They aren’t just flattering – they’re one of the hottest types of leads you can get because they heard a trusted source rave about you and recommend you to them. The coveted referral is the highest form of flattery your company can receive. Your customers feel they get so much value from you, they are compelled to share their experiences and recommend you to others. Research from The Financial Brand has found the cost-per-acquisition (CPA) for financial institutions is anywhere from $250-$400. However, with a basic referral program that offers $50 to a current customer who refers a friend, and $50 for the new referral, the CPA drops to $110-$175. The graph below shows that companies also experience a higher closing rate (70%) when the prospective client is referred to them.
Implementing a referral program encourages existing clients to become advocates of your brand and promotes positive brand awareness among potential clients, all while lowering your costs. In order to increase your number of participating members, we’ve come up with six ideas that can breathe new life into your referral program.
An innate competitiveness lies within many people, you can bring this out in your existing customers and expand your client base at the same time with a referral contest. In order to ensure success, you’ll need to establish a sense of urgency among participants. The contest should be set for a specific duration of time of when referrals can be submitted and when the referral must sign up by. Whichever customer submits the most referrals (that decide to sign up for your company’s services) within the timeframe will win a prize. Customers are more likely to participate if they believe they have a good chance of winning. So, you may want to further entice people to partake by offering prizes for your second and third place winners. One of the major keys to a successful referral contest is ensuring your customers are aware of the contest in the first place. Focus your promotion efforts on generating a buzz around the great prizes your firm is offering to the winners because this is what customers are really interested in. The prizes offered should be more enticing than a standard referral program, since there are fewer winners, but still within your budget.
Unlike a referral contest, with scaled referrals there are not just one or two winners. Instead, a scaled referral program rewards everyone and uses the simple idea that the more referrals a customer brings in, the higher their rewards will be. For instance, the first referral a customer brings in will receive a $50 reward, for the second referral $100, $150 for the third referral, and so on. We recommend setting a cap for how many referrals a customer can bring in while receiving the bonus rewards. After the cap, they would receive the standard referral reward your firm offers.
Rather than paying a customer for each individual referral, your firm also has the option to utilize benchmarks. With this type of referral program, you would keep track of the number of referrals each customer provides and reward them after they reach a predetermined number of referrals. Let’s say you set benchmarks for every 5 referrals a customer brings in. Once a customer brings in their first 5 referrals they receive a $100 reward. If they bring in 5 more referrals they will receive a $150 reward. This method has proven successful because just as people are competitive against others in a contest, they are competitive against themselves. After customers reaches the first benchmark and receives their reward, they’ll want to continue their achievements to reach the next goal and then the one after that.
One way to promote the previous programs mentioned and increase participation is encouraging your customers to refer friends and family via social media. By doing so, you are able to lead traffic directly to your pages when clients tag your social accounts, generating additional exposure that your firm would not otherwise receive. Even Forbes has taken notice of social media’s rise to the top. Facebook leads all social media outlets, generating 16-25% of social referral traffic each month.
Enabling your customers to link their Facebook and other social accounts gives you instant access to a customer’s network and simplifies the referral process for current customers. When your customers choose to link their accounts, they are given the ability to select friends they wish to share your services with in just a few clicks. Today’s customers like quick and easy, so any opportunity to reduce the steps and time the referral process takes will ultimately result in higher customer participation and new clients for your business.
With an invite-only program you can give a code to all customers, those that have been with your firm for a certain time period, or those who opted into a particular service or product. The customer is then able to share the code with friends and family members. For every person that joins using the customer’s unique code, both the current customer and new referral receives a reward. Uber is one company that has made sharing referral codes easy for customers and seen great success. The offer code is presented on its own page and gives users the opportunity to send the code to their phonebook contacts or share with their social networks. Both parties receive a $20 reward when the referral joins. A program like Uber’s can prove to be especially effective due to the enticement of receiving a reward, as well as the invitation aspect which creates a sense of exclusivity. People are drawn to the feeling they are special and receiving a promotion that appears selective can foster that feeling.
Be Creative with Rewards
The rewards within your referral programs don’t have to be just cash. If a consumer is referred to you for a home loan, you could give them a free interior design consultation. If they are referred for a car loan, offer a free car detailing. Personalizing your website can aid you in determining what prizes and rewards certain customers should receive by gathering information, just as tip #3 discusses in our 5 Ways to Simplify Your Financial Services Website. Incorporating this type of customization into your prizes will create a greater appeal because it shows you are in touch with your clients and reaffirms why they should be referring your company.
As we discussed earlier, some referral programs—like a contest—have fewer winners so you can offer bigger and better prizes like a vacation getaway. If a vacation prize is a little too extravagant and out of budget, offering prizes such as an iPad, GoPro, among other tech gadgets are great alternatives that will excite customers to participate in your referral program.
Customers that are willing to promote your company through referrals are a great asset to you. But, in order to have success with any of these programs customers need to be aware and interested in the program—advertising at your locations, sending e-mails to clients, and promoting on social media will all draw the attention you need. No matter if you implement a whole new program, tweak an existing one, or improve the rewards you offer, establishing a creative program that rewards your customers for bringing you referrals will ultimately result in new business and the overall growth of your firm.