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Referral program 101

referral programs EarlyParrot

It is common for people to recommend things to each other. It is good to hear a bit of advice from a reliable friend, especially if there is a serious dilemma. Why not make the most of this habit?

Referral marketing is a solution where you take advantage of people’s tendency to share their experiences or opinions with others. Customer referrals can bring many new clients and expand your customer base. Moreover, referral marketing campaigns are very easy to create and relatively low-cost. Below you can find out about the basics of referral marketing – what it is, how it works, and how to create a referral marketing program. You will also find here some examples of industries where the power of referral has the most potential. Shall we start?

What is referral marketing?

Some people call referral marketing word-of-mouth marketing since people are encouraged to spread the word about your product or service. A good referral marketing strategy is fundamental to make the most of your campaign. 

The referral mechanism is about building a network of loyal customers and encouraging them to share good reviews about you with their friends and referral links at the same time. What is a referral link? It could be a unique URL or code that every current customer who has joined your program has. They can share it with their friends or family, and once those potential customers use the referral links both parties can earn rewards. These may be discount coupons or free products, for example. The referral terms are up to the business provider. 

How does this form of marketing help your business? A successful referral can bring you many new customers, lower customer acquisition costs, and expand brand awareness. Referrals can bring a 30% higher conversion rate than other marketing channels. They can also increase customer loyalty, since participating in such a program gives a sense of belonging.

It is important to add that a referral marketing program is a great option for both B2C and B2B companies.

What does a successful referral mean?

To perceive a given client as a successful referral, there are a few rules to follow. First, your regular customer has to share a link; otherwise, there is no proof of them making a recommendation. The referral marketing software needs to follow this link and monitor its performance. Secondly, the link has to be used, which means a potential customer has to visit your website via it and take the desired action, e.g., make a purchase or sign up for your newsletter. Your referral link may be a direct link to the registered site or the shopping cart, it is up to you. Wherever the link leads, it should be clearly stated in the communication, since nobody wants to click on a link with no clear destination.

Also, it is essential to mention that a successful referral does not always mean a reward for both sides or either. There are various types of referral marketing programs and incentives models. You can choose:

  • One-sided –  one person is rewarded. The gifted side could be either your existing client or the new one who came via link. Rewarding the former will make them more motivated and possibly result in more referrals. Rewarding the new customer will increase the chance that they finish the transaction and come back for more in the future. Nevertheless, such customers might not generate as many referrals as loyal ones.
  • Two-sided – both sides are rewarded. Since you reward both the referrer and the new client, this type of incentive will undoubtedly attract the most customers. You can choose the same type of referral reward for both parties or vary this aspect as well, it is all up to you. Needless to say that motivating your clients in this way will earn you more recommendations and solidify your bonds with clients, as well as increase their loyalty.
  • There is also the option of no reward, but its effectiveness is doubtful. Though people rarely devote their time completely unselfishly, this does not mean it will not happen every now and then. You can also set a target of, for example, three successful referrals to earn the reward, but it is hard to predict whether people would be willing to participate this way. As you might assume, this model will not drastically increase your brand awareness or gain you many new customers.

What is a referral program?

Loyalty programs and referral programs are similar in many ways. Every user of your website can join them. In the case of referrals, you should establish incentives and highlight a signup option on your site or send it via email to encourage them. 

Suppose you run an eCommerce business. Once your happy customers do some shopping, they will receive a link to share with others. If they share it with friends who use the link, both your customers and friends can receive gifts. To create such a campaign, you would need a referral marketing software solution. For this we have a recommendation – EarlyParrot!

What is a good referral rate?

There are a few different ways to calculate a business’s referral rate. One way is to measure the number of new customers acquired through referrals over a certain period of time. Another way is to measure the amount of revenue generated from referrals over a certain period of time.

No matter which way you measure it, a high referral rate is a good indicator that your business is doing something right. It means that your customers are happy with your product or service and they are willing to recommend you to their friends and family.

How to create a referral program – a step by step guide

Once you choose the referral program software, there are few things to do next. Before you click to create a new program, you need to think about a few aspects. First, establish who your target audience is. Then consider what type of incentive you want to offer, whether it should be a discount for your services or maybe a free product?

After such preparation, you can get down to business and start building your referral campaign. We will guide you through the process using EarlyParrot as an example.

Step one: the goal and incentives

So first you need to establish your goal. There are various options depending on the industry you operate in. Then you should focus on your referral incentives system and decide the type of them – whether they will be referral or welcome ones. You can set as many as you need. What you should do next is describe the incentive in detail and you even add an image. 

Step two: invitations

To let people know about your program you need to tell them about it. How to do so? Using social media sites would be the best option. You customers can share the news with their friends and build a social network. What is your role here? To make this social share positive, type the message they can publish. It would be easier for your users to just click a share button than design their own messages. EarlyParrot offers most of the popular options such as Facebook, Twitter, and WhatsApp.

