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5 Quick Tips to Building a Customer Referral Program

by Nina Stepanov

Date

March 23, 2015 at 12:00 PM

Customer Referral ProgramCustomer referral programs and advocate marketing have been in the limelight recently and for good reasons.

  • 1 in 3 people come to a brand through a recommendation, and customers who were referred by loyal customers have a 37% higher retention rate. (Deloitte)
  • Word of mouth is the primary factor behind 20-50% of all purchasing decisions, especially when considering a first time buy or something relatively expensive. (McKinsey)

But what does all of this mean for you?  Well, although purchasing decisions for your product or service are as complex as ever, a leading factor in your prospect's decision-making process is advocacy from their trusted sources. The question is, are you harnessing the power of your brand advocates to get these quality referrals?

There are a few quick steps you can take to building a customer referral program so you can start reaping the benefits of referral leads that, on average, are 4-10x more valuable than regular leads, resulting in shorter sales cycles, increased win rates, and larger order sizes (Influitive).

1. Find Your Advocates

Advocates, by definition, are consumers and business buyers who frequently recommend brands and products without being paid to do so (Zuberance). Those advocates should be highly trusted by your brand and/or have a substantial amount of influence over the market that you're selling to. But where do you actually get them? 

  • Review sites: These are a hot spot for brand advocates. Whether you've asked for the review directly or it got their organically, anyone who's willing to give you a good or even great review should be on your list of advocates to encourage referrals from. Don't just check the major review sites though! There are tons of folks talking about brands on sites like Quora and Reddit as well. 

    Pro Tip: If your business uses services like Net Promoter Score, make sure to add those customers who rate your business on the positive side of the scale.

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  • Social media channels: A great place to find advocates. Are there people on your social media radar who are constantly advocating for your product or service by engaging in conversations with others or posting about how much they love your brand or product/service? Whether they're a customer or not, social media advocates are great for helping spread the word about your program as well as for adding leads to the funnel directly from their conversations across social channels.

    Pro Tip:
     We found this awesome tweet using HubSpot's Social Inbox tool by including words like "love" and "HubSpot" while excluding any tweets from our own handles. This stream makes it super easy to see who is talking about us in a lovable way.

 

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  • Talk to your colleagues: Tap into your internal resources. Talk to your colleagues to find out if they have customers who they commonly work with to get feedback from (i.e. beta testers) or maybe your sales and marketing teams are working with customers to obtain things like case studies or reference calls. These conversations will most likely garner a hefty list of both customers and non-customers who are well-accustomed to helping your business thrive.

There are tons of locations, on and off the web, where you can find advocates specific to your industry, so keep an eye out for the places where people are talking about your business. Aggregate these advocates into lists to make marketing to them easier and more effective.

2. Set a Goal

It's important to set goals for your program, even if it's brand new and you have no historical data to base it off of. A useful factor to consider could be the amount of referrals your business is getting organically. You might figure out this number by reviewing sales notes or talking to your marketing team to see how often someone mentions a referral or that they've been referred. Referrals might even be happening outside of the business all together, such as customers talking to prospects over coffee or through social media messages. If this number is non-existent or too difficult to figure out, set a relatively reasonable goal based on how many advocates you're planning to engage in the program and a conversion rate around 10% (Friendbuy).

If you'd like to be more mathematical about this process, try these steps:

  1. Talk to your sales, account management, and support teams to find out how often referrals are made (if at all).
  2. Consider what the average dollar value that each new customer brings into your business is.
  3. Figure out how many referrals you'd need to sell to at least break even (compared to time and effort spent marketing, and managing the program).
  4. Using break even point and a 10% conversion rate, calculate how many referrals your advocates would have to make to fuel your funnel.

Pro Tip: Keep in mind that your business could fare extremely well with a much smaller conversion rate if your product or service is very expensive or requires large amounts of marketing and/or sales effort.

There are many factors to consider here, so don't take it too lightly, but don't be too hard on yourself when starting from scratch either. Setting this goal will be helpful in measuring yourself and it will push you towards a metric that you can tweak once you've built out the program and seen what works.

