If you are unclear about the scope and success rate of referral programs, here’s a fun fact –
88% of Americans say they would prefer to be incentivized or rewarded for sharing their product recommendations on their social media as well as to their family and friends.
Purchase decisions are based on many factors, such as product quality, service, and reliability, but one of the driving factors is recommendations. We extend the same trust we have for a family member to a brand or product they have recommended. This is perhaps the most important rationale behind the unparalleled success of referral systems.
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What are Referral Reward Programs?
Referral reward programs are a highly effective marketing strategy that focuses on rewarding customers that refer other customers. It is a dynamic and systematic strategy to encourage customers to talk about your brand and recommend it to their network of family, peers, and friends. A customer interested in participating in a referral program can either share a referral link supplied by the brand or bring in other customers via word-of-mouth publicity or other mediums. The customer then earns incentives based on the terms and conditions of the referral program.
Referral programs generate three to five times higher conversion rates than any other marketing channel. It’s simply leveraging the fact that most purchases are based on recommendations or someone else’s influence.
How Can Referral Reward Programs Prove Beneficial for your Business?
- Improved Engagement – Referral reward programs have a high customer engagement rate. Customers that are participating in the program tend to follow the brand closely and are more open to receiving communication from the brand. Close association and enhanced engagement both considerably improve the chances of frequent purchases.
- Aids in Customer Retention and Acquisition – One of the prime benefits of adopting a referral reward program is that it improves customer retention rates through engagement strategies. Customers who are more involved with the brand through their referral programs are more likely to continue their association with the brand. Also, customers are four times more likely to purchase something when referred by a friend. Retained customers are responsible for bringing in new customers through their referrals, thus significantly improving the sales cycle.
- Improves Market Penetration – Referral programs help in accelerating market penetration in due time. Retained customers bring in new customers, and the cycle goes on. This way, referral programs widen the scope of reach and help the brand to reach out to untapped markets.
- Brand Advocacy – According to American Express, “90% of American customers share their customer service experiences with others.” Referral programs are a great way to leverage this and incentivize brand advocates for their referrals. Here, referral reward programs act as a token of appreciation from the brand to loyal customers for referring their network.
- Improves Brand Credibility – 28% of millennials say they won’t try a product if their friends don’t approve of it or share it with them. When a customer refers the brand to his network, it becomes doubly effective. Word of mouth marketing is believed to influence 20-50% of all purchasing decisions, and referrals act as a catalyst, considerably boosting brand credibility in the process.
- Targeted Marketing Strategy – Customers who participate in the referral program are most likely to refer friends that they think will be interested in the products to improve their chances of earning referral rewards. Referral reward programs are thus a great way to attract relevant audiences who are more inclined to purchase your brand.
Building an Effective Referral Program
Building a referral rewards program is a dynamic and systematic process. To build an efficient plan, here’s what you will need:
- Predefined Objectives – Before undertaking a new initiative, such as a referral rewards program, as a brand and company, it is imperative that you have a predefined goal. You can devise a referral plan that is best suited for your business requirements, based on whatever your objective is: be it acquisition, retention, market penetration, etc.
- Knowledge about your Target Audience – The second and most crucial step is identifying and understanding your target audience. Only when you have correctly identified and studied your audience can you create a program that will effectively entice and engage your customers.
- Predetermined Rewards/Incentives – Based on your target group’s analysis, you can determine what incentives would be best suited to drive your referral rewards program. The rewards you select should be appealing enough so that your target group is motivated to participate; it must also suit your brand values and be in alignment with your marketing budget.
- Marketing and Communication Calendar – The next step is to identify channels and communicate with your audience through these mediums; this is where a communication calendar will help you. Sending the right message through the right medium and at the right time is imperative in order to create a successful referral reward program.
- Referral Host – To ensure that your referral program has a high ROI, you will need assistance from a referral host and a dynamic platform to launch your program. Loyalty and referral platforms like Annex Cloud will help to create a highly engaging and remunerative referral program.
How Annex Cloud Can Help Leverage Maximum Benefits through Referral Programs
Initiating, managing, and monitoring a referral program is a complex process. Annex Cloud monitors and manages the vast data and analytics that ensure the smooth execution of a referral program.
Annex Cloud provides a dynamic platform that enables you to monitor conversion rate and suitably incentivize customers, all in a seamless process. With bespoke solutions and custom-built functionality, Annex Cloud will design a referral program that is suited to your business sensibilities and ensures greater ROI.
To find out more about Annex Cloud and our extensive range of services, connect with our Referral Experience Manager.