Examples of Good Referral Programs:
Dollar for Dollar: Uber
Percentage Paid to Referrer: Pavlok
Tiered: Kitchen Surfing
What you’ll often find in ecommerce and online retailers are referral customers that come from referrals from another customer – spend earlier and spend more and a lot more valuable over a lifetime. So make sure you are leveraging your existing customers to refer friends who look like them and who are going to be the ideal customers for you.
What are the three types of referral programs?
The pretty typical one is dollar for dollar.
Uber is a very good example. It started worldwide offering $25 for you and $25 for your friends when they sign up. It is a great two-sided incentive so you and your friend will get some benefit from it and obviously encourages referrals.
There is this company called Pavlock which does a percentage run. That’s the second one we are going to cover.
So for every sale of their devices, if you refer a friend, you get 20% of your friend’s value in terms of what they purchased. Cash back if you refer friend.
This is ideal maybe for a one time purchase or an expensive purchase. A little bit tougher to scale if you have a whole product range and you want to get multiple purchase off of someone overtime as you don’t want to be paying for every single sale you make to those people.
The third type is the tiered program.
A lot of software companies use this, like Dropbox. Refer a friend and you get 250MB.
In the ecommerce space, you can refer a friend and get 5% off, refer two friends 10% off, refer 3 friends 15% off etc… You might want to tier it up as much as far as it will go.
What are three ways to optimise these referrals?
The first one is, you gotta know your numbers.
Cost of sales for all your marketing channels is crucial. So know your number you don’t give away too much. But knowing your numbers also means you can probably make it a lot more generous than you think.
Get a real sense for what your cost for sale is. Work it out through multiple channels, test, and optimise it as you go along and don’t be scared to change it if it’s not working.
Make it two-sided.
You gotta incentivise customers to refer other customers. Make sure that the referrer and the referee are getting some kind of benefit out of it, as it’s gonna cover the broadest range of people in terms of getting it out there to their friends and colleagues.
Utilise all channels you know of.
Of course you’re gonna post pitches and sequence it up, automation to get emails out to the customer. After your receipt you are asking for a review. You got those things, don’t you?
Make sure that you are down the track after the customer’s purchase. You’re making them an offer to say, “Hey, do you know anybody who’d like our product, here’s an incentive to do it.” Build this into your post pitches process, built into an automation, encourage sharing through social channels, encourage sharing through email.
If you take the time to build and cost out a referral program, make sure you utilise it for every channel.