what is a referral programme?

The best way to get referrals or new customers

The goal of marketing is not only to attract as many customers as possible to a company, but also to make them feel a bond with the company and consider themselves part of it. A good way to achieve both of these goals is the referral programme.

This strategy consists of encouraging a company's existing customers to recommend its products or services to their personal network of acquaintances. Referrals are therefore all the new contacts that a company gets through its employees, customers or suppliers. In short, the referral programme is a word-of-mouth marketing model that offers benefits to its customers (such as discounts or attendance at events) if they manage to convince people in their circle.

If customers feel comfortable and satisfied with the company, they are more likely to recommend it to those close to them, but the referral programme actively supports that strategy, adding quality to the experience of both long-time customers (through rewards) and newcomers, as 92% of consumers worldwide trust recommendations from acquaintances more than advertising, according to a study by Jay Baer.

Before discussing the benefits of a referral programme or discovering how to implement one, it is important to differentiate between the three types of referral programmes available in order to find the most appropriate one for each company's circumstances:

• Invitations: This is the simplest programme. It consists of establishing the most opportune context for a user to invite another person to join the company. Therefore, it does not offer tangible benefits to either party. Rather, it works as an emotional incentive to improve the user's experience on a social network (such as Instagram or Twitter) or in a chat application.
• Give&Get: This is where the rewards offered by the company for both existing customers and referrals come into play, although one party may have access to more attractive benefits compared to the other. Either way, the result is that the customer gets a reward for bringing the company to another person. The same is true for the referral once they have used the brand's services.
• Pyramid: In this strategy, only customers who are already part of the company get benefits; in fact, as they get more referrals, they will be eligible for better rewards.

Advantages of the referral programme

Now that we know what it is, we can analyse the benefits that this type of programme offers to a company's marketing strategy:

• Increases sales: Customers who come to a company through a sincere recommendation from a trusted person spend 200% more than regular buyers.
• Lower advertising costs: In general, referral programmes are cheaper and more effective than traditional advertising campaigns, so you can spend money on customer rewards to make them more attractive. It is important to note that the strategy should always have a budget that guarantees its profitability.
• Improve brand recognition: In addition to providing a quality customer experience with the company, a referral programme helps to increase brand awareness.
• Build customer loyalty. Referrals have a Lifetime Value between 16% and 37% higher than other customers.

How to implement this programme

As with all marketing campaigns, it is important to plan for success and the following steps can be taken during the launch of your referral programme:

• Establish the profile of your ideal customer. By specifying the characteristics that your potential customer should have, you help others to find referrals more accurately. Therefore, it is important that you share this information with your current customers so that they themselves can make a selection among their acquaintances.
• Determine the rewards - we'll talk about the top five benefits you can offer your customers later on. At this stage, you need to decide whether you will follow a Give&Get or a pyramid programme.
• Design the programme: First, you need to choose the software you will use to run the campaign. This way, you will be able to monitor the campaign and check if you reach your goals or not (which will help you to improve the programme). According to Hostinger, the three best tools are: Viral Loops, ReferralCandy and Referral Factory. From here, you can design the programme with the resources offered by the software you have chosen.
• Promote the strategy to your customers. Once you have launched the programme, you need to share it with your customers so that they know about it and decide whether or not to participate. Your job will be to inform, encourage the most reluctant ones and point out the benefits they can get.
• Listen to your customers and improve the programme. If the software or the strategy approach gives your customers a problem, listen to them and try to improve it. You may even receive recommendations or requests for help in convincing more people.
• Loyalise your referrals. As your customers add new contacts to your business, make sure you offer them the best service. In fact, you can invite them to join the programme's recruitment team to get them involved in your brand and expand your business.

Reward ideas

For a referral programme to work, you need to determine the benefits that will encourage both your customers and your potential referrals (if you ultimately opt for the Give&Get model). Here are five reward ideas for you to choose the most appropriate for your strategy, but they are not the only ones:

• Free products.
• Discounts: This is probably the most common reward, but it is no less effective. If it is not economically feasible to give away products, you can choose to offer different discounts according to the degree of involvement of your customers (following the pyramid model). You can also give away products to customers and offer discounts to referrals (copying the strategy of the shaving company Harry's). Another option would be to offer discounts to both your customers and referrals.
• Events: For example, you could offer guided tours of your company or access to exclusive parties (as Tesla did in its referral programme).
• Subscriptions: If possible, another good option would be to enhance your customer's relationship with your company's resources through premium subscriptions (a real example is Evernote) or extensions to existing services.
• Fundraising: You can set aside the direct benefits and launch a charity campaign in favour of a collective cause. In this way, you would contribute money for each referral, motivating your customers to participate.

Final tips

Finally, here are three suggestions that you can implement during your programme activity:

• Create a relationship between your programme and your customers' values - if you take into account your customers' motivations, you can design your programme around them so that they feel more comfortable and connected to the brand.
• Identify your current customers with the highest potential. Not all your customers have the same capacity to become referrers, so you should select those who show a higher level of satisfaction with your company. Also, it is interesting to use LinkedIn to check which customers have more contacts or followers, as they will become small influencers.
• Help your clients to look for referrals. Facilitating the process of attracting your clients is fundamental so that they do not get discouraged. In this way, you can send them different templates with a guide text that talks about your company and the programme itself. Do not forget that the final objective is not only to attract new clients, but to make them loyal to the ones you already have and to make them participate in your company.