Those who are new to the marketing field may not be familiar with this process, but referral marketing is an excellent strategy to promote business growth. Let’s take a look at what referral marketing is, why it works, and how to start your first referral marketing campaign.
Congratulations! It’s time to start your first referral marketing campaign journey. This is an exciting time for any business, because growth and development are just around the corner.
How does referral marketing work?
Referral marketing It is a very effective way to bring new business to your company. It is so effective because after the initial setup, most of the marketing work is done by your own customers and customers who participate in the referral program.Participants in the referral program, usually called Referrer, Recommend your business through recommendation in exchange for some kind of reward.
Most referral programs include incentives to encourage participants to make as many referrals as possible. The most effective style includes two-way incentives, where the referrer and the referee each get rewards.
For example, everyone registered by the referrer will get a free one-month subscription. Conversely, when someone signs up through a referral, they will get the first month for free.
These activities worked well because everyone involved in the program received some form of benefit. Active participants get rewards and the company gets new business.
The key to efficient and effective activities is the setup phase. It is not uncommon to have some high initial costs, which may scare people away, but once up and running, most programs will continue to be great options for business income generation.
Benefits of starting a referral program
The obvious benefit of starting a referral program is that your business will begin to attract new customers. The increase in income makes everyone happy, especially those in the financial industry, but in addition to direct income, there are countless benefits.
Build brand awareness
The more people talking about your business, the more people who know your brand.
The math adds up. When your business is running a referral marketing program with many active participants, more people will participate in conversations about your business. It means that consciousness is growing.
The advantage of this method of building brand awareness is that it is not necessarily a short-lived viral marketing system. The number of people actively spreading brand awareness continues to increase. In fact, when people become customers through referral programs, they are more likely to participate in the process themselves after initial registration or purchase. They have witnessed these benefits with their own eyes.
Reduce customer acquisition costs (CAC)
Customer acquisition cost (CAC) is exactly what it sounds like. This is the price for new customers. It is a measure of how much it costs your business to turn a potential customer into a customer. The lower your CAC, the better, because it means your business spends less time to attract customers through.
After the initial setup, the acquisition cost of referral marketing is very low. Usually, you will only miss a relatively small amount of income per referral (for example, 1-2 months of subscription). When you consider the lifetime value of the customer, the acquisition cost pales in comparison.
Increase conversion rate
What every sales department wants to hear-“The conversion rate has increased.” Increase conversion rate This means that a higher percentage of potential customers are turning into active customers. The higher the better.
When customers are introduced to your company through their acquaintances, they are more likely to become converted customers. This is because some of the trust between merchants and consumers is inherited from their friends’ previous transactions. In addition, being able to see how the process works for them is a great help to the conversion.
Reduce churn rate
Many SaaS and subscription companies track their churn rate. This metric is based on the number or percentage of users who stopped subscribing in any given time period. A high churn rate means that customers are not retained, and may indicate that customers are not completely satisfied with the services or products they received.
when Deloitte After studying the retention rate of customers, they found that the retention rate of customers who subscribed to the business after recommendation was 37% higher than that of customers who joined them.
Improve customer lifetime value (LTV)
Related to the previous point, customers who join through referral programs usually bring higher customer lifetime value. In addition, because customers actively participate in the recommendation process, they are more likely to repeat purchases on their own. Longer subscriptions or repeat purchases mean an increase in the overall average lifetime value of the customer base.
this Lifetime value index Most useful when investigating with CAC. The goal of any business should be to have low CAC and high LTV. When the situation is reversed, problems arise.
This makes perfect sense, but a large number of companies spend thousands of dollars to acquire customers (through paid advertising), and then they only subscribe or buy once. Having a strong and helpful referral program can perfectly solve these problems.
How to set up your first referral event
The benefits are obvious, and the indicators are ready to be calculated and measured. Now is the time to start the first recommendation event. But first, some settings need to be made to ensure that the event runs smoothly, and more importantly, to provide a positive customer experience.
