Referral programs are known for being one of the most effective ways to source new customers.
Not only are they much cheaper and easier to set up than most other lead generation mechanisms, they bring in significantly higher quality leads on average too.
In the long run, it’s these new customers that brands are interested in. A new customer with high brand affinity can be a hugely valuable asset.
But when it comes to running a successful referral program, it’s the efforts of existing customers, or advocates, which make all the difference. They’re the ones actively searching for friends and acquaintances who will hopefully become long term paying customers.
Referral programs give high quality leads for many reasons. Firstly, existing customers are more likely to refer friends with similar shopping habits and personalities.
Research also shows that the prospect of a reward plays a key role in encouraging customers to find suitable people to refer.
If advocates know there’s a sizeable reward waiting for them once their friend makes it through the onboarding, they’ll try harder to find new customers that are a good fit for your brand.
Bearing this in mind, it’s essential that your referral program gives advocates a worthwhile incentive.
However, they usually aren’t reactive, meaning advocates will always get the same reward, regardless of the quality of the person they refer.
In our experience, the best way to encourage your advocates to find high value customers is to reward them when their referred friend performs high-value actions.
There are a few different ways to do this. Let’s take a look at two examples.
Arguably the most effective reactive discount you can offer an advocate is a discount or cashback equal to a percentage of the new customer’s spend:
This type of incentive is trickier to implement than a standard discount. But it gives the advocate a clear incentive to find a suitable friend to refer.
The advocate’s incentive is directly tied to the amount of money the new customer spends within a certain time period.
This isn’t the only type of reactive incentive brands can offer advocates as part of their referral program. Take a look at this blog about the 10 most important learnings from referral programs to find out what influences advocates.
Another option is a discount, coupon, or cashback reward that increases depending on how many new customers the advocate refers.
In this case, the advocate gets a reward for the first three new customers they refer. This setup could give them $20 cashback for the first customer, $25 for the second, and $30 for the third.
Rather than linking the reward to the amount of money spent by the new customer, this referral example places more emphasis on the number of new customers the advocate manages to sign up.
To set up the first reactive discount example mentioned above using Talon.One’s Promotion Engine, you’ll need to create a campaign rule with the following conditions and effects:
This campaign gives you a working reactive discount to offer existing customers as part of your referral program.
The referral examples mentioned above place weight on rewards for advocates. But you can use similar reactive mechanisms to offer customized rewards to new customers too.
To learn more about how to set up various other promotional campaign types, or to learn more about promotions in general, check out our Content Library.
Reactive referral rewards are better for your customers and your business: