Who Sent You?
A customer-referral program can be an easy, low-cost way to boost sales
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
MAKE YOUR CUSTOMERS BIG SHOTS
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.
SIZE DOESN’T MATTER (MUCH)
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.”
LOOK OUT FOR SCAMMERS
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.