According to New York Times, 65% of new business generally comes from referrals. That certainly means on average, two-thirds of customers rely heavily on recommendations from family and friends when it comes to buying products or services. Furthermore, in a survey conducted by Nielsen, it has been found that 92% of people trust recommendations from family and friends more than all other forms of marketing. That same survey reported that people are 4 times more likely to buy when referred by a friend.
Creating an effective referral program is the best approach marketers can adopt to tap into the power of consumer recommendations and achieve exceptional results.
So, how can you create a referral marketing program that increases reach, boosts trust, and generates more sales? Before getting started with one of your own customer referral programs, let’s look at a few examples of companies that used referral marketing to propel their businesses.
This file hosting powerhouse launched a referral program that not only lifted the company’s worth but also rewarded customers with product-based perks. With this referral program, Dropbox went from 100,000 users to 4 million in just 15 months, which increased the total number of signups by sixty percent.
Here’s what makes Dropbox’s referral program great:
- Both parties rewarded: The referral program gave additional 500MB of free storage to both referrer and their referred friends.
- Non-cash rewards: One of the major benefits of this referral program was that it provided additional storage space instead of dollars.
- Email & social media invites available: Dropbox used SEM and affiliate marketing, which enabled customers to send the referral to their contacts via email or social networks such as Facebook, Twitter, LinkedIn, etc.
- Progress chart: The referral program included a tracker that allowed users to track the status of all the friends they had referred.
Uber is one of the leading ride-sharing services on the planet. Uber today is worth $50 billion and the key reason behind this is its incentivized referral program. This ride-sharing app offers free rides to people for referring the app to others. Earlier, Uber had a double-sided incentive program, offering both parties a credit of $10 on new user sign up. But, with time, Uber has made the program even friendlier by offering $20 credits to both the referrer and the referred.
Here’s what makes Uber’s referral program a great success:
- Incentives provided: Similar to Dropbox, Uber also provided dual-sided rewards, offering both the parties a free ride.
- Easy to share: Uber didn’t require any Facebook apps, lead forms, or any additional user data to share the referral code with friends. All it required was an email/message from your phone to your friend.
- Partnerships: Uber implemented a few partnerships to entice both new and loyal customers to take a ride. Partners of Uber include Capital One credit card, Starwood Hotels, and Spotify, to name a few.
Airbnb, an online marketplace that enables people to list, find, and rent vacation homes, launched a referral program in 2014, which the company has been optimizing ever since. Earlier, Airbnb focused on attracting new guests with their referral scheme. However, this has changed recently as Airbnb has started testing a new referral program – focusing on attracting new hosts with diverse incentives.
Here’s what makes Airbnb’s referral program so famous among users:
- New functionality: Airbnb added new banners, notifications, and new navigation elements throughout their site to maximize the visibility and discoverability of the new program.
- Incentives: Similar to Dropbox and Uber, Airbnb also provided incentives to both the referring and the referred user, once they fulfilled the required criterion. Existing hosts were offered $75 cash reward for referring a new host, while the referred hosts were awarded a $25 reward on their first booking.
- New host invite dashboard: To distinguish their new host referral program from the guest one, Airbnb created a new dashboard, featuring new invite functionalities such as Facebook, Twitter, email, direct link, and Gmail contacts import.
Lessons that marketers can learn from successful referral marketing campaigns
Take care of both the parties: To make your referral marketing campaign a success, it is necessary to motivate both the parties to engage in your referral program. This can be done by providing two-way incentives to both the referrer and the referred.
Simplify the process: To get more of your loyal customers to share your services/product with their family and friends, make the referral process simple and easy to share. The simpler it is, the more actively they’ll engage and share.
Think of benefits beyond money: To provide referral benefits does not always mean to offer money or cashbacks. These benefits may include an extra on top of your services or product, for example, free rides in Uber’s case and extra space in Dropbox’s case.
Automate, track, and optimize: To run a successful referral marketing campaign at scale, you need a system that can automate your campaign and track its performance. Once you have the visibility into the campaign performance metrics, you can optimize the campaign.