The Do's and Don'ts of an Effective Referral-Marketing Program
While referrals do happen organically, they're never a given -- even if a customer loves your products and services.
Opinions expressed by Entrepreneur contributors are their own.
In many businesses, referrals are viewed as an organic byproduct of the company successfully doing its job. If you exceed customer expectations, it's natural to assume they'll return the favor by singing your praises to their networks. If you blow them away with world-class customer service, you can expect a flood of social-media goodwill.
But here's the problem with those assumptions: 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 study found that while 83 percent of customers say they're willing to provide referrals after a positive brand experience, only 29 percent actually do. That chasm exists for many reasons, but it's often exacerbated by a failure to properly prioritize and manage a referral program.
Related: 6 Hacks to Drive Massive Referrals
So, how can your company close that gap? Here's a list of referral marketing "dos" and "don'ts" that will help you proactively convert happy customers into reliable revenue-drivers:
1. Do give customers the tools they need to promote your company.
For referral marketing to work, you can't expect customers to invest time and energy into developing tools and assets to support your brand. Instead, you need to make the referral process as simple as possible. This might mean creating a hashtag that customers can share on Twitter, or developing email templates that ensure ambassadors use the right language and share the right landing page URL.
Regardless, decreasing the effort required to deliver a referral is a critical piece of the referral-marketing equation.
2. Don't expect customers to always be thinking about you.
One of the biggest mistakes companies make with referral marketing is assuming customers always have their brands on the top of their minds. If you're not constantly looking for opportunities to engage your most loyal customers, then you're missing a huge opportunity to encourage and incentivize conversations about your products or services.
3. Do think about who (and how) you ask for referrals.
To operate a successful referral marketing program, you must consider who you're targeting, where those people are most active, and which incentives are most likely to influence specific actions. Early adopters love being the first to discover or experience a new product. Others are driven by monetary gain, such as a $200 credit on their bill or a percentage of the sale.
Regardless of where your customers fall on that spectrum, it's critical to truly understand their motivations and preferences before you reach out. If you offer the wrong incentive to the wrong customer in the wrong environment, your referral marketing program will fail to generate results.
4. Don't "set it and forget it."
Once you get a referral marketing program up and running, it's easy to fall into the trap of assuming the engine will run itself. Like all strategic marketing initiatives, referral-marketing programs thrive in an environment of perpetual optimization.
This is where referral marketing software can be enormously helpful. With the right tools, you can create a structured process around monitoring, tracking, testing and incentivizing referrals. Why is this valuable? Over time, the analytics created by that process will provide clear trends into the activities, channels and customer personas that are driving the best results. Arming yourself with that insight will make it much easier to successfully scale your referral marketing program.
5. Do incorporate referrals into your overall marketing strategy.
The best referral-marketing programs (see Airbnb and Dropbox) share a common thread: referrals are embedded into every aspect of the user experience. Referral calls to action are included in newsletters and blogs. Employee email signatures feature referral messaging. And the referral program is fully integrated with other critical systems (customer-relationship management, marketing automation, ecommerce technology, point-of-sale systems, optimization tools, etc.).
For referrals to consistently deliver bottom-line results, they must be part of how your business operates. Without structure and commitment, you're largely at the mercy of chance. But with the right approach, process and technology, you can turn referrals into a predictable, scalable channel of high-quality revenue.
Related: 5 Ways to Make It Rain Referrals