When you as a customer need to buy something new, where do you look for advice? Most likely, you’ll start with asking friends or close ones for some recommendations. The concept of referral marketing leverages this to the benefit of a business: it is one of the most cost-effective strategies to encourage others to talk about your brand. So let’s look closer at how it works.

Why do you need a referral program?

9 out of 10 customers trust recommendations, and this number is obviously much higher than from traditional advertising. There is no surprise: we are more likely to follow the guidance of our friends and some influencers than digital ads.

At the same time, while the vast majority of satisfied customers are willing to recommend something to their friends, less than 1/3 of them actually do it. So, without a proper referral marketing strategy that encourages sharing experience, you may lose new leads without even realizing it.

In addition, the referral program not only significantly reduces the cost of attracting new customers, but also increases their retention. This proven tactic continues to bring in more loyal customers for B2C companies like Dropbox, Tesla, Uber, and others.

How does it work in practice?

In short, the referral program is about involving more people (referrers) in the process of attracting new customers (referees) in exchange for a reward. But as with any marketing campaign, you need to draw a plan before launch.

Step 1. Set your goals

You need to be clear about your expectations and standards for those who participate in the program. Make the referral process simple and easy to share. A properly designed referral strategy should answer all these questions:

  • What do you want to achieve (new customers or attention to new products/services or something else)?
  • Is your campaign permanent or limited in time?
  • Who is eligible for referral bonuses?
  • What actions should be completed to get a bonus?
  • How do you reward customers?
  • Is there any limit on the number of rewards someone can earn?

Step 2. Choose a reward program

There are two main approaches to run a referral campaign – one-sided and two-sided. With a one-sided approach, a reward is received by one participant – a referrer or a referee. Let’s say, John (one of your customers) offers Anna (who never bought anything from your store) to make the first purchase using his referral link. Once Anna completes her order, only John will get a bonus.

However, if you don’t give a reward for the second person  – Anna from our example, she may lose interest in it. By launching a two-sided campaign, you encourage both participants. That generates more interest and, consequently, gives more leads.

Source: mention-me campaign for wonderbly.com

The next question is a type of reward. To understand which incentive works better, consider what your customers value the most. While it seems like cash bonuses are likely to benefit clients more than other rewards, this is not always the case. Depending on their preferences, you can offer something more valuable that will keep them coming back to your store in the future – discounts, service upgrades (e.g. exclusive photo book templates, premium materials, individual packaging), samples of new products. Moreover, the reward does not have to be the same. Consider combining different incentives at once: discount + gift, bonus + free delivery, etc. 

Source: mention-me campaign for photobox.co.uk

Step 3. Actively promote it

One of the main reasons for a poorly working referral campaign is the lack of information support. Even if customers are loyal to you, it doesn’t mean they are going to talk about your brand. This is why you need to promote your program. Do research about the most effective way to grow your lists and then test it out. Add details about your referral program in newsletters and social media, create a landing page, and add a pop-up in the app and main web page. 

Source: www.trouva.com/friends

Step 4. Track the performance

To assess the effectiveness of a referral program, we advise tracking the following metrics:

  • The number of referrals
  • Virality, or the number of customers who came from one recommendation
  • Conversion, or the proportion of referees who ordered a product or service. 

In addition, you can run an A/B test offering different types of bonuses, and then follow up on which option has better results. The good news is that you needn’t develop everything from scratch: popular referral providers already have integrated analytics, link distribution, and tracking.

Bottom line

Implementing a referral program is a smart fit for retail, including photo products businesses. Your company is not the only one that can benefit from using this marketing tool. Referrals turn your customers into convincing influencers: if they’re satisfied with your product and bonuses they’re getting from cooperation with your brand, that’s a powerful selling point to others. Hope our tips will poise your business for the revenue growth 💪