Step three: communication

Referral campaigns should start with your loyal clients, so make an email list and tell them the news. What about email campaigns? They can be useful for making some noise about your program. You may want to create one campaign to invite guests and another one as a reaction to their participation. EarlyParrot allows you to design the messages from scratch with templates that vary depending on the email types. It is also a good idea to spread the word about your customer referral program by adding some positive reviews from your clients. This would be an additional incentive and make you seem more reliable.

Step four: the referral widget

The referral process should include designing referral widgets. A widget can be designed according to the type of share page. EarlyParrot offers many sharing options, so you are obliged to develop sections like reward widgets or activity widgets. Through these share pages, your customers will be able to spread a positive experience about your business, so each referral widget should be designed carefully.

Step five: integrations

It is a crucial aspect of making your word of mouth marketing useful. You need to integrate the software with your landing page and the platforms you use daily. Early Parrot has a wide range of available integrations, so we are almost sure you will be able to find yours here. It does not require a huge effort, just find the program and EarlyParrot will guide you through the process. It won’t take you longer than 15 minutes.

Step six: campaign monitoring

Tracking your program’s key metrics is crucial for making it successful. You have to know what’s working and what’s not. By having such information, you will be able to adjust the campaign accordingly. 

As a recap of this short guide, it is worth mentioning that the whole referral process is automated. EarlyParrot automatically detects whether new customers buy your products via recommendations from friends or if they come from organic traffic. You can make any adjustments as you need, since thanks to the dashboard you have access to each of your campaigns at any time.

Which industries can make the most of referrals?

Referral marketing is a form of marketing that can be very effective for basically any industry. Additionally, many B2B tech companies admit that referrals from their loyal customers have been one of the most effective tactics during the COVID-19 pandemic period. Few industries benefit more from referrals than others, but it is all determined by their types of consumers.

  • For example, it is relatively easy for eCommerce sites to encourage people to be active participants in a referral program, especially if they sell FMCGs, clothes, or accessories. Rewards like discount codes from such industries are more likely to be used and redeemed by clients who often shop for those kinds of goods.   
  • But on the other hand, when it comes to more significant expenses, people like to ask for advice and buy from a reliable source. When a discount comes along with that recommendation, it is even better. Such industries like SaaS or tech services can also benefit from referral marketing programs.
  • Niche industries can profit a little more than others. Such businesses do not experience huge popularity, at least at the very beginning, which is why referral marketing comes in handy. No matter how many clients a company has, they can all recommend it to their friends. This is exactly how referral marketing works. The word is spread, and the popularity increases.

It is important to say that referral strategies work not only for products but services as well. There is plenty of proof of this, including the following examples of companies. So what are the most popular referral program examples?

  1. Clubhouse, the latest flavor of the month. Its popularity grew beyond anybody’s expectations. All thanks to a sense of inclusivity and referrals!
  2. Uber, one of the most popular referral programs. It operates in many countries, and referrals allow the app to expand its reach.  
  3. Credit Agricole is just one example of how the banking industry uses referral channels to say thank you to devoted customers and reach new ones.
  4. PayPal runs a referral campaign, too. This is another example of a financial app using the power of recommendation.s 
  5. …and many more. Here is an article about referral programs provided by some key players, feel free to dive in.

From a customer’s perspective, a well-designed program may be a great opportunity to find new providers and save some money. According to MediaVenue, such recommendations work better than TV advertising for almost half of all Millenials. This means that referral channels really work!

How to provide a successful referral program

There is no ready-made recipe for running an effective referral program. Each business manages these issues differently, but we can provide some guidelines that may become handy.

  • Focus on the user – they should be your reference point. Step into the customer’s shoes for a minute and consider which type of reward would be the best for increasing their satisfaction. A deep understanding of your target market would make your sales efforts efficient and allow you to see all the benefits of referral marketing at its finest. What else should you do to keep your happy customers around and willing to share links?
  • Keep your online reviews visible. They are a powerful form of social proof, which makes your brand seem more reliable. Even if one negative review appears, do not worry. This indicates that real people use your products; you can’t please everyone no matter how much you want to. Highlight positive reviews on your website, and present some comments from social media platforms. This will encourage potential customers to purchase or do another desired action. The more social proof, the better.
  • Use referral marketing as part of your whole digital marketing strategy. Create a synergy effect with social media marketing or email campaigns to make a buzz about the entire business. Compare your referral program with a loyalty program and send invitations to the whole user base. Make your strategy a comprehensive whole.

If you are interested in more pieces of advice, feel free to read this article. You will find more ways to make the most of referrals with almost minimal effort here.

Ready, set, refer!

Creating a referral program is not rocket science, but it remains some effort. Hopefully, with our guidelines, you now know what it is, how to use this tactic wisely, and what to do to benefit from this strategy.

We have shown you referral marketing in a nutshell, and it should be a good place to start with a referral campaign. Feel free to share this piece with your marketer friends and come back any time you have any doubts about your campaign!

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