Turn Customers Into Salespeople – Pass It On
Many people would consider a positive review of a company from a trusted friend the most earnest form of marketing. The idea that a company can leave such a good impression that someone feels the need to share their experience can feel decidedly organic, compared to a contrived television advert where impossibly beautiful people’s lives are made immeasurably better through the presence of product/service X. Indeed, referrals can even feel organic when they are incentivised.
In an article for Social Media Today, Kirsty Sharman, Founder and CEO of The Referral Factory,outlines the importance of referrals in marketing programs. This goes beyond simply hoping customers will recommend a company to their friends and family – it involves strategic planning and careful implementation to ensure as many customers as possible become active advocates for your brand.
Sharman brings some figures to the table that highlight just how far a company can widen their customer base through referrals:
· People are 4 times more likely to make a purchase if referred by a friend
· Customers achieved through referrals can generate 16% more profit than a non-referred customer
· Referred customers are 4-5 times more likely to create their own referrals
· If new customers are attained through paidadvertising and subsequently refer friends, a referral loop is achieved, reducing the cost per acquisition by approximately 34%
· If a company has 50,000 customers, each of whom have 5 friends with similar interests, there is the possibility of reaching 250,000 potential customers through referrals
· Recommendations in WhatsApp messages from friends and family receive 55 more clicks than one Facebook Ad impression
· By timing a referral request to follow a positive brand experience, the number received can increase by up to 36%
· 77% of customers report word-of-mouth feed back as being the most persuasive factor when making a purchase
These figures reiterate that trust in the source can have a huge impact on whether a consumer becomes a customer, after hearing about a product. While it looks great on paper, it is important that companies do not jump in with both feet, instead taking the time to devise a roll-out strategy. Software like The Referral Factory can help achieve this by formalising the way in which referrals are requested, rewarded and tracked. Sharman notes that any referral program should be initially launched to a limited section of your customer-base as atrial. The results can then be analysed and the model can be refined, before the pool of clients. If it is successful, it can then be implemented in its entirety.
Sharman also warns against launching a program without a capon the amount of referrals that will be recognised, using the example of PayPalin 2000 as a referral program that almost bankrupted the company. In a similar vein, the manner of the incentive also needs to be carefully considered. While the incentive should be attractive enough to motivate customers, it should also be economically viable, so as no to make a significant dent in profit margins. There are a range of options, too, from cash payments to discounts, andfrom prestige gifts to credit for future purchases. Classic Folios’ referral scheme (https://www.classicfolios.com/referral-scheme) even offers referrers to swap the £250 John Lewis vouchers for a charitable donation.
While some companies may remain wary of referral programs,perhaps citing PayPal’s 2000 rollout as a warning sign, they can be worked into a marketing budget, per Sharman’s advice. Caps on rewards can help marketing teams prepare for a maximum expenditure, while the rewards could steer customers towards making purchases that they otherwise may not have – for example, by offering discounts on orders over X amount. The cost of the rewards may also be offset by the improved cost per acquisition, whereby a single paidad could essentially attract multiple new customers through referral loops.
The allure of a reward for simply mentioning a product to a friend, tagging them in a post or providing their email address is obvious. Many schemes also offer a similar incentive to the referred party if they follow-through on the referral, to help ensure a tangible return on the investment.
Not only do referral programs help companies attract new customers, they also provide an efficient way of obtaining data and tracking the source of leads, while strengthening relationships with buyers.
Whether it is handled in-house or through a referral specialist, such as The Referral Factory, and with a vast range of communication tools at a company’s disposal, spreading word of mouth has never been easier or, with the right execution, profitable.