THE DEFINITIVE GUIDE BUILDING A WORLDCLASS REFERRAL PROGRAM TECHNIQUES TO TRANSFORM HAPPY CUSTOMERS INTO REVENUEDRIVING BRAND AMBASSADORS In almost every industry, referrals are the gold standard of customer acquisition. Research has repeatedly shown that referred leads close faster, buy more, and stay longer — all with significantly less eort and at a much lower CPA than non-referred prospects. A University of Pennsylvania study¹ found that referred customers are more loyal and profitable — by a 16% margin — than their non-referred counterparts. Referred customers are 16% more profitable What’s not to like about that? Truth is, most of us inherently understand the value of referrals. When we make a big purchase, we seek out reviews or ping our networks for recommendations. In fact, a 2016 Nielsen poll conducted on behalf of Ambassador revealed that, across industries, 82% of Americans seek recommendations from friends and family when considering a purchase. When we see the same people talk about a purchase they made? Nielsen’s survey for Ambassador suggests two-thirds of us are at least a little more likely to make the same purchase. All of this has never been more true than in the age of the internet — a chaotic, noisy place where we’re constantly bombarded with blatant marketing messages, thinly-veiled “native advertising,” and unapologetic branded soapboxing. In this environment, a referral from a trusted source is a welcome respite from the subjectivity of typical brand communications. Building a World-Class Referral Program | 2 83% 29% of customers of those are willing to customers provide referrals actually do So, why isn’t there more talk about referral marketing? It’s simple: More often than not, people expect referrals to just happen organically. Here’s the problem with that assumption: While referrals do happen organically, they’re never a given — even if a customer loves your products and services. In fact, a Texas Tech University study² found that while 83% of customers say they’re willing to provide referrals after a positive brand experience, only 29% actually do. That chasm exists for many reasons, but it’s often exacerbated by a failure to prioritize and manage a truly scalable referral marketing program. How can your company close that gap? This eBook will explore the basics of referral marketing, the techniques you can use to transform happy customers into revenue-driving brand ambassadors, and the simple steps you can take to ensure your referral program is easy to manage, measure, and scale. Happy reading! Je Epstein Founder & CEO, Ambassador Building a World-Class Referral Program | 3 CHAPTER 01 The Strategy Defining and Demystifying Referral Marketing People influence people. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising. Mark Zuckerberg Founder & CEO, Facebook Building a World-Class Referral Program | 4 Ultimately, the goal of referral marketing is simple: To harness the power of authentic word-of-mouth to drive a steady stream of high-quality referrals to your business (and grow revenue as a result). Executing against that goal, however, is a bit more complicated. For referral marketing to work, you need to have a few core building blocks in place: A quality product that customers love: While referral marketing can generate dramatic results, it all starts with your product. If your customers are continually telling you how much they love it, they’ll probably be willing to do the same thing with their network. A captive, engaged audience: If your relationship with customers is mostly transactional (think: buying milk at a convenience store) and your social following is disengaged, referral marketing might not be for you. If, on the other hand, you’ve built up a captive audience of loyal customers, fans, and followers, referral marketing can be incredibly powerful. Engage and incentivize them correctly, and you’ll see a big ROI. A process to track, manage, and reward referrals: In order to move away from the traditional ad-hoc approach to referrals, you’ll need to implement processes that automate the repetitive nature of creating, tracking, and rewarding referral campaigns. This is the only way to make referrals a truly scalable source of revenue. Beyond those building blocks, the core strategies that drive referral marketing aren’t rocket science. In fact, the approaches deployed by brands like Airbnb, Uber, and Google to drive incredible user growth are, for the most part, replicable. Building a World-Class Referral Program | 5 The Do’s and Don’ts of Successful Referral Marketing That said, referral marketing isn’t something to treat lackadaisically. In order to build a program that your customers, fans, and followers want to participate in, there are some key best practices you’ll want to keep in mind: DO DON’T Consider how (and when) you ask Make customers do all the work The best referral marketing programs For referral marketing to be eective, you operate with a deep