You have a program where people can show how successful they’ve been using your methodology. Many folks would be proud to share how successful they’ve been with others as part of a community, not just people they know but others who ask about your program. It’s similar to what I’ve done for a number of software companies that want to reward people who extend their platforms.”
“The key is to lower the barriers to entry. Make it easy.”
A referral program can spread like wildfire if the offer is strong and easy to communicate. “So we can leverage what we’ve done on the blog and email marketing?” It’s not difficult to automatically generate links from a blog, web publisher, or its landing pages that pass the referral code needed for this type of program.
And email marketing systems often give you the ability to embed a specific code for each person who receives your email; that code would be the referral link needed to credit both the referrer and referral.
The technology provides automation to make getting referrals easier and more scalable. The same technology can be used to create stronger and more profitable relationships with the customers who will be providing you referrals, and influence your prospects to move from ‘maybe’ to ‘yes’.
Tags: Blogging, Online Community, Referral Marketing
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