Lower acquisition cost with a referral program
Description
By implementing a referral program as part of your broader loyalty scheme, you can expect both immediate and long-term benefits in customer engagement, revenue growth, and reduced marketing costs.
Examples of strategic benefits:
- Customer Retention: Rewarding existing customers for referrals reinforces their connection with your brand, improving retention rates.
- Lower Customer Acquisition Costs: Referrals are a cost-effective way to acquire new customers, cutting down on marketing spend.
- Quality Leads: People are likely to refer like-minded individuals who fit your target customer profile, leading to higher quality leads.
There are multiple pitfalls with wrong referral implementation but Memberson provides the knowledge and functionality to implement referral programs with successful outcomes.
Concept
Establish referral program that enables members to refer friends, family, colleagues where both the member and the person signing up receives benefits and incentives to engage with the brand
Execution
- Define scope of referral program
- Set up rewards and incentives of referral program
- Provide sharing mechanism of personal codes for referral
- Ensure referral codes input fields and logic is enabled in sign up channels
- Run report and analysis to track referral metrics
KPI
- Member acquisition =>10% increase in members
- Spending=> 5% increase
- Cost of referral rewards
Detailed Execution in Memberson Loyalty CRM Platform
This is a typical implementation process but there are various configuration options available depending on the exact rewards and referral strategy.
#1 Define scope of referral program
Typically, the scope is to include all the members and allow them to share their referral (personal) code with anyone. However, it is possible to be more selective and only include a certain set of members (VIP or high-value clients) and give more attractive rewards based on who is referring and the activity of the person referring. However, for this particular use case we will include all the members, and we will set up a generic set of rewards and incentive.
We do recommend that a more detailed strategy session is being conducted to determine the exact scope and parameters of the referral program.
#2 Set up rewards and incentives of the referral program
In order to encourage your existing members to invite their friends to join the membership program there typically needs to be two set of incentives:
- One for the person that is referring the member
- And one for the person that is signing up
For this use case we will give $20 vouchers for the person that is referring the member and $20 additional voucher for the person signing up, which will be in addition to any other welcome package that may be available for the sign up.
It is recommended to also consider post purchase rewards structure as an alternative, which is described in more detail in #24 Loyalty Best Practice – Increase spending via invite a friend with post purchase rewards.
#3 Provide sharing mechanism of personal codes for referral
Every member has a personal unique code as part of their profile:
This can be displayed in the member channels (e-commerce site, member portal, mobile app or similar) with mechanisms to make it easy for them to share with their friends.
Do note that it is critical that the sharing of the personal code is done by the member from their personal email or mobile number. Both from a consent perspective but also to ensure that it is a personal direct request. The member channel can make it easy to share by automatically open up whatsapp, SMS or email channels with the referral link or personal code already populated in the message to the member. See some examples below:
#4 Ensure referral code input fields and logic is enabledin sign-up channels
Once a person has received a referral code, they can eitherclick on the link (web-based sign up forms) and the referral will beautomatically included in the sign up field, or if the sign up form is in amobile app the user may need to manually type in the referral code.
Once a person uses the referral code a relation will becreated between the person that referred the member and the new member. This enablestracking from both the referrer and the referrer. At the same time the referralincentive is given (if it is based on the sign-up event). Please see below anexample of such a relations created due to referrals (invite a friend):
#5 Run report and analysis to track referral metrics
You can now run simplereferral report to check on both how many people that has been referred andwhat type of activity that they generate over certain periods of time.
Once referrals has beenenabled you want to treat this as a campaign and promote this and potentiallychange the reward and incentive mechanism to drive further referrals andrefresh your referral program. One typical problem we see is that there is someexcitement and tractions when it is first launched but after this there is nofurther promotions or information about the referral program and limitedreferrals is being made thereafter.
As highlighted before if thereis too many of the referrals that do not generate activity do considerintroducing post purchase rewards for the referre instead of sign-up rewards. See#24 Loyalty Best Practice – Increase spending via invite a friendwith post purchase rewards.
