UNLOCK THE MARKETING AND SALESPOTENTIAL OF YOUR CUSTOMERS

How to Build a Successful ReferralMarketing Program

WHY A REFERRAL PROGRAM?

The way customers engage with businesses has changed dramatically. Dovetailing with the exponential growth of social media platforms Facebook, Twitter and LinkedIn, your customers’ ability to advocate online, instantly spreading their opinions – positive and negative – to hundreds or thousands of friends, connections and followers, can have a fast and direct impact on your top & bottom line. Since people trust other people more than they trust brands, social Since people trust other people more than they trust brands, social media advocacy has become today’s word of mouth marketing – According to Nielsen, 84% of consumers trust recommendations from friends & family above all other forms of advertising[1].

Online reviews and recommendations have increasingly become an essential part of the consumer buying decision making process. This also applies to businesses who increasingly turn to online increasingly turn to online sources for an unbiased perspective.

of all B2B and B2C purchases involved some

form of WOM recommendation during the purchase cycle -

Forrester)

80%

WHY A REFERRAL PROGRAM?

How can brands take advantage of this new dynamic that reduces their influence on the buying process? By enabling their existing customer base to market their products, By enabling their existing customer base to market their products, services or experiences on their behalf through an effective referral program. Referral marketing uses incentives to encourage the distribution of positive information by customers. Given sufficient incentives, your customers will spread your brand’s value throughout their social networks, driving awareness of it to people who know them and trust them. Referred customers, are in essence ‘pre-qualified leads’, since they are likely to have the same lifestyles and habits as their friends – your customers that initially referred them. Referrals that become customers have been shown to be more Referrals that become customers have been shown to be more valuable in both the short and the long run; according to the Wharton School of Business, the average value of a referred customer is 16% higher than that of a non-referred customer with similar demographics.

Further, a study by the American Marketing Association[2] that tracked 10,000 customers of a leading German bank for three years, found that referred customers: ● Have a higher initial contribution margin ● Have a higher retention rate, which continues over time Referred customeReferred customer’s come to your brand at a lower cost, stay longer, and have a higher lifetime value than customers coming in by other means.

The Lifetime Value of a new referral customer is

16% higher – Wharton School of

Business

BENEFITS

The 5 main benefits your business will realize with an effective referral program are:

The ability to cut through the marketing clutterThe average NorthThe average North American urban consumer is bombarded with between 3,000 to 5,000 messages every day. Adding up professional communications, personal communications and marketing messages, it has become increasingly difficult for businesses to get noticed. Adapting to this barrage, consumers have become adept at filtering messages, and typically only retain a few – less than 10 messages a day from the thousands they receive. Howevethey receive. However, because referral marketing delivers relevant information and a valuable offer from a trusted source, it is far more likely to cut through this clutter and be remembered by recipients.

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BENEFITS

Growth and improvements in your CRM/customer databaseData is the lifeblood of business in 2014. A less talked about, but important, benefit of a successful referral program is its ability to expand your customer data, in both quantity and quality.

A few examples:

● Acquiring additional data on your existing customers and prospects such as gender, age, nationality and location● Expanding your CRM data by including social profiles● Flagging existing CRM members as strong brand advocates● Identifying non-customer brand advocates for inclusion in your CRM

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An Accelerated Positive Industry ReputationAn endorsement from a trusted source boosts a businessAn endorsement from a trusted source boosts a business’ reputation. By enabling your customers to become proactive and consistent referrers, you will raise your reputation at a much quicker pace than by organic means. Further, a company with a strong reputation typically enjoys higher Average Order Values (AOV) and Lifetime Value (LTV) from customers.

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More and better customer data means better strategic and tactical decision-making around products and services by your business, since decisions are based on measurable data-driven events

IS A REFERRAL PROGRAM RIGHT FOR YOU?

Ask yourself the following three questions:

If the answers to these questions is ‘yes’, read on.

We’ll give you the step-by-step primer on how to launch an effective program.

1. Are there customers in your base that are willing to recommend your products, services or experience to others? 2. Is your value proposition understood by customers? Well-understood enough for them communicate it to others? 3. 3. Are you willing to provision the resources to build and manage a referral program?

