How to Ensure Advocates Get the Most Out of Your Referral Program

Marketing
-
Jan 8, 2021
Henry Bewicke
Henry Bewicke
Promotions Advisor
4
Min to read

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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.

Why referral programs give high quality leads

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. 

Maximizing advocate rewards

Bearing this in mind, it’s essential that your referral program gives advocates a worthwhile incentive.

Typical referral program incentives for advocates are things like discounts, coupons, or gift items. They're simple to set up, easy to publicize/promote, and they offer customers a clear end reward.

However, they usually aren’t reactive, meaning advocates will always get the same reward, regardless of the quality of the person they refer.

Offering a reactive discount

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. 

Reactive discount tied to new customer’s spend

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:

Advocate reward system

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 kind of reactive discount will benefit a business in the following ways:

  • The advocate will put more effort into finding a high-spending individual to refer
  • The advocate is more likely to encourage the new customer to spend in order to increase their reward

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. 

Reactive reward tied to number of new customers referred

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.

Setting up a reactive discount tied to new customer purchase

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:

Condition:

  • Check referral code is valid
  • Friend’s purchase total is over 50 dollars

Effects:

  • Redeem referral code
  • Set 20% discount for the friend/new customer
  • Create advocate coupon with value ((Friend’s purchase 1, 2, 3)*20%)

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.

Summary

Reactive referral rewards are better for your customers and your business:

  • Your customers will get better rewards
  • They'll put more effort into finding valuable new customers
content LiBRARY
Mobility Best Practice Case Study: WeShare
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CONTENT LIBRARY
Download Your Talon.One Loyalty Playbook
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Best Practices for loyalty programs
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Promotion tips
Industry insights
Case Studies
Mobility Best Practice Case Study: WeShare
Get Your Free Case Study
How to boost referrals by more than 50%
How to implement creative promotion ideas
How to solve legacy limitations and drive customer acquisition
Download Your Talon.One Loyalty Playbook
Loyalty Playbook Cover
Best Practices for loyalty programs
How to gain a competitive advantage
Your definitive guide to loyal customers