People trust their friends and peers over a business (for reasons). According to Nielsen, more than eight in 10 global respondents (83%) say they completely or somewhat trust the recommendations of friends and family.
But trust isn’t only confined only to those in our inner circle. In fact, two-thirds (66%) say they trust consumer opinions posted online—the third-most-trusted format.
So why don’t we ask these folks to refer us more often?
Companies likely realize the importance of using their networks (partners, customers, employees) to grow their business—and a referral program makes sense—but where do you start?
ITA Group has been running referral programs masterfully for over 20 years and has it down to a science. Below are some pieces of advice (plus, proof of our referral program prowess).
But first, the groundwork.
What Is a Referral Program?
A referral program is a word-of-mouth marketing tactic that encourages your network to advocate on behalf of your brand. Rather than writing reviews online, or submitting customer feedback surveys, referral programs let individuals share their brand experience with partners, colleagues and friends, or influence a purchase by sharing their details with a solution provider they will likely need.
The purpose of a referral program is to attract new business leads. By asking loyal followers who know about your business to think about contacts or associates who would benefit from your product or service, they’ll refer leads that are a good fit for your brand.
Referrals only make it easier for your marketing and sales teams to nurture and engage customers. Not only are these leads a good match for your business, they’re also familiar with your company and its reputation through the filter of someone they know personally. Since they’ve been referred by someone they know, referred individuals have a reliable resource telling them that your company is trustworthy and produces a positive experience.
Plus, referred customers are proven to spend 25% more, are more likely to make a repeat purchase, and three times more likely to refer someone else.
How to Build a Referral Program
You can certainly run an informal referral program, but we’ve found an end-to-end system makes a referral program easier to manage and more efficient, plus delivers a higher ROI. You need to incent correctly, promote the opportunity to participants, ensure the program is user-friendly, monitor progress and submissions, and assess the effectiveness.
1. Identify & Understand Your Audience
The most important ingredient of a successful referral program is a deep understanding of your audience. Understanding their reason(s) for joining your referral program, the best way to get them to join and what would make them refer their peers, clients, friends, staff or co-workers impacts every part of your referral program.
Questions to Consider
- Who are you targeting?
- What do you want them to do?
- How much information do you need for the referral?
The more relevant and tailored, the better your referral program audience’s experience. Personalization one way to ensure a stellar program experience. New research tells us it also happens to be one of the single most important things you can do to increase sales or influence your brand (check out the research for yourself).
- What’s a referral worth to you?
- Is it a worthwhile incentive compared to the effort of the person?
- Map the incentive to the activity
- Decide if you’ll vary pay outs (based on submission, engagement, sold, etc.)
- Set a budget (not sure what to budget? Ask an expert—I’m glad to refer you)
3. Promote Your Program
Strategic changes and purpose-driven communications pave the way for a new referral program. You’ll want to promote the referral program once it launches, but it’s also important to continue reminding your audience over time and especially when targeting an audience that experiences high turnover, shifting priorities, or seasonality. It’s also important to know that demand sometimes dictates referral activity; consider enabling the audience with tools to talk about your brand and, like any good influencer program, test a pro-social tactic by giving them something to offer the recipient who needs your services.
- Tell your referral audience about the program
- Prepare a response when your audience asks, “What’s in it for me?” (WIIFM)
- Repeat yourself
- Keep an eye on turnover
- Account for different levels of management (access to reps/person or not, if they can earn or donate, etc.)
4. Enable With Technology
Referral program platforms offer tools dedicated to streamlining referrals, follow-up and reporting. You can see exactly what’s happening with your referral programs and even enable field teams with personalized dashboards. With real-time data at your fingertips, program administrators can make data-driven decisions for ongoing program improvement, know who to talk to and when, and see where things aren’t quite what they should be (low referrals, questionably high referrals, untimely follow ups, etc.).
- Make it easy for the users
- Show progress towards goals
- Show possible earnings
- Connect it to your internal workings to speed along process
Want to strive to be the best? Studies show the quicker you respond to an interested party or lead, the more likely they are to convert. Calling within 5 hours is 40% more effective than calling after 24 hours.
Related: Learn how role-relevant goals and data visualization helped sales professionals monitor their progress and achieve their yearly benchmark.
5. Manage Your Workflow
Like any lead generation effort, what you do after acquiring information is more important than just collecting the referred individual’s name. Workflows, when designed with a focus on the audience and desired outcomes, are the key to a perfect referral program. Figure out who needs to get these, how quickly, what it takes to follow up and if you want/need to send data back to the original referrer.
Often in a formal referral program, closed loop reporting supports rewarding on a closed deal after the initial referral payout. Mapping the process out early and integrating appropriate technology or staffing will help:
- Anticipate problems
- Increase revenue
- Decrease/avoid unnecessary time delays
- Improve communication between program administrators and participants
Questions to Consider
- Did you connect it to your systems?
- Who works it? How fast?
- How do you report back what happened?
- Do your original referrers need updates?
- How do you route things?
6. Monitor the Program
Keeping track of audience referral progress, close rates, engagement cliffs, earning redemptions and overall budget health is key. It’s important to know who is sending referrals to your business, how many, when, if they close, and if they spent their earnings. Tracking spent earnings might seem frivolous, but it’s usually a good indicator for seeing value in their relationship with you. Are they taking advantage of the connection and their discretionary effort?
- Set your KPIs
- Monitor against KPIs
- Check on common factors like:
- Referral rate
- Response time
- Close rate
- Source of referrals
- Incentive changes
- Redemption rates
Don’t forget to thank the referrer for helping you out—and thank the referred for joining the fold.
7. Assess & Adjust Your Program
Test your program regularly to see what’s going well and where you can stand to improve. Try sending feedback surveys to see what participants think about your program and be sure to apply the feedback moving forward. You can also get savvy with different ways to reward for referrals that push for “one more.” Experts can help forecast the right approach based on modeling of historic data.
- Other Considerations/Recommendations Continually optimize incentives
- Continue to communicate effectively
- Forecast with enough data
- Add/change audiences as needed
- Don’t forget to ask the customers and referrers how they feel about it
It’s Time to Build a Referral Program That Works
There is a lot of opportunity in getting referrals. If you haven’t taken active efforts to encourage customer referrals, or haven’t incorporated referral program ideas into your marketing strategy, you’re missing out on a precious source of potential revenue.
Learn more about the impact of referral programs and how ITA Group helped one telecom company reinvent their referral incentives to reignite channel loyalty.