Why you need a referral channel

You don’t need a customer referral scheme? 5 reasons to think again!

   

Here at Mention Me we are passionate about all things referral, but we appreciate not everyone has yet seen the light. Maybe we can persuade you with the insights we have gleaned by running refer-a-friend programmes for over 100 retail clients.

According to Nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising. If that's the case, then what’s stopping you? Could it be one of these misconceptions:

1. My brand is well known, so I’ll get referrals naturally

We have worked with many well known brands, who you might consider would naturally receive referrals.  However once implementing a refer-a-friend scheme, they typically have seen new customer acquisition increase by between 10-30%!

Having a brand everyone loves is wonderful, but that doesn't necessarily translate into word of mouth. You need to give customers a reason and the tools to share.

The reason doesn’t have to be money off (more detail on that one in  point 2 below); making it easy to refer is also key.  We offer 14 ways to share a referral offer and find different tools work better for different brands; the key is to become a natural part of the conversation. One game changer is our unique “mention by name” capability which means friends can just say “enter my name at the checkout”, so referrals can simply take place in normal conversation.

These case studies of referral schemes at FarFetch and Emma Bridgewater are excellent examples of great brands using referrals well.

2. I don’t want to give away discounts unnecessarily

Firstly, referrals doesn't need to be about discounting. Although this can be highly successful in certain markets, other offers such as vouchers, free delivery or gifts can also work well. We have undertaken over 700 AB tests with our clients, to identify which offers and sharing options work best.

This guide should give you some useful tips on developing a refer-a-friend test plan.

If you do decide to discount, this needn’t impact your bottom line. Our clients have found that referred customers generally spend more on their first purchase to the tune of 10-25% more than than the 'normal' AOV. This completely counterbalances the discount right from the first order.

The discount can in turn be a powerful motivator for the existing customer too: in fact customers who earn a reward for introducing a friend are 54% more likely to shop with you again.

3. We already run an affiliate scheme so we don’t need a referral scheme

An affiliate scheme and a referral programme are very different things. Affiliate schemes can be a great tool for customer acquisition, but customers referring your product are likely to have a deeper connection to the brand.

An affiliate is likely to be driven by monetary motivations (usually), whereas a referrer has tried your product or service and is engaged enough to share it with their friends and family. This interesting post from Ritchie Mehta shows why winning ‘earned’ before ‘bought’ loyalty results in stickier relationships.

You are likely to find that customers acquired via referrals turn out to be more valuable to your business. We have found that there is a virality to referral programmes, with referred customers in turn likely to refer 3x more frequently. They also tend to spend more and have a lifetime value 2x that of non-referred customer.

4. We don’t have the development resource to implement a referral programme

You don’t have to have a large development team to launch refer-a-friend. In fact the Mention Me platform works with just two javascript tags and can plug into ecommerce platforms and tag containers. It also Integrates easily with many popular shopping carts such as Magento and Shopify. This means your scheme can be up and running and you can see the benefits really quickly; typically within a few weeks.

Once your referral programme is launched you are going to need to optimise it to see the true benefits. Without testing, referrals will only account for up to 5% of customer acquisition; AB testing can increase this to up to 30%.

The Mention Me testing platform enables the marketing teams to make any changes they want without any development involvement. Crucial when internal resources are limited.

5. I can’t afford the time or marketing budget for another marketing channel

Ironically many modern digital marketing initiatives are trying to mimic the goodness that comes built-in with referral. Friends make the ultimate tailored and personalised recommendations.

They are more trustworthy so conversion is higher; they are influencers on a deeply personal level and they naturally work across multiple channels. With the superior metrics that referrals can deliver, you'll soon find that they outperform all your other marketing channels.

The question should be - Can you afford not to have referrals as a channel?

Learn more about how outsourcing refer-a-friend with Mention Me platform works. Request a demo

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