Turn Loyal Customers Into A Referral Engine

Turn Loyal Customers Into A Referral Engine

Between over saturation and hype, it’s not surprising that consumer confidence in advertising is at an all time low. The good news is that brands can leverage their customers to generate new business that is both more effective and cheaper than paid advertising. Interchangeably called “word of mouth marketing,” “crowdsource marketing,” or “referral marketing,” the business case for building brand advocates is staggering:

  • 92% of consumers around the world say they trust earned media, such as word-of-mouth or recommendations from friends and family, above all other forms of advertising.
  • 77% of consumers are more likely to buy a new product when learning about it from friends or family.
  • 65% of new business comes from referrals.
  • Referred customers are about 25% more profitable per year for businesses than their non-referred counterparts
  • Referred customers are 18% less likely to churn, and they have about a 25% higher lifetime value than non-referred customers.
  • Referral programs are extremely efficient, costing only 5% – 15% of the customer acquisition cost for online advertising like PPC.

Referral technology used to be expensive and required custom coding, which meant that only brands with very deep pockets could employ this strategy. With the advent of complex browser-side javascript and cloud computing, there are now many suppliers of referral marketing technology that make this strategy cost effective for brands of all sizes.

How It Works

Referral Marketing Widget

Referral technology is an online system that tracks the referrer and a referrer’s recommendation and the friends’ actions – including purchases. In order for the matching to work, the friend must click a custom link, called a pURL (personal URL), with embedded referrer information.

Referral technology makes it fast and easy (and fun!) for the referrer to share the custom link via integrations with Email, Facebook, and Twitter. Since the goal is to spread the link to as many people as possible, good referral programs allow the referrer to import their email address book to blast all of their friends at once.

Once the friend clicks on the referral link, they receive a promotion code. The code may be located on a dedicated landing page, sent in an email, or both. The friend applies the promotion code during checkout and receives the discount. At the same time the order is completed, the referrer receives an email notification that they have a new credit. Referrers can receive multiple rewards, and friends can continue to earn rewards by becoming referrers too.

Best Practices for Success

There are three types of referral marketing structures; Reciprocal Offer; One-Sided Offer; and No Offer.

The most popular (and successful) program structure is the Reciprocal Offer where both the referrer and the friend get an equal benefit, such as, “You Get $10, Your Friends Get $10.”

In a One-Sided Offer, only the referrer or the friend receives a benefit, such as “Get $10 for every friend you refer’ or the reverse, “Your Friends Get $10 When You Share.” For the former, you can try to motivate the referrer to share by offering the reward to the referrer; for the latter, the referrer is more likely to share an offer that directly benefits the recipient. Without balancing both sides of the equation, this program structure usually results in lower results.

In some cases, simply asking for the referral is enough and No Offer is required for either party. Non-profits, or socially motivated brands, may be able to motivate their brand ambassadors to “save the whales,” or make a donation. But in the commerce world, direct incentives like cash rewards or discounts rule the roost. According to marketing automation technology advisory firm Software Advice, 50% of consumers reported that a direct incentive would make them more likely to give a referral.

Spread the Word

Once you’ve decided on the best offer structure to launch your program, it’s time to promote your referral program to your best advocates: your existing customers.

Referral Marketing PromotionAnyone who buys from you should get a referral promotion. Referral widgets, links or banners can be appended to the shopping and post checkout experience via auto popups and transaction emails. On brands’ sites, the referral program should be displayed across social media, home pages, store pages, product pages, the checkout complete page and all static pages with consistent creative, messaging, and locations.

Additionally, plan on sending out a dedicated referral email to your entire databases regularly: ideally, once a month bolstered with social media promotion. Many of our clients overlay additional contests to enter for a chance to win a “grand prize” in addition to the usual reward. Once or twice a year, try doubling your referral bonus for a limited time. At Symphony, we’ve seen a double referral bonus more than triple referrals during the promotion time.

Interestingly, there are consumers who have not purchased your products that will also refer you. This is especially true for aspirational brands or brands with a very specific audience, such as baby products, etc. Sometimes the referrer hopes to accrue rewards to use on the site, sometimes the referrer does it to pass along discounts and offers to friends who they know are likely to purchase the product. The key takeaway is to make referring easy for ANYONE who wants to spread the work about your brand. The best referral platforms allow customers to share and earn credit even if they don’t have an account.

