Thanks Jen! I know a friend who would also love this!
More than Just Transactional Perks & Points
Hey Jen! I found this amazing shirt! You should check it out.
Likewise, 74% of consumers say that word-of-mouth is a key influencer in their purchasing decisions. Simply put, you listen to the recommendations of your friends.
It’s called referral marketing, and businesses of all shapes and sizes are investing in this lucrative channel.
When you look at your apps or open your wallet, how many rewards-related items do you find? Probably a lot. You’re not alone. The average U.S. consumer is a member of at least 13 rewards programs, and that number continues to increase year over year.
Wouldn’t it be great if there were a way to marry the mass appeal of rewards with the power of personal recommendations? Actually, it already exists.
Ashley - I thought you'd love this shirt, since you were asking about the one I just got. Here's a 15% off coupon code.
Next, we'll define some of the key aspects of referral marketing programs and explore examples of brands doing referrals right.
Thanks for using my code! I just got an email with $25 off too.
Hey, HotelTonight is offering $25 off for my friends and family!
Referral Program (also called refer-a-friend) is a set of digital marketing campaigns built to acquire new customers by rewarding people who refer their friends to your brand or products. It reaches people across multiple channels including web, mobile, email, social media, physical media and more.
What Is Referral Marketing?
Example HotelTonight’s referral program allows existing customers to send invite codes to friends and family. When a referred customer signs up, they receive $25 off their first booking over $135. When the referred customer completes a stay,the advocate receives $25 off their next booking.
Oh great! I was just looking for a hotel for my vacation. Thanks :)
Before we start diving into the details of referral marketing, let’s define what exactly a referral program is.
Next up: Why Are Brands Launching Referral Programs?
Why Are Brands Launching Referral Programs
The Dream Bed drives ongoing loyalty by donating a bed to someone in need for every bed purchased. They also incentivize referrals with their Give $50, Get $50 refer-a-friend program.
Customer Lifetime Value (CLTV) The dollar value of an average customer’s worth to a brand over the entire timespan of his/her interaction with it.
Referral programs help brands achieve two important goals: customer acquisition and brand loyalty.
Customer Aquisition The act of adding new paying customers to a customer list.
Next up: How Do Referral Programs Work?
Loyalty The emotional connection a customer feels for a brand. Loyalty directly impacts customer lifetime value and willingness to refer a friend to a brand.
How Do Referral Programs Work?
The friend receives $7 off their first order; after the order is completed, the advocate also receives $7 off their next order.
Affiliate A third party who receives a commission based on the amount of traffic or purchases they drive for a brand. Unlike advocates, affiliates are usually motivated by economic interest, so they often acquire bargain hunters who are less valuable and loyal than referred customers.
Referral programs rely on advocates who refer products or services to their friends using personalized codes or links. Advocates are motivated to refer by their positive feeling for your brand.
Share Link (Referral Link) The unique, trackable link that an advocate sends to a friend when sharing a referral.
Advocate A person who refers a brand, product, or service to a friend. Anyone who interacts with a brand can become an advocate.
Next up: What Type of Rewards do Referral Programs Offer?
Referral Rate The rate at which advocates refer friends as new customers.
Food delivery service, Seamless, makes it easy for advocates to share a signup link with a friend from their microsite.
Conversely, software company DocuSign offers an external reward. For each person who signs an annual contract, the advocate receives a $20 Amazon gift card. If they referred a friend who made a purchase over $50, both they and their friend received a $15 credit.
Internal Reward A referral reward related to a brand’s product or service. Usually offered as an incentive for advocates to refer friends, internal rewards drive retention by incentivizing future purchases.
Next up: How Do Referrals Affect Sales?
External Reward A referral reward unrelated to the product or service a brand provides. External rewards can provide continued motivation for super advocates who’ve already received internal rewards.
There are two major types of rewards a brand can offer to their advocates who refer new customers: external rewards and internal rewards.
Retailer ModCloth offered an internal reward to advocates. If they referred a friend who made a purchase over $50, both they and their friend received a $15 credit.
What Type of Rewards do Referral Programs Offer?
How Do Referrals Affect Sales?
Referred Customers Are Better Customers
The AOV of a referred Uber user is about $17 per ride, and their average CLTV is around 4 years. This means that Uber drives a 12X return on its investment for each referred customer who uses their service.
Learn More about Referrals
Average Order Value (AOV) The dollar value of the average purchase that a brand’s customers make.
Referral programs impact two key sales metrics for brands: customer lifetime value (CLTV) and average order value (AOV). Both advocates and the friends they refer tend to have higher CLTVs and AOVs than customers acquired through other channels.
Extole’s refer-a-friend software makes it easy to manage and track a referral program for your brand. Find out why referral marketing is a must-have strategy for acquiring and retaining customers.