Why Retail Referral Programs Need A/B Testing to Succeed

by Grace Miller |

Congratulations on embracing referral marketing for retail.  By implementing a referral marketing program, you are already leveraging one of the best ways to maximize your profits per customer.  Marketing to customers who are already loyal is much better for the bottom line than constantly courting new customers.  Referrals are as close as you can get to instantly loyal new customers. That’s because friends and family are a bigger influence on people’s buying decisions than any advertising campaign could ever be. However, referral marketing still does require some of the more traditional methods of optimizing campaigns, including A/B testing.

The Importance of Effective Referral Marketing

The tiniest variation in how you present your referral marketing for retail could have a big impact on how many of your customers refer someone to your company.  Ineffective referral marketing practices are unlikely to cost you your current customers.  (By contrast, poor customer service will, sometimes even after a single unpleasant phone conversation with a representative of your company.)  Still, by not presenting your referral program in the most appealing possible way, you could be missing out on customers who come to your brand with a built-in sense of loyalty.  A/B testing is one of the most practical ways to ensure that your company’s customer referral program is effective.

The Benefits of A/B Testing

It is frustrating to develop a referral marketing program only to find that it generates few referrals.  Instead of abandoning the referral marketing program and building a new one from scratch, A/B testing lets you evaluate and improve your referral marketing campaign while it is still going on.  A number of different A/B tests, run consecutively or simultaneously, can help you improve your referral marketing program in real-time.

A/B testing is especially effective because it is usually not the rewards you offer that can sink or float a referral marketing campaign.  Differences in layout and interface can have a substantial impact on participation in your referral program. It is fast and easy to set up two versions of a marketing email or referral program landing page and see which one has a better conversion rate.

Interpreting the Results of A/B Testing

A benefit of A/B testing is that its variables are very tightly controlled.  The tests are very specific to your particular company. Instead of reading other market studies to determine which results can be generalized to your customer base, you can see how your own customers respond to different versions of the website or invitation email.  Best of all, A/B testing is superior to opinion surveys. With A/B testing, you are measuring customers’ actual behavior, not just what they say they prefer.

When A/B testing referral program emails, it is easy to track which customers respond in which way.  You might find that version A of the email has a higher conversion rate among recipients above age 40, while version B has a higher conversion rate with younger recipients.  You might find that men prefer version A while women prefer version B. Based on that, you can choose which version to keep based on which gender makes up the majority of your most loyal customers.

Retail Referral Programs

For Best Results, Run Multiple A/B Tests

In all likelihood, you will need to tweak several aspects of your referral marketing campaign before you achieve maximum results.  This could require a series of A/B testing experiments. The A/B testing of your referral marketing campaign might go something like this:

  1. Step one: Do customers prefer a hot pink “refer a friend” button or an electric blue “refer a friend” button on your homepage?  You A/B testing shows that women under age 30 prefer the pink button, while everyone else responds better to the blue button.
  2. Step two: Should the blue button say “refer a friend” or “refer a friend and get rewards”?  More people click on the one that just says “refer a friend.” Keep it simple might be a cliché, but it is true.
  3. Step three: Should the blue “refer a friend” button be in the left margin or the right margin?  Right-handed users respond better when it’s on the right, and left-handed users are more likely to click when it’s on the left.  Most of your customers are righties (sorry, Ned Flanders), so keep the button on the right.

A/B Testing Is a Great Investment

A/B testing is relatively inexpensive, and it generates valuable data quickly.  Highly successful companies, such as Google, run A/B tests virtually all the time.  Your referral marketing campaign can benefit greatly when you study which variables get the best response from your current customers.  The simplicity and specific focus of A/B testing make it easy to avoid confusing results. The results of A/B tests show you exactly how to apply them.

Annex Cloud has a great success record developing referral marketing campaigns for businesses.  Contact us about testing your company’s referral marketing strategy today.

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