understanding of can’t expect existing customers to do all of who they’re targeting, where those people the legwork for you. While the vast majority are active, and which incentives will drive of happy customers say they’re willing to actions. Studying your referral candidates’ provide referrals, the truth is they’ll only motivations and preferences before you follow through if the referral process is reach out is critical to success. If you oer extremely simple. the wrong incentive to the wrong customer in the wrong environment, your program will fail. DO DON’T Make referrals part of your “Set it and forget it” broader strategy Like all strategic marketing initiatives, The highest performing referral marketing referral marketing programs thrive in an programs share a common thread: referrals environment of perpetual optimization. are fully baked into every customer’s This is where referral marketing software sales, marketing, and support experience. becomes enormously valuable. With the Referral CTAs are included throughout right technology, you can create (and the company’s website. Employee email automate) much-needed process around signatures feature referral messaging. And monitoring, tracking, and incentivizing the referral program is fully integrated with referrals. Over time, that will generate other critical systems (CRM, marketing insight to help optimize results. automation, eCommerce technology, point- of-sale systems, optimization tools, etc.). Building a World-Class Referral Program | 6 3 Use Cases for Referral Marketing 01 02 03 Fashion eCommerce B2B SaaS Big Ticket Items Large customer bases. Gmail, Evernote, Dropbox, Because margins and Engaged social followings. and Trello all drove customer value tend to be High customer lifetime exponential growth early higher with big ticket items values. All of that adds up on by harnessing the - such as TVs, furniture, to organic word-of-mouth, power of referrals. With even cars - brands that sell an interest in referrals, and these businesses, brand them can oer larger referral plenty of room to get creative ambassadors can be incentives that are more with incentive structures rewarded for referrals with appealing to both parties. (more on that later). premium features or a cut of the referred customer’s recurring revenue. One Key Takeaway At its core, referral marketing isn’t overly complex. In fact, getting started is as simple as putting yourself in your customer’s shoes. Objectively, would you recommend your company’s products to others? Where and how would you do it? What incentives would motivate you to increase your referral activity? What barriers would keep you from doing it? Answer those questions and you’ll be well on your way to building an eective referral marketing strategy. Building a World-Class Referral Program | 7 CHAPTER 02 The People Identifying, Engaging, and Recruiting the Right Brand Ambassadors A brand is no longer what we tell the consumer it is. It is what consumers tell each other it is. Scott Cook Co-founder, Intuit Building a World-Class Referral Program | 8 Think about the last time word-of-mouth influenced one of your purchasing decisions. Maybe a friend shared their love of a subscription service like StitchFix, a co-worker sent you a referral code for free Uber credits, or a neighbor recommended their favorite contractor. Or maybe it was as simple as a friendly suggestion on where to go to dinner. Regardless, you probably acted on the referral, in part, because it came from someone you trusted. Now, think about the last time you received a referral and ignored it. What led you to discredit the recommendation? A lack of trust in the person delivering it? The way in which the referral was shared? Generally, when referrals are directionless, or look and feel like an advertisement, we tend to tune them out — and rightfully so. In those circumstances, the “referral” feels interruptive and confusing, instead of helpful, beneficial, and authentic. Why is that distinction important? For referral marketing to work, you need to ensure experiences that align with the first description above, not the latter. So, before you start getting your marketing and sales teams excited, and engaging customers for referrals, let’s review how to ensure amazing experiences for your brand ambassadors, their referrals, and your team. There’s a process to engaging ambassadors, and if you manage it properly you’ll reap the rewards for years to come. If you don’t, it could come back to haunt you. Building a World-Class Referral Program | 9 The Core Characteristics of Successful Brand Ambassadors So, what does an eective brand ambassador look like? How should they act? What should they know? If you’re in the process of assembling an army of passionate brand advocates, here are the key characteristics you should be looking for: 1 They already know and love you Quality brands already have existing relationships with raving fans - usually loyal customers.