A significant part of startup marketing involves word of mouth marketing or referral marketing. This marketing strategy involves setting up a strong referral program that prompts customers to share their positive experience of using a product or service through word of mouth recommendations directly to other people.
Business owners have been using this strategy on basic levels for a long time now. The difference today is that startups are taking this strategy to the next level with their brilliant referral programs.
Referral marketing is considered to be one of the most trusted marketing approaches applied by both large and small businesses globally. Customers coming through referrals are more inclined to stay for a longer time.
However, to get the best out of your referral marketing strategy, you need a well-planned referral program. Not only does a referral program persuade customers to continue to shop with you, but it also instills customer loyalty, because they feel rewarded, valued and special.
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Why Do You Need A Referral Program?
Let’s look at some of the reasons why a referral program is a must for startups:
1. Return On Investment (ROI)
The cost involved with a referral program for generating leads is much lower than in other ways. Commissions, gifts, and discounts are but a small price to pay in comparison to the profit you can make from it.
One of the most cost-effective referral programs is to award points to customers for every referral, which can later be exchanged for gifts or discounts.
This way can help you gain more clients without spending a lot, and ultimately increasing your ROI value.
2. A Reminder of Why They Chose You
While referring a friend or family member to a certain product or service, your customer explains the reasons for why they purchased from your business and why it is a great idea.
A referral program encourages customers to scout for potential clients while reminding themselves of your startup’s advantages. Since customer referrals are usually awarded proportionately to the number of people referred, it portrays your business as one that values the customers’ efforts.
3. Customers Feel Like They Are A Part Of The Family
Customers who help in bringing referral customers, feel like they contribute to the company’s success. Express your gratitude towards their efforts, and boost their enthusiasm.
When customers feel like they’re a part of the company family, they double their efforts in referring new customers. Besides, they’ll keep getting rewarded for their efforts which is more the reason for them to continue bringing referrals.
4. Increase In Customer Engagement
Whenever someone refers to a product or a brand to someone, the latter would tend to look it up online. They would want to learn more about the company from its website or social media handles, like Facebook, Instagram, LinkedIn, Twitter, etc.
Another reason for customers to look you up online is to check your referral reward schemes. This will help you in boosting your customer engagement.
Also, many referral programs can be executed online on social media, by tagging people or sharing it with them. In this way, your social media presence and activity could drastically increase.
#5 Drives Repeatable Purchases
When the rewards of your referral program include discounts, points, cashback, etc. that can be redeemed in future purchases, customers will come back to purchase from you.
Since they earn rewards by referring your startup to their friends, the people who purchase from you or engage with your brand will be authentic. Sometimes it’s the other way round. Your current customers may want to purchase from you, but they would like to get a discount on the product.
For that reason, they might quickly refer your company to someone. Whatever be the reason, it’s a win-win for them and your company both.
Ways To Get The Best Out Of Your Referral Program
Now that we know that referral programs can do a lot of good to your company, let’s look at a few ways that can maximize the advantage from it:
If you design a complex referral program that is too difficult to understand for the layman, it might not get you your desired results. The simpler your referral program the better.
If your program involves too many criteria, try simplifying it. Sometimes, the customers need to put in a lot of unnecessary effort just to redeem the rewards. In such cases, they don’t consider the reward worth their referral efforts.
Simplify the reward schemes so that your customers can directly weigh the rewards along with their efforts involved. If your referral program can convince them that they can easily gain from referring your startup, it will go a long way.
#2 Market Research
With the help of detailed market research, invest in a buyer persona. Identify your potential customers, their habits and lifestyle choices. Once you have a clear picture of what your customer would want from you, design a referral program around it to attract them, and even make them refer your company further.
#3 Use Social Media To Expand Your Reach
Social media is an indispensable part of our lives today, be it personal or professional. In fact, today’s world is so dependant on it, that no business can thrive without social media marketing.
Every brand has to have an account on popular social media platforms to stay connected to a large number of people. Use that connection to expand the reach of your referral program.
With personal communication, your customers can tap only a handful of people. However, through social media, they can refer your company to all of their followers/friends with just a single share button.
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#4 Contests and Giveaways
Brands use contests to excite and engage their customers all the time. Not only does it boost their enthusiasm but it also helps in building a chain for a better reach.
Most contests on social media require a criterion of tagging at least three friends to be eligible. Then those three people tag three more to participate. Your reach multiplies directly by three in this way at every step leading to immense brand awareness.
Another benefit of contests is that you don’t have to reward every participant. You just promise giveaways to the winners as per the criteria. In this way, you’re achieving a huge referral reach with minimal spending.
#5 Harness The Power Of Influencers
Influencer marketing is just a different form of referral marketing. Since it involves rewarding influencers for referring your products or services to their followers, the two are quite similar.
As a startup, you might find it difficult to involve the big influencers and torchbearers of the tech world. However, you can try to get small and mid-level influencers in your target market to refer your product to their audience and reward them for those referrals.
This is termed as micro-influencer marketing.
Case Studies Of Successful Referral Programs
Since Uber was the first ride-sharing app, it was struggling to grow their customer base. To crack it, they started giving customers a personalized referral code.
Every time a new account was created using such a referral code, both parties got their next Uber trip free. This concept of dual-sided rewards turned out to be extremely successful, as it had an incentive for both sides, and customers were more comfortable in referring.
Dropbox, the file transfer/online storage service had launched a referral program that rewarded customers with its product-based perks instead of monetary ones.
It offered an extra 500 MB of free storage space to the one who made the referral, and to the newly-referred customer, both. This led to massive growth in the customer base for the company.
Since they rewarded a part of their product to the customers, it also led to increased engagement from the customers.
Evernote, a note-taking software had launched a referral program that awarded points to customers every time they made a referral. Those points could be redeemed for the software’s premium features.
Besides, every time a customer’s referred lead upgraded to their Premium facility, the customer who referred them received additional points. Giving customers rewards at a later stage, like here, when the person they referred to, upgrades their product could serve as a reminder to refer again.
It would also motivate them to encourage their peers to upgrade. This sort of referral program had dual benefits for Evernote – purchases and upgrades.
FreeAgent, an accounting software launched a referral program where they offered both the new users and referring customers a 10% discount, which would last for as long as both parties were paying subscribers.
Once a customer had referred 10 peers, they could even use the software for free. After that, they could ask to join its program, which allowed customers to earn 20% of the subsequent referral subscriptions.
This well-planned referral program helped them in bringing in a lot of customers.
To grow quickly and consistently, startups need a strong referral program, that could multiply their customer base multifold. Referrals are a sign of trust and goodwill, as they come from friends and family: from someone whose words matter to us.
Referrals are quite cost-effective and the amount of revenue you can generate is comparatively much higher than the costs of discounts or rewards.
Just like before going for a film we trust a friend’s word who has already watched it, we would like to buy a product that a friend has already used and vouches for. Use that for your advantage.