Loyalty and Referrals: A Winning Combination

by Sean Ogino |

Loyalty and Referrals: A Winning Combination

Loyalty programs and referral programs are same in the sense that they both give rewards for a certain behavioral action of your customers. But the similarity ends there only. The way loyalty and referrals operate is different, with loyalty programs generally being more complex. Which program will complement which company also varies depending upon brand power, and profit margin. But despite these differences, we have consistently seen that the customers who make referrals do tend to be more loyal, and loyal customers tend to refer. There must be something in between them, which makes loyalty and referrals beautifully complement each other. What is that? We will try to figure it out.

Use Your Loyal Customers To Get More Customers:

It is much wiser to acquire all the people in the customer’s circle rather than acquiring a single customer only. This simple thread of common sense gave rise to the concept of referral. Indeed, it makes a lot of sense to use existing customers as a potent instrument to get more customers, as referral request from a known friend is definitely more trustworthy than a marketing email from a retailer or etailer. Indeed, Nielsen notes that 92% of consumers trust referrals from people they know.

A study from the Wharton School of Business states that referred customers are between 16% and 24% more loyal on average. That’s why it is important to present the referral opportunity wherever customers interact with your brand. It works on the principle of direct proportionality: The total number of referrals are directly proportional to the overall chances of conversion. And in the world which is abundant with social media, mobile phones, and email access, it’s not at all a difficult task. Besides, it also strengthens your efforts of inbound marketing.

Bebe has flawlessly intertwined loyalty and referrals. They reward referrers with loyalty points and place referral CTAs in its global header, global footer, and product listings. The two programs bolster each other to both gather more customers and propel more customers to return again.

bebe rewards mobile loyalty and referrals

Take Advantage of Your Preexisting Loyalty Program Infrastructure:

Even if you are running a loyalty program of a smaller proportion, you already have an infrastructure with information like member accounts, points, and excited customers. This data can act as building blocks of a referral program too. The gathering of the above-mentioned resources needs a systematic investment of time and money. So, why not use the same stones and machinery to build a new building if you can? Thus, it’s actually a waste of those resources’ full potential not to have a referral extension.

As you are armed with the whereabouts of your loyal customers due to your loyalty program, you can target your most active and loyal membership program participants with your referral plan, and they’ll become your best advocates. The truth is, as they are in love with your product, they are the most potential candidates to refer your brand or product to their friends. Then, it doesn’t need much explanation to prove the point that adding a referral to a loyalty program is a quick, easy, and scalable way to get new members. It’s as if it’s a next logical step for loyalty programs!

Gamification Possibilities:

Loyalty and referrals are inherently suited to gamification process, as they both reward users for repeated, specific actions—making purchases and converting new customers. It means that it’s possible to devise a loyalty program which will be connected to a gamified referral program, and vice versa is also true.

So, what you can do is this: Put a completion or task bar in your loyalty-referral program. We generally don’t like it when we have unfinished tasks in front of us. Uncompleted tasks stick in our memories, and we feel relaxed only after their completion or when our subconscious tells us that we are doing something in the pursuit of finishing those tasks. Gamification does the same thing for referral programs– but with a fun. The progress bar keeps reminding the customers that they have to share as much as possible and the progress bar tells them how far they are from the ultimate goal. And believe it or not, customers do consider it as a game or as a mission and this subconscious interpretation is easy to be nurtured due to an easy and ubiquitous availability of mobile phones. Naturally, humans are more reactive when they are in a happy or positive state of mind. The referral numbers may go higher!

We all know that Uber, a transport giant, has seamlessly mixed the loyalty and referral program that assigns each customer a personalized referral code as soon as their account is activated. To encourage their customers to share those referral codes, Uber placed a progress bar in its program call-to-action to refer friends.

To Conclude…

There is a reason why 1% of a retail website’s customers generate as much as 40% of its revenue. They like your brand and that’s why they purchase and repurchase from you. And being the natural advocates, they have the definite potential to not just bring more revenue, but more customers as well. Linking loyalty and referrals gives you anefficient outlet to that potential…and it can change the whole dynamics of your sales in an extremely positive way. That’s why many experts are openly voicing the inevitable fact that referral is the future of loyalty.

For more information about how loyalty and referrals interact, check out our white paper, Advocate Loyalty: A Four-Point Strategy!

[White Paper]
[White Paper]