Key Performance Metrics to Optimize

Like all marketing campaigns, referral marketing is not a “set it and forget it” tactic. It requires ongoing monitoring, testing, and optimizing.

  • Customer Acquisition Cost (CAC). Referral marketing should be your lowest cost of acquisition. Structure your offers to optimize customer acquisition at an acceptable cost to your business: if your average order value (AOV) is $25, a $5 reward may be appropriate. If your AOV is $250, then a $25 reward may be appropriate.
  • Sharing Rate. Test different calls to action to increase the number of people who share.
  • Referral Visits (calculated as clicks on shared content). Test different offers to increase the friends who visit.
  • Referral Conversion Rate. Test different offers, landing pages, and products to increase the number of friends who redeem the promotion.

Once your referral program is underway, your brand can test other referral incentives such as coupons, gift cards, loyalty points, discounts, bonus products, free month (for subscriptions), donations to charity, exclusive merchandise, free shipping, free trials, and more. You can add gamification to referral marketing by creating tiers that unlock additional prizes or discounts when the referrer achieves benchmarks such as 5 friends have redeemed the reward, or 5 referrals in a particular time period. Your imagination and creativity are the limit when motivating your customers to become brand ambassadors.

Getting Started

At Symphony, we have developed a launch sequence that includes the following steps.

  • Launch with a “dollars off” promotion that is easy to understand. Since the goal is to attract new customers to your site, “25% off”, or even “50% off”, is meaningless to someone who doesn’t know how much your products cost. However, everyone grasps the value of $5 or $10 off.
  • Create a reciprocal offer where both the referrer and the friend benefit equally.
  • Do not force referrers to login before they share – extra steps dampen participation rates.
  • Do not limit referral rewards, so your best referrers will continue to accrue rewards and spread the word. Most referrers will generate 1 – 2 referrals, however your superstars will generate 5 – 6 referrals or more.

Case Study

A Symphony brand in the Food and Beverage vertical achieved dramatic results after implementing a referral program. Within the first month, the brand discovered that referrals are 8.5 times more likely to convert than any other channel. Plus, each referral share is worth an additional $5 in revenue.

Summary

According to Symphony CEO & Co-Founder, Harish Abbott, “The best and greatest companies actually use their customers to bring in new customers. These brands deliver an amazing experience to their customers across the entire lifecycle, so the customer ends up referring more customers. That is the most powerful way to grow a brand, and it is also why the most cost effective way to grow a brand is to service your existing customers.”

With effective referral marketing, brands can expect to see lower customer acquisition costs, faster growth, higher profits and a reduced reliance on paid advertising. To get there, you need a plan to launch, test, and optimize the way you would any other marketing program. You also need to maintain focus on the core traits that help your brand stand out: great products and a memorable shopping experience. By first delighting your customers and then providing the right incentives to refer, you can turn your customers into a powerful referral engine for growth.

 

Tech Trends from Shop.org

Tech Trends from Shop.org

Mobile and omni-channel strategies continued to dominate this year’s Shop.org summit in Seattle (Sep 29 – Oct 1, 2014). Overall, the mood was upbeat, with holiday spending forecasts predicting year over year growth. Although holiday strategies are top of mind for everyone in the retail business at this time of year, we also had an opportunity to think about emerging trends for commerce technology, and the increasing intersection of technology and services to build sustainable online brands.

As a commerce service provider, we think a lot about how technology streamlines and improves brand efficiency and delights customers.

Unfortunately, more options do not necessarily translate to a better experience. We saw a bewildering array of massive feature sets, yet many companies expressed frustration that clients were not leveraging the advanced functionality. The ‘whiz-bang’ is great – but if clients can’t take a disciplined approach to A/B testing, how can they expect to benefit from technology that offers the complexity of multivariate testing? And while most platforms are bolting new features on as fast as the technology evolves, very few companies are taking an integrated business approach to platform development.

As commerce technology matures, we expect that newer, nimbler technologies will offer the most client benefit. Benefits will come in streamlined integration, more robust technology (instead of building on a framework that is 15 years old), and cheaper technology costs. A few years ago, marketing automation tools, referral marketing, and even A/B testing required large marketing and IT budgets to implement. Companies with deep pockets had an edge because they could afford the latest technology. Thanks to cloud-based deployments, lower server costs, and extensive code bases that are widely available, those technologies are now accessible and affordable to all players – regardless of size.

