Top 5 must-dos for a successful referral program

Organizations looking to develop a referral program have a lot to consider.  Everything from finding the appropriate technology to determining the best date for launch to figuring out their reward structure, it all takes deliberate thought to make sure the right decisions are made. Of all the moving parts to consider, following these top five must-dos will ensure your program is a success:

1)  Devote the time, money and resources needed to set the program up right the first time.

Companies sometimes think launching their referral programs as pilot studies and then growing them into more robust programs later is the way to go.  Typically this is because they either don’t have the IT resources available to create important integrations, or they don’t have complete buy-in from corporate. This is a mistake. Referral programs need to be designed and implemented from the get-go to be full-fledge functional and efficient tools for the audiences they serve.  Approaching a referral program with “one toe in the water” will net potentially inconclusive and often mediocre results.  If the referral program is going to be an integral part of the enterprise, then find a way to incorporate all the parts of the enterprise necessary to ensure program adoption and success right from the start.

2) Understand IN PRACTICE how leads are currently making it into the sales funnel.

A potential customer came in with an existing referral program that needed improving.  Their executives explained how the sales process worked: sales reps were currently using a home-grown referral database to enter leads and then managing those leads using their CRM.  But the home-grown referral database was unsophisticated and the data proved hard to track referral marketing success; they needed a more streamlined approach whereby the sales reps could simply enter leads into the referral program and have them sync to the CRM, updating automatically as the sale progressed.  After much hard work, the customer launched a cool new referral platform that met their requirements.  The result? Their sales leads decreased by half.  Why? Because the business did not understand how their sales team actually used their CRM.  As it turned out, reps had never utilized the home-grown referral database at all; instead, they were entering the leads directly into the CRM. By developing a new process to “streamline” things, they had inadvertently introduced a whole new step in the sales process.  This is not an uncommon discovery for companies when they start to dig into the details of how their sales processes work.  Before considering a referral program, companies need to truly understand how their sales team interacts with the tools they are provided when it comes to current customers and potential leads.  There are ways to successfully integrate referral programs into CRM systems that can streamline the work being done and increase ROI without introducing a change in the organizational culture or sales process.

3) Make the call-to-action for customers crystal clear.

Drop-offs in referral program participation often occur in two spots:  the registration point for customers, and the call-to-action point for leads.  Why?  Because customers may be drawn to look at what the referral program is offering, but at the point they need to make a decision to join, if the message is vague or cumbersome, they are less likely to complete their registration.  Similarly, leads may click through the emails or social posts from their friends, but if they can’t tell what they get for providing their personal information, the drop-off rate will increase.

A company with a successful referral program used the following headline in their recruitment emails to customers: “Get a $20 card and 1000 reward points when you get your friends to buy our product.”  In the body of the email, there were three steps to achieving the reward.  That’s it.

The message is simple: 1) Tell your customers what you want them to do. 2) Tell them how to do it. 3) Tell them what they will get for doing it.

4) Promote the referral program everywhere customers go, and promote it constantly.

Research on referral program success rates shows that broad promotion of a company’s referral program is a significant step in getting customers to refer multiple times.  On average, twenty percent of customers will register for the referral program.  A significant proportion of those who register for the program will only make one successful referral during the lifetime of the program.  Customers who have a positive experience with the referral program are twice as likely to successfully refer again, and one-fifth of any company’s customers who register for their referral program will refer successfully multiple times.  One of the key values customers who refer successfully over and over bring to a company’s sales process is their knowledge of others who are in the market for a particular product. However, timing is critical. If a current customer gets a referral program invitation email from a company but has no referral in mind, the email will be ignored.  However, weeks later, the same customer may identify a referral and will need to be able to easily find a link to the company’s referral program, preferably on the website or through the online account pages.

On average, the number of days between successful referrals for customers who will refer more than once is sixty-three.  Companies must advertise their referral program everywhere their customers go, and promote it constantly through as many channels as possible.  Without frequent and continued promotion, referral program success is left completely to chance.

5) Follow FTC compliance and IRS tax laws.

Companies with referral programs need to be aware of the various laws and regulations around solicitations (CAN SPAM), promotions, and rewarding.  In an earlier blog post I talk about CAN SPAM, but there are two other regulatory considerations companies need to keep in mind:

First, the Federal Trade Commission recently passed a law under its 16 CFR Part 255, “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”   The regulation states if a person makes a post on any social network (such as Facebook, Twitter, Instagram, Pinterest, