Many business owners think that referral programme works for new client attraction only. Why pay for referral programme if the client base constantly grows? In this article we will talk about hidden opportunities of referral programme that should not be overlooked.
What is referral loyalty programme
As you already know, referral programme is the part of loyalty programme, one of the tools to attract and hold the clients. It contains three participants:
- Shop/brand/service — programme organizer
- The affiliate — a person who made purchase and can receive the reward for recommendation given to third party. For example, you recommend the shop to your friend
- The referral — the person who made a purchase after recommendation received
What is the affiliate's benefit?
If a friend makes purchase upon recommendation, you get the bonus from the shop: points, cashback, loyalty programme member status update, monetary certificate, certificate for partner service. The stimulation features vary a lot. Everything depends on loyalty programme complexity and company budget.
What is the referral's benefit?
Benefit of positive experience. Friends would hardly recommend bad shop or poor service. Positive experience based on trust is the benefit here. Even though it is not monetary one.
What is benefit for business?
Existing client has strong motivation to recommend the shop. One wants the prospective benefit in form points, discounts, gifts. Statistics of how many clients recommend your enterprise is useful. Every affiliate is a happy client. These numbers are helpful for analysis of target audience satisfaction, its loyalty and trust level.
Second advantage is that the new clients are attracted. As you know, one recommendation from a friend is much more than 10 nice advertising banners. Referral programme helps in finding new clients. But instead of advertisement, buyers tell themselves their friends about your brand, shop. One can say, they work partly as effective advertising for target audience.
The cumulative return from one client is higher on 10-13%, in case one came through referral programme.
It is cheaper to attract new clients with referral programme rather than with advertising.
Every second person makes purchase upon recommendation. More than that, people usually look for recommendations from friends.
Useful referral programme feature to be used in work this clients
Referral programme helps not only with finding new clients but also with repeat sale increase. This point is often overlooked and business does not pay appropriate attention to such flexible tool as client stimulation. Reward earned by the affiliate must fulfill its main function, meaning motivate the person to visit store again and make purchase. Therefore set the reward that can be actually received after repeat sale:
- points and bonuses at client card
- extra discount for next purchase
- access to private sale
- unique offers
- cashback increase
Cashback or bonus is not itself a gift. This is abstract entry that is not tangible and cannot invoke emotions. But after person made repeat purchase and paid with points, the positive experience is established: "I've just recommended the shop to my friend, and now I can buy nice goods on smaller price".
The chance to benefit motivates client to make repeat purchase. Sometimes buyers forget about accumulated points or shop campaign. To be more sure and to make stimulation stronger, you can set the bonus or discount expire date. It can be one month or couple of weeks, the period of time depends on sphere of your business activity. For example, this temporal interval can be few months for beauty parlor. For supermarket it can be couple of weeks, as we do grocery almost daily.
Use referral programme as a tool to increase the repeat sale. No need to invent anything, create the reward and it will become the cause of repeat purchase.
In case referral programme is used without loyalty programme
Referral programme would help to find new one-time customer then. It would not help with repeat sale. If one has no loyalty programme, buyer usually receives money or material gift as reward. This is how it works for coffee shop:
- your guest recommends coffee shop to one's friend
- that friend buys coffee at your shop. The affiliate's identifier here is the bill, the name or social net account
- after friend makes purchase, the affiliate receives dessert and coffee
Are the referral and the affiliate motivated enough to make the repeat purchase at this coffee shop? One person receives the reward and is not linked to the shop anymore, referral cycle is over. The second participant had nice coffee upon recommendation and has no connection now to be back. Meanwhile business spent money on reward, free dessert and coffee.
Example of car rental:
- you recommend to your friend the car rental, that you have used before
- your friend rent the car as well
- you receive the gift from the rental — 1500 rubles were transferred to your credit card. You spend this money in grocery store next door
Referral loyalty programme without full loyalty programme cannot increase the repeat sale. You and your client's story should not be over, the person should always have the reason to be back. And the most popular reason is the discount and accumulated point spending.
Extra: how to understand if your company is ready to launch referral loyalty programme?
People will recommend your shop without referral programme. This shows that your product is high-quality, in demand, competitive. Referral mechanics provide extra stimulation and it is easier for clients to follow the clear scenario with reward and to make a decision to recommend.
You have plenty of active buyers, who brings here the referrals. There is no one standard number of active audience, it is individual for each particular business. You can calculate this value yourself, with statistics from CRM. Active customer buys your product minimum 1 time per month. If this share is less than 20-30%, you should first work on client loyalty or client base increase. Perhaps, you miss your target audience.
You are ready to cope with extra load if referral programme brings its fruition. It considers number of employees, web-site capacity, logistics.
Your product can be recommended any time, its purpose can be explained in five words. For example, it can be inconvenient to recommend brand of feminine hygiene products, special cosmetics, waxing items.
It is also difficult to recommend complex product like gestalt therapy course with first grade certificate. Correct product positioning and promotion channels identification make us understand if referral programme will benefit or not.
Professional approach to referral loyalty programme will promote business even during crisis. Learn how to use all opportunities of referral programme and gain number of goals at once: attract new clients, hold your regular customers, and increase the rate of repeat sale.