So if the tools are all available, how will tomorrow’s players differentiate themselves? We believe the new competitive advantage for commerce technology will come in three areas: integration, personalization, and user experience.

Integration

Integration enables all of the moving pieces to speak to each other, especially for brands operating both wholesale and retail businesses. Separate systems require a heavy investment in staff and reporting to simply manage the business on a day-to-day basis. Integration eliminates the need for multiple system reconciliations and opens up new opportunities with real time data. Brands will demand that their technology systems from all vendors connect seamlessly without the need to mash up data from the web store, inventory management system, fulfillment partner, shipping carrier, etc. as they do today.

Personalization

Integration will enable brands to have a deeper level of personalization. The ability for a single system to collect all of the data from marketing and logistics systems including emails, product purchase data, shipping data, and post purchase activities such as customer service and returns will allow brands an unprecedented level of customization. Future brands will not require “buyer personas,” they will be able to identify and talk to every customer individually.

Intuitive User Experience and Design

The user interface has to be easy to understand, use and customize to specific business requirements. This is for both the brand and the customer: customer tolerance for slow loading speeds and poor mobile shopping is at an all time low. From a brand’s perspective, clunky email set up, difficult dashboards or reporting interfaces will detract from user adoption. As social selling becomes more prominent, brands require the ability to quickly and easily move into new channels with a contemporary aesthetic whether that is responsive design, or video, or shopping carts on Facebook.

Finally, the evolution of commerce platforms will change the nature of commerce business itself. Although technology can streamline repetitive tasks like transactional emails, advanced shipping notifications, order management and the like – someone still has to do the heavy lifting of setting up and managing these programs. The most robust solutions will empower brands to fully manage their business, or outsource specific functions to expert service providers, while enjoying all of the benefits of full integration.

Just as Shopify revolutionized the way brands could sell direct online in minutes, the future of commerce as a service will be to combine technology and services to build a create customizable business infrastructure that is fully integrated across the entire customer buying cycle.

What trends did you see at Shop.org?

How to Win the Waiting Game

How to Win the Waiting Game

You build your brand experience to optimize everything about the online shopping experience. Mobile Responsive? Check. SEO? Check. Awesome product copy? Check. Beautiful product photos? Check. Optimized shopping cart? Check. Your customer punches in her credit card details, sits back…and waits.

What will happen next? Your customers are probably experiencing a wide range of emotions right about now.

  • Excitement (I can’t wait to get my new Darth Vader thumb drive!)
  • Anticipation (I hope this candle has a $5,000 ring!)
  • Urgency (This gift better arrive in time for my friend’s birthday!)
  • Wariness (Will my new umbrella work like it says?)

Chances are your customers are checking back frequently to find out where their packages are. Has it been shipped? What is the estimated delivery time?

Providing shipping and tracking information for your customers is a best practice for multiple reasons. First, customers expect it. Second, providing the information reduces strain on customer service (Where is my package? When will it arrive?) Perhaps most importantly, tracking information also reduces chargebacks. Customers are less likely to cancel an order when they see it’s already en route.

But is there a way to leverage what is basically a transactional experience for the customer into more brand engagement? Turns out, your customers are checking on their delivery tracking a lot. Furthermore, the customers that do check their orders, do so more than once.

Instead of bumping your customers off to the shipping carrier and forfeiting any possibility of an up sell, why not bring them directly back to your site? Sophisticated brand retailers like Nordstrom, Bonobos, and One Kings Lane have all shifted their delivery tracking to an onsite model. In fact, by implementing onsite delivery information, Symphony brands noticed an immediate increase in visits – over 10% of landing page sessions were checking on the status of their orders.

Remember that this is basically free traffic that you would have been sending directly to FedEx, UPS, or USPS. Considering how much energy and money goes into getting website traffic, onsite tracking offers brands an easy way to up sell and reinforce brand identity.

Savvy brands want to own as much of the customer experience as possible: onsite tracking provides a way to re-engage customers during the waiting period from the excitement of the order to the “moment of truth” when your customer receives her awesome new product.

(You did use your own unique packaging, so your customer had another great brand touch point, right? Of course you did.)