3. Choose the Right Incentive(s)

It's common knowledge that trying to buy your brand advocates is bad news for your business. Paying advocates to promote your brand can get pricey and extremely inefficient in the long run. On top of the price tag and it's inefficiency, there's minimal trust in a paid to perform relationship where trust should really be a key factor. Instead, consider rewarding your advocates for their organic promotion of your brand.

For example, HubSpot's customer referral program incentivizes by offering a free ticket to INBOUND 2015 for each referred customer who purchases any HubSpot plan. How did we choose what incentive to offer? We asked our customers what they wanted and considered what would be valuable to them as customers.

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It can be difficult to decide what your advocates will want in return for their efforts or what will encourage them to continue advocating for you. Successful referral programs have shown that rewards, especially those that reward both the advocate and their referral (double-sided incentive), drive substantially better results (ReferralSaasquatch).

Pro Tip: You don't have to give away cash. Some of the best referral programs work so well because they tie their rewards and incentives to their business. Value comes in many different shapes and sizes so don't limit yourself to just cash or discounts on your product/service. 

Try out a double-sided incentive and test it against a one-sided incentive to see what works best. You could also try out an incentive for just the referral and nothing for the advocate. There are endless possibilites of rewards, both monetary and non-monetary that may excite your advocates, so try out a few and see what sticks.

A helpful metric to consider when choosing a rewards system is that the number one factor, according to a study done by comScore, that drives an advocate to promote a specific brand is that they want to help people. Help your customers help others!

4. Find Your Promotional Mediums

Now that you've got your advocates, your goals and your incentives all set up, it's time to decide where and how you're going to promote your program. Just like advocates are found in many different locations, so should your customer referral program. An email campaign is a great start but unless you're constantly reminding your customers (in a way that doesn't annoy them enough to stop opening your emails), then you're going to have to find a few more places to stay top of mind. Get creative and find out where your customers spend the most time or even pages they frequent for short periods of time. Some examples of locations to promote include:

  • Your Blog
  • Newsletters
  • Product and Service updates
  • Email receipts
  • Various CTA locations

This list could go on and on depending on what type of business you're running but what's key is to promote your program in as many places as it makes sense to do so. Once you figure out which locations garner the most (and best) referrals, you can start optimizing them for even better results. Try not to get stuck in a rut of promotion across the same medium, you may find that one works very well but that doesn't mean you should stop searching for new opportunities to get even more traction.

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Pro Tip: Don't neglect your promotions. A stale CTA or an email with no followup can be easily overlooked and forgotten amongst all the clutter of the web. Freshen things up every once in a while and try new things.

5. Keep Your Tech in Check

The tech behind your program is easily overlooked or taken for granted, but it's going to make or break how you approach and manage referrals. Some key information and metrics that you should easily be able to keep track of include:

  • Who is referring who?
  • How far along in the sales process is a referral?
  • When did a referral become a customer (or not)?
  • Which of your promotional materials is working best (and worst)?
  • Which incentive should your advocate receive and when?

There is a lot of information and many data points that you should know as a manager of a customer referral program, so make sure you're set up for success before you begin promoting. It can be easy to set up a campaign with an email, landing page, thank you page, some CTA's, and kickback email but if you don't have one central location to store and keep track of the data going in and how it's processed, you'll be lost in excel sheets and endless emails threads. You'll probably end up wasting your time and make it harder for the program to garner the results you're hoping to get. Failing to keep track of your data will also make it extremely difficult to prove the value of your time spent versus the value added.

Pro Tip: Do yourself a favor and talk to your operations teams so they know what's going on with this new type of leads. On-board your sales reps to use the correct verbiage when speaking with referral leads. Align with your overall marketing team to make sure you're not spamming customers. Find opportunities to work in tandem with the efforts of your colleagues.

Building a customer referral program can be time consuming but if done well, the benefits are likely to far outweigh the costs. Just don't be afraid to try something new. Take charge and harness the power of your advocate community, today.

Are you working on a referral program too? I'm currently building, testing, and learning the ropes of The HubSpot Customer Referral Program. I'm using tons of HubSpot tools, including Email, Landing Pages, Lists, Social Inbox, and many more. Please share what has worked for you and any tips you have to offer in the comments.

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Written by Nina Stepanov

Nina is a member of the Customer Marketing team at HubSpot. She is in charge of building HubSpot's Customer Referral Program. Connect with her on Twitter @ninerr.

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