Set goals
The first step is to set goals for your campaign. What do you actually want from referral marketing activities? The obvious is more customers, more sales, more subscriptions. But it is worth studying the achievable goals in depth and considering larger goals in a more granular range.
You may want to attract more registrations in a particular customer base. Your goal may be to sell a specific product to the person being recommended. Many different goals can be set.
The key is to set them up from the beginning, reflect on them and evaluate them as the activity progresses. There is no harm in adding or editing your goals as you move forward, as long as you don’t move the goal bars to achieve them more easily.
Don’t forget to set measurable data-driven goals so you can benchmark your progress against the goals. Examples include click-through rate, conversion rate, engagement rate, etc.
Select referral reward
This should be done on two different levels-what rewards you will provide as incentives, and who will receive them.
First, the types of rewards your business offers are usually tied to the services or products you provide. For example, if you sell a subscription-based platform, many referral plans will include free subscriptions for several months or receive discounts from monthly subscriptions. Platforms such as the Monthly Food Box often go this way.
Many other types of rewards can be offered, but the most common are often gift cards (internal or external company), cash or credit. Less used but still valid rewards include subscription upgrades (even if temporary) and cash back rewards.
Deciding who gets the reward is equally important. There are 3 common settings-no excitation, one-sided excitation, and two-sided excitation. Depending on the number of rewards and incentives provided, recommended marketing strategies are often more effective.
- No incentive: There is no reward to provide any reward to anyone who provides a recommendation. Without a referral plan, many companies are already acting in this way. If your business is in such a position that you accept recommendations without providing any incentives, then you may question why you should bother about it.But a better question is to ask how many more If the referrer is rewarded, you will be recommended.
- Motivate: The next step is to provide rewards for only one person. This may be the referrer or the referrer himself. An example is that existing customers get a free one-month subscription for anyone from the company they recommend.This is very similar to Affiliate marketing But the focus is on their own personal network, not a broad, unknown audience.
- Two-way incentive: Two-way incentives are the most common form of recommended marketing. Everyone will get something from this process. When Uber launched, it used two-way incentives to provide credit to referees and provide free first-hand for referees.
Reach existing customers
A good way to start a referral program is to reach existing customers. During the initial setup and planning phase, you can ask them what they think is good for them, or what they hope to provide potential customers.
Later in the process, you need to let all customers know that the referral program is open and ready for them to participate.
You should expect that your current customers and potential participants will need a little encouragement to participate. Make the perfect recommendation email It requires planning, but it is worth every effort. Well done, you will see that your referral program is off to a good start.
Choose a distribution channel for promotion
Now it is time to consider the actual logistics of the recommendation process. How will you present your offer to customers, and how will they use these items to promote your referral program?
A good starting point is to consider which path is right for you at the moment. If you have had bad luck in the past, there is no point in launching a social media campaign.
The process should be considered in the same way as any other marketing campaign. It should be planned, structured, and then put into action. The best way is to keep it simple. The more steps participants must follow, the less likely they are to participate fully.
Use recommended software for automation
The most difficult part of the setup process has been completed. Now, it’s time to make the recommendation activity smooth and easy through automation.Platform like Growth surfing Make everything simple and centralized in one place-allowing you to effectively track your marketing activities, adjust as needed, and observe your business growth.
It is also worth noting that the integration with payment gateways such as stripe Can make all the difference. These integrations are not always available out of the box, but the best recommended marketing platform will make them ready for simple plug-and-play setup.
wrap up
As with everything in business, preparation and planning will ultimately pay off. Once you are ready to start your referral program and the automation is in place, there is little to be actively managed, but countless benefits can be obtained.
- From the perspective of customers and participants, ask them what they want from the referral program.
- Track your metrics to understand how referral activities can improve your business.
- Use automation to make your recommendation plan management easier.
