The Psychology Behind Referral Programs That Work

by Grace Miller |

The Psychology Behind Referral Programs That Work

Understanding human psychology allows us to better understand and predict human behavior. To craft referral programs that work, it is important to first understand how these programs will be perceived and processed by the consumer psyche.  Here are some of the key psychological principles that drive referrals.

Instant Gratification

Consumer behaviorists have consistently observed that shoppers prefer smaller, immediate rewards over larger but delayed rewards. The logic behind this observation is that the human mind places more value on instant gratification even if the reward is small over waiting for a reward that is more substantial. Studies also confirm that a person shows a higher level of cognitive activity when exposed to immediate rewards. At Annex Cloud, we find that people are 300% more likely to share when prompted to do so on the same page compared to a dedicated landing page.

At the same time, the human attention span has also shortened to around eight seconds, which means that the promise of rewards must be swift and tangible. Using imagery and instant or tangible rewards is a good way to help customers stay engaged.

The Moment of Cognitive Dissonance

In the taxonomy of psychology, cognitive dissonance is the state of having inconsistent thoughts, beliefs, or attitudes, especially as relating to behavioral decisions and attitude changes. In terms of consumer behavior, this is commonly known as “buyer’s remorse.” After buying something, especially if it is costly, doubts about the purchase begin to erode the buyer’s mind. He or she starts to think about the possibility of better deals that could have been obtained or doubt the function or necessity of the product. The buyer’s brain continues to weigh the pros and cons of the purchase until their mind achieves a state of balance, or “consonance.”

Buyer’s remorse can be a formidable obstacle for referral marketing. After all, how can you ask a customer to refer a friend if they themselves are having doubts? Fortunately, buyer’s remorse is a latent phenomenon, which means that encouraging recommendations immediately after the purchase is the key to success. For instance, marketers have seen that a small refer-a-friend pop-up after a purchase can drive a 16x conversion increase.

The Principle Of Collective Liking

Coined by French sociologist Émile Durkheim, the term collective consciousness refers to a set of shared beliefs, ideas and moral attitudes which operate as a unifying force within society. Indirectly, this also refers to the impact of peer opinions on an individual. It gave rise to the rule of collective liking. The basic premise of this rule is that if others, who are obviously in majority, are finding a particular product good, then it must be good.

Marketing has capitalized on this trend in the past with the invention of Tupperware parties, which were basically social gatherings used as an opportunity for friends and neighbors to share, discuss and endorse Tupperware products. It was observed that people were far more likely to buy the product if its virtues were being communicated between a familiar or a social setting

The same idea can be applied to referral marketing. Individuals react better when they feel like they are partaking in something approved by their peers or participating in community creating. Meanwhile, the need for community approval is one of the reasons that referral marketing can help even the most established brands.

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Reciprocity of Human Nature

Robert Cialdini refers to reciprocity as one of the major “weapons of influence.”  He argues that by nature, people respect gratitude and want to give something in return for that gratitude shown by others. To pinpoint this urge of buyers to return favors, Cialdini cited an infamous social experiment conducted in 1974 by a sociologist named Phillip Kunz. Before the holidays, Kunz sent out 600 Christmas cards to complete strangers whom he’d chosen at random. Despite the fact that Kunz sent cards out to strangers, he received over 200 enthusiastic and thankful Christmas cards in return. Why did so many people respond to the stranger? Simple, Cialdini argued, to reciprocate a kind action.

For referral marketing, reciprocity highlights the power of brand gratitude towards consumers. Something as simple as a “thank you” email for purchasing a product that also contains information about your referral program can make a consumer more amenable to referring a friend. Another part of this strategy is to thank consumers who have been active for your brand while encouraging them to remain active with rewards. Not only will the consumer feel recognized, but they will also feel the need to reciprocate the brand’s gratitude.

While the psyche is naturally complex, referral programs that work learn to utilize key elements of consumer thought in order to encourage consumers to recommend a product. In fact, studies show that 92% of consumers trust referrals from people they know!

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