A STEP-BY-STEP GUIDE TO BUILDINGA REFERRAL PROGRAM

MAKING IT REAL

Ready to make your referral program come to life and start generating leads? Here’s how we do it. Before you start:

Your IncentiveExamine which reward(s) you will offer your customers to incent them to provide referrals for you. Here are a few angles to consider before you decide on incentives:

Target the reward to your customer base: ensure that the reward they get for referring is aligned with their expectations, motivations and perceptions of value. A car dealership offering a $5 coffee card for referrals is unlikely to get traction. A car dealership offering a $50 or $100 gas card for referrals that result in new car test-drives will move the needle. The reward should feel unique, ideally being something that only your business can provide such as a new product, unique experience or rewards points. Exclusivity is a prime referral driver for your customers.

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Appoint an owner for the program. Your organization should have a champion or program manager that owns the program. Part of their role will be to communicate and ensure that your organization has buy-in from various stakeholders, across multiple departments. A clear, named program owner will ensure that everyone involved understands a referral initiative takes long-term effort to improve and evolve over time.

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Review what your competition is doing, so that your program does not potentially overlap or duplicate theirs:

Stagger your timing with theirs to make sure your program’s message & offer stands out. Next, when you begin program planning, consider the following 5 elements as its pillars:

● Are any of your competitors running a referral program?● What incentives are they offering for referrals?● When are they active with their program?● How are they marketing & communicating the program?

MAKING IT REAL

# of Successful Referrals

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$50

$100

$200 ($50 bonus)

$250

$375 ($75 bonus)

Cummulative Rewards

Balance the rewards between referrers and referred customers: make them the same. Balancing the rewards structure will ensure that neither party feels cheated or short-changed (eg - "Why are new customers being rewarded more than me? Ive been a customer of this company for years".)

Experiment with diExperiment with different offer values: If you are offering points, gift cards, money or a reward that has a denominational value, explore increasing or decreasing the amount(s) to determine an optimal denomination that will convert at the highest rate. In one instance, we found that the brand received an equal amount of referrals when we cut the offer value in half. Try different offer types: Perform A/B testing on offer types. For example, a loyalty points reward equivalent to $50 can be tested against $50 cash, a $50 gift certificate or a $50 product. Don’t hesitate to experiment, or to split your customer into several smaller test groups o find the right incentive.

Create a rewards structure that provides increasing rewards Create a rewards structure that provides increasing rewards for referral behavior: your rewards structure should allow for increasing rewards as more milestones are achieved. The structure should not be linear - referrers should be rewarded at a higher level for referring 3 friends vs. 5 friends. This will keep their interest in the incentives longer, since they escalate. An example:

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Example:

MAKING IT REAL

Find your high-value customers: depending on how much data you have, identify who your high-value customers are - the ones with the highest lifetime value or those who have performed a high number of repeat purchases. Customers that spend the most money with you are typically happy with your product, service or experience, and are most likely to advocate on your behalf. These are your best brand advocates. Don’t be afraid to go the extra mile to market advocates. Don’t be afraid to go the extra mile to market the program to these individuals

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Your CRM DatabaseStart with your customer database or CRM database - depending on how much information you have in it, you can leverage it in multiple ways to market the referral program to your customers, especially the ones who carry the highest value to you.

Ensure you have a valid point of contact for these customers:

1. Valid email address and commercial messaging permission (eg – CASL, CANSPAM)?2. Home address3. Social data (eg - Facebook user ID)4. If B2B, additional firmographic data, if available ● Industry ● Annual Revenue ● Number of Employees ● Geographic Location ● Job Title of Buyer

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List creation: separate high value customers by type of contact information. This will help determine how these customers will be marketed to. For example, high LTVs you have a home address for, can be direct mailed, while lower value LTVs can be emailed or called, provided you have their permission under CASL. Make sure to suppress communications to all customers who appear on national Do Not Call Not Call and Do Not Mail lists.

