Recently, we’ve been conducting a mid-year review. The topic of customer referrals is always a key part of that discussion. We value our partnerships and strive to see those relationships stay strong and expand. As we continue to nurture and improve our own referral process, we’ve discovered some great information and want to share.
As we mentioned in our last blog, customer referrals are one of the best ways to connect with new customers—yet creating an effective referral program can be tricky.
There are many specific types of referral programs. According to Entrepreneur Magazine, “Creativity is the key to any good incentive program. People just naturally like to help each other, but especially when they know their efforts are successful.”
The article goes on to suggest several types of referral or incentive programs:
- Free estimates, samples or analyses
- Additional products or services for no extra cost
- Product or service discounts
- Product or service time extensions
- Extended memberships
- Group discounts
- Extended warranties
- Reduced costs on peripheral items or services
This list is just the tip of the iceberg. We’ve all been on the receiving end of such offers. Some are more effective than others. How do you know what will work best for your business? And is the hard work and attention of a referral program really worth it?
An article published by the Harvard Business Review says yes. A team at Goethe University and the University of Pennsylvania’s Wharton School, “studied 10,000 accounts in a large bank over a period of three years, and found that customers obtained through referrals are both more loyal and more valuable than other customers.” The study calculated that referred customers are 18% more likely to stay with the bank and generated 16% more in profits. All told, the researchers calculated that the bank earns a return about 60% on what amounted to a $30 dollar referral incentive.
An exhaustive search of effective programs by a company Referral Candy revealed several companies with best practices in customer incentives and referrals. Let’s take a quick look at three of the best:
Dropbox gives free storage space to its customers who refer others. This technique has been extremely successful for growing their platform and revenues. People come to Dropbox for storage space and online accessibility of their documents, not for cash or gadgets or other perks. Storage and Accessibility. That’s it, so that’s what their referral program gives.
APPLY THIS: Be sure you give customers what they want.
The Airbnb Referral Program allows registered Airbnb users to earn Travel Credits toward future travel by referring friends to Airbnb. With this program, travelers can earn $20 credit for every friend they refer who travels using an Airbnb booking and $80 credit for every referral that acts as an Airbnb host. They are using this cleverly to recruit more hosts which is what they need, and to give credit to their customers so they continue to use their service.
APPLY THIS: Give customers an incentive to keep using your product with their referral.
Internet productivity giant Evernote uses a points system to reward its customers who refer new users. Evernote customers can redeem their points for an upgrade, similar to an airline points system, but for referrals rather than frequency of use. Evernote has a premium product with more features, and they use this to incentivize referrals. They get double duty from this promotion because with their program, “Your friends also benefit from referrals.” Every referred friend is given one month of Evernote Premium just for getting started.
APPLY THIS: Maximize the impact of your premium product or upgrades by using them to reward customers who refer and to introduce newly referred customers to your very best.
When considering how to craft your customer referral program for the best possible results, give customers what they want, offer incentives, and maximize your premium product. You already have what it takes to create a great program. All it takes is thinking differently and some hard work to reap the valuable bottom-line results of successful referrals.
Have a referral to share? If you know a colleague or organization looking to achieve HIRE Confidence, please send us their contact information. As a thank you, you’ll receive your choice of a new EASy Simulation to try for free. Or how about a “selfie referral?” Just contact us and receive the same offer!