Who Sent You?

A cus­tomer-re­fer­ral pro­gram can be an easy, low-cost way to boost sales

Inc. (USA) - - LAUNCH -

Erin Con­dren knew her artis­tic day plan­ners might not leap out at on­line shop­pers, so she of­fered her best cus­tomers a deal: If they sent po­ten­tial busi­ness her way through links on their own web­sites, she’d give those loyal cus­tomers a credit to­ward fu­ture pur­chases each time a re­ferred cus­tomer cre­ated an ac­count. The ap­proach worked. To­day, 12 years af­ter launch, Con­dren’s epony­mous com­pany, based in Hawthorne, Cal­i­for­nia, has a cus­tomer-re­fer­ral pro­gram, with re­wards for both re­ferred and re­fer­ring cus­tomers, that gen­er­ated 24 per­cent of its $40 mil­lion in 2015 sales. Re­fer­rals may seem old-school, but Nielsen’s 2015 Global Trust in Ad­ver­tis­ing study found that 83 per­cent of con­sumers take ac­tion—in­ves­ti­gate a brand or buy some­thing—on rec­om­men­da­tions from peo­ple they know. Use these tips to mine gold from your cus­tomers’ real-life so­cial net­works. — ETELKA LEHOCZKY


Your cus­tomers don’t want to be sales­peo­ple, says Will Fraser, co-founder and CEO of re­fer­ral­pro­gram plat­form Re­fer­ral SaaSquatch—they want to be influencers. “Greed [for a re­ward] works to a point, but what re­ally mo­ti­vates peo­ple is gain­ing so­cial cap­i­tal,” says Fraser. “The value you’re re­ally giv­ing me is that I [as the re­fer­rer] have the abil­ity to look like an in­sider and give a friend or col­league an of­fer as a VIP cus­tomer.” With that in mind, give re­wards to both re­fer­rers and those re­ferred. Zty­lus, a Hous­ton­based maker of cell-phone cam­era cases and lenses, gives an ini­tial 25 per­cent dis­count to re­ferred cus­tomers and a 10 per­cent cash re­ward to re­fer­rers. The com­pany gets 10 per­cent of to­tal sales from re­fer­rals.


Com­pa­nies have had suc­cess with sim­ple cash pay­outs, per­cent­age dis­counts, and less con­ven­tional re­wards, but one sur­pris­ing fact holds true: Small re­wards per­form as well as large ones. Lug­gage maker Trunk­ster used to of­fer re­fer­rers $30 off, but it saw no de­crease in re­fer­rals when it low­ered that to $20. The most im­por­tant thing is to keep the of­fer sim­ple. “You want to make your re­ward easy to un­der­stand for the con­sumers so it en­tices them,” says Trunk­ster co-founder Gas­ton Blanchet. To re­ally catch the cus­tomer’s eye, go be­yond just dis­counts. Fraser says you should of­fer free prod­uct when­ever pos­si­ble. “If you’re a stock trad­ing app,” he says, “what’s go­ing to work there is credit to trade with.”


Un­for­tu­nately, many peo­ple are out to scam re­fer­ral pro­grams. To col­lect the re­ward, some buy mer­chan­dise and then re­turn it, re­fer imag­i­nary peo­ple, or even forge coupons. To de­ter them, give re­wards only when the re­ferred cus­tomer buys some­thing, not just for in­quiries. Put lim­its on ev­ery as­pect of the re­fer­ral. At first, Con­dren didn’t limit how much credit her cus­tomers could ac­cu­mu­late, and now a few have more than $ 10,000 worth. At Pavlok, which mar­kets an elec­tronic bracelet that helps break bad habits, CEO Ma­neesh Sethi is re­vis­ing the com­pany’s six-month re­turn pol­icy to pre­vent buy­ers from col­lect­ing re­wards and then re­turn­ing the prod­ucts. “We screen for peo­ple with mas­sive amounts of re­fer­rals,” he says.

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