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MAKING IT REAL

Email: Make email a key part of the program, including initial Make email a key part of the program, including initial announcements and subsequent reminders. Email generates the highest ROI among online marketing channels, on average more than $40 per dollar spent. It is still one of the most cost-effective ways of having your customers refer friends, and enables an “optimize as you” go approach, for creative and messaging. A study done by ExactTarget reports that 63% of people surveyed said they use email to share content with their people surveyed said they use email to share content with their friends and family, vs. 33% for Facebook and 5% for Twitter.[3]

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Your Marketing ChannelsYYou are now ready to formulate your media and marketing plans. The key will be to use a multi-channel approach, leverage earned, owned and paid media to ensure the program is a success. For example, a one-time direct mail-only campaign using no additional channels will likely not generate results. A successful program will typically use multiple channels, and will communicate the program consistently: the more you keep the program top-of-mind for your audiences and remind them they can make recommendations, the audiences and remind them they can make recommendations, the higher the referral rates. Customers are busy people. Asking them to refer once is not enough. Remember the Marketing Rule Of Seven: as with other media, a message often needs to be communicated 7 times before it is acted upon by a recipient.

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MAKING IT REAL

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MAKING IT REAL

Web Properties: if your website has a secure area where users must log in, if your website has a secure area where users must log in, promotional banners, interstitials or pop-ups served immediately after login are an effective means of communicating the program. If your internal IT/digital department has the ability and bandwidth, they can personalize the message by addressing customers by name, outlining the benefits of referring their friends, or customizing the message further to your highest-value customers by referencing their purchase your highest-value customers by referencing their purchase habits. Please use online properties that can identify your customers. Do not target messaging to non-customers.

In-store/in-location POS Signage (if applicable): If your company has bricks & mortar locations, drive If your company has bricks & mortar locations, drive customers to your program where they shop, by promoting your program with signage at the point of transaction. For companies like financial institutions, this may be the teller area. For telcos or retailers, this would be at the point of sale. Your messaging at the point of sale should be clear, concise and include a call to action that leads to a destination online that is mobile optimized, so customers can begin online that is mobile optimized, so customers can begin referring immediately. One of our most successful programs used in-store material to drive to the referral program - it was the largest driver of customer acquisition among the vehicles leveraged by a tangible margin.

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Receipts or Account Statements: if your company provides receipts for transactions, a call-to-action printed on the front or back can drive customers to the referral program when they get home. You can also do this for digital eCommerce receipts, on-screen or emailed.

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MAKING IT REAL

Remarketing: Message recipients sometimes act only after viewing a Message recipients sometimes act only after viewing a message multiple times. When your customers land on your referral program’s website for the first time, you can follow up by serving them targeted ads around the web, and on Facebook, to retarget them, and keep the program top of mind. Ensure that you drop both types of pixels on your referral microsite or page:

1. 1. WWW Pixel: retarget customers who are either interested or are already participating in the program by displaying ads across the web on some of the websites they visit most. Remember, you will need to think of a strategy for the Flash-based & static banners to serve up across various devices and ad networks.

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2. Facebook pixel: retarget customers on Facebook with newsfeed ads, right hand side ads and ads within mobile applications

MAKING IT REAL

Total Invites: show how many invites they have sent out to their friends, and if possible show friend multipliers. This allows them to see the reach of their influence.

Clicks on invites: show how many clicks their invites have received. This lets them know that their efforts are not for nothing and people are listening to their referrals.

Progress Bar: Progress Bar: show your advocates how much/which incentives they have earned via a progress bar, as well as how far they are from earning their next reward.

Badges: rewarding your users by giving them badges as they move up the rewards ladder motivates them to unlock the next achievement level. Badges should be related to your organization and fit your customer demographic.

An easy-to-access user dashboard: Build an online dashboard so referrers can log in and view how they are faring in the program. It will keep them active and engaged, and allow them to see how far away they are from their next milestone or reward. We recommend showing the following:

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GamificationGamifying the referral & rewards process can be a key driver of success for your program. There is no clear-cut blueprint for how to gamify, since every business is different. However, there are two core gamification elements that have helped our referral programs achieve success:

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MAKING IT REAL

When a friend signs-up to the program

When they have received a reward

When friends click on the invite (we suggest picking a milestone such as 5 clicks) so they know people are interested in the invite and that they are that much closer to earning rewards.

TTimely news and reminders about the program. This type of messaging will keep them engaged and coming back.

Opt-in: with Bill C28 (the new Canadian spam law) now enacted, and CANSPAM having reach into your customer base, strongly recommend to referrers that they need to opt-in to receive emails from you, that will let them know:

Create a Program Guide: Several top games, including those made by Zynga, provide an easy-to-follow guide to walk you through the initiative. It is one of the reasons these games do so well. You do not necessarily need a cartoon character to guide your users on how to navigate your program, however, a simple, step-by-step guide that works effectively across all platforms (desktop, tablet & mobile) to help users fully understand rewards, what they need to do help users fully understand rewards, what they need to do to get them, how they can get started and how they can achieve more success (eg - by opting-in to emails, they can receive important updates and reminders) will help program success. The guide should end with the user referring a friend and unlocking a badge or initial reward.

The user experience you create for your advocates when they onboard into the program is a key success driver.

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MAKING IT REAL

Monitoring, Testing & Optimization

Referral programs are similar to marketing campaigns – they perform Referral programs are similar to marketing campaigns – they perform best when an agile approach is used, to optimize them over the length of their run. Do not build a program only to let it languish, or expect it to run itself. Consistently review the analytics on a weekly basis or after a major marketing push (eg – an email broadcast). You can’t manage or understand what you don’t measure.Referral program results can be measured and quantified unlike Referral program results can be measured and quantified unlike many other marketing initiatives; you can double down on elements that work and de-emphasize ones that are not working.

The core items to monitor on a regular basis are:

User paths:

As a first step, using Google Analytics, Adobe Omniture or another site tracking platform, ensure to set up goal tracking for both users referring friends and those accepting invites

For customers that are referring friendsFor customers that are referring friends, pinpoint where they are dropping off. This will tell you where potential bottlenecks, or issues with your user experience, design or copy are occurring. Attack these areas first when optimizing the user experience.

When optimizing customer user flows:

Start with two different onboarding flows for your customers, splitting your customer base in half. Perform A/B testing, with one onboarding through Flow A, the other through Flow B. Select the one that is performing the best and move forward with it.

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Make sure to track everything in the A/B tests: button clicks, email open rates, and above all else, successful referrals. The numbers will let you know which of Flow A or Flow B is the one to move forward with.

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For prospects being referred by friends, use the same approach as above. When optimizing prospect user flows:

Only ask for the minimum information you need to create an account. For example, if you only require a name and email address to register, do not ask for mailing address or birthday. Asking for too soon immediately significantly affects conversions.

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MAKING IT REAL

Lifetime Value: this is the fundamental data point to capture and measure. It will help you understand the impact of the referral program over time. Be sure to track the LTV of referred customers, comparing them to the LTV of current customers. Referred users tend to have a higher lifetime values -- and higher average order values.

Ensure that your landing page is personalized with the referrers name. ie. “Your friend Jane Doe has referred you to [Company Name]”. This way the experience will feel like a natural digital introduction, and help with conversions.

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Other KPIs to measure: ● Number of referrals● Number of first-time buyers (net acquisition)● Revenue generated from referrals: You can split this metric up into two different measures, lifetime value and average order value. average order value. ● Retention rate of referrals (tenure)

● Reach: For every Facebook Post, Tweet or forwarded email, understand how many friends or followers were potentially exposed to the endorsement● Advocacy Rate: percentage of your customers who will make referrals.● Referral Rate: percentage of referrals per referrer● Conversion Rate: percentage of purchases made vs. ● Conversion Rate: percentage of purchases made vs. number of customers exposed to the offer

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RECAP

By harnessing the power of referral marketing, you can turn your customers into a new sales channel that will acquire new customers at a lower overall cost than through other channels. Referral programs are also strong drivers of brand awareness and improved CRM data. Remember the key pillars for success:Remember the key pillars for success:

Incentive: offer an appropriate, unique and targeted reward.

CRM: find your high value customers, and build your marketing plan around them

Multiple channels:Multiple channels: social media, email, remarketing and your web properties should all be part of the marketing mix for your referral program. Deploy direct mail, signage & Facebook ads if you have the budget.

Gamify: help generate strong engagement for your program by leveraging gaming tactics like dashboards and program guides

Measure: Measure: establish KPIs, and take the pulse of your program consistently and accurately - daily if required

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WWe’ve shared our approach to the

referral programs we build in the hope that you find success in building a successful program of your own.

Best of luck!Best of luck!

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