Referral marketing via email is one of the most potent strategies for customer acquisition. It costs much less than other outreach initiatives and delivers faster and better results. Running a referral program as part of email marketing continues to be the No.1 way to add new customers, drive sales, and increase ROI.
In this blog, we discuss the top 14 approaches to help you create the best-designed referral program that will prove to be the most effective tool in your email marketing kit.
1. Make it easy to refer friends
The first consideration for a successful referral program is making it easy for your customers to refer their friends. Your referral program should have clear instructions and be easy to understand. The referral should be possible with just a few clicks. You can use email templates or social media sharing buttons that make it easier for your customers to refer their friends.
According to a study by Extole, referral programs with easy-to-use sharing options result in 30% more referrals. Offering rewards for sharing on social media can increase referrals by 25%.
2. Offer an incentive
An incentive is a great way to encourage customers to refer their friends. Incentives can be in the form of discounts, free products, or exclusive content. The incentive should be something your customers find valuable and motivating enough to refer their friends.
According to a study by ReferralCandy, referral programs that offer incentives can increase referrals by up to 71%.
Uber, the popular ride-sharing service, offers a referral program that gives the referrer and the friend a discount on their next ride. This incentive has consistently delivered results in increasing referrals and growing the company.
3. Create a sense of urgency
Creating a sense of urgency can encourage your customers to refer their friends quickly. You can nudge them into quick action by setting a deadline for the referral program or by offering a limited-time incentive.
According to a study by Social Annex, referral programs with a sense of urgency can increase referrals by up to 50%.
Airbnb, the popular vacation rental platform, created urgency by offering a limited-time incentive to their customers. The stimulus was a $50 credit for both the referrer and the new user who signed up. This referral program led to increased bookings and higher revenues.
4. Leverage social proof
Social proof can be a powerful tool in referral marketing. You can leverage social proof by showcasing customer reviews, testimonials, or social media shares about your products or services.
According to a study by Nielsen, 92% of consumers trust recommendations from friends and family over all other forms of advertising.
Harry’s, the men’s grooming company, uses social proof to encourage referrals. They showcase customer reviews and ratings on their website and referral program. It has been successful in growing first-time customers and accelerating sales.
5. Use personalization
Personalization can make your referral program more effective. You can personalize your referral program by using the customer’s name in the referral message or tailoring the incentive according to the customer’s preferences.
According to a study by Infosys, 86% of consumers say that personalization plays a significant role in their purchasing decisions.
Example: Dollar Shave Club
Dollar Shave Club, a men’s grooming company, uses personalization in their referral program. They tailor the incentive as per the customer’s profile by offering a free product matching the customer’s grooming needs.
6. Target the right audience
Targeting the right audience can increase the effectiveness of your referral program. You can target your existing customers or specific segments of your customer base that are more likely to refer their friends.
According to a study by Mention Me, targeting existing customers can result in up to 80% of all referral sales. You can also target specific segments of your customer base that are more likely to refer to their circle of people. For example, if you sell products that are popular among millennials, you can target your referral program to this segment of your customer base.
Glossier, a beauty brand popular among millennials, uses targeted referral marketing to grow their business. They offer incentives to their existing customers to refer their friends. Glossier also targets their referral program to the specific age groups in their customer base that are more likely to refer similar users.
7. Make it a game
Gamification can be a fun and effective way to encourage referrals. You can turn your referral program into a game by creating a leaderboard, offering badges or trophies, or providing special recognition for top referrers.
According to a study by Smile.io, referral programs that use gamification can increase referrals by up to 500%.
PayPal, the popular online payment platform, uses gamification in their referral program. They offer badges and trophies for top referrers and special recognition for the most successful ones.
8. Offer a two-sided incentive
A two-sided incentive can be a powerful way to encourage referrals. It rewards both the referrer and the referred user who signs up. It creates a win-win situation and can increase the likelihood that your customers will refer to a sizable chunk of the people they know well enough.
According to MarketShare, word-of-mouth (as a result of referral programs) has improved marketing effectiveness by up to 54%.
Evernote, the popular note-taking app, offers a two-sided incentive in their referral program. They offer a free month of Evernote Premium to both the referrer and the user who becomes a subscriber.
9. Follow up and reward referrers
Following up with referrers and rewarding them can be a great way to encourage them to refer more customers. A result-oriented follow-up involves thanking them for their referral and providing them with updates on the status of their referrals. You can also reward referrers with ‘feel-good’ recognition.
According to Social Media Today, 78% of B2B marketers say that referral programs generate good or excellent leads; 54% say that referral programs have a lower cost-per-lead than other channels.
Dropbox follows up with their referrers by providing them with updates on the status of their referrals. They also reward their top referrers with additional incentives, such as extra storage space.
10. Test and optimize your referral program
Testing and optimizing your referral program can help you improve its effectiveness. You can test different incentives, messaging content and styles, and targeting strategies to see what works best for your business.
According to a study by Extole, companies that test and optimize their referral programs can increase referrals by up to 50%.
Airbnb tests and optimizes their referral program on an ongoing basis. They use A/B testing to test different messaging and incentives, and they derive actionable insights from their data analysis to identify areas for improvement.
11. Use social media for promotion
Social media can be a powerful tool for promoting your referral program. You can create posts or ads for the promotion and encourage your followers to share them with friends. You can also use social media influencers to promote your referral program and reach a larger audience.
According to Software Advice, more than 50% of people are likely to give a referral if offered a direct incentive, social recognition, or access to an exclusive loyalty program.
Uber uses social media to promote their referral program by creating ads encouraging riders to share their referral code with friends. They also use social media influencers to promote their referral program and extend their reach beyond the first-level and second-level connections of the referrers.
12. Provide multiple ways to refer
Providing multiple ways to refer can make it easier for your customers to share your referral program with their friends. You can offer email referrals, social media referrals, or even a referral link that existing users can communicate in various ways across multiple channels.
According to the Wharton School of Business, the lifetime value of a new referral customer is 16% higher than your average customer.
Harry’s, the men’s grooming company, offers several easy options to refer in their referral program. Customers can refer friends by email, social media, instant messaging apps, and other channels.
13. Make it easy to redeem incentives
Making it easy to redeem incentives can increase the likelihood that your customers will refer their friends. You can provide clear instructions on claiming the incentives; you can also consider automating the process, so incentives get instantly applied to the referrer and the referred user.
According to Annex Cloud, highly effective customer referral programs can bring as many as 20,000 new email addresses per month.
Example: Amazon Prime
Amazon Prime makes it easy to redeem incentives in their referral program. They provide clear instructions on redeeming rewards, which are automatically applied to the referrer and their referred friend’s account.
14. Create a referral program for non-customers
Creating a referral program for non-customers is the most effective way to create new customers. You can offer incentives for signing up or making a purchase, and you can encourage referrals by providing easy ways to share the program with acquaintances of the new user.
According to the Keller Faye group, when specific case studies about referral software were analyzed, researchers found a 10% increase in word-of-mouth (WOM) referrals done both offline and online.
Example: Dollar Shave Club
Dollar Shave Club created a referral program for non-customers by offering a free trial of their service. They also provide incentives for referrals and widen their circle of users by approaching the connections of new customers.
Referral programs in email marketing can help you reach a wider audience and increase your customer base. Quoting from ‘Business 2 Community’ (a thought leadership and industry trends platform), referred customers have an 18% lower churn and contribute 16% more profits than customers acquired by other means.
Following the above mentioned approaches, you can supercharge your referral programs and reap rich dividends. Implementing these strategies in your email marketing can help you exponentially increase referrals and grow your ROI. Regularly test and optimize your referral email campaigns, track results, and carry out relevant tweaks to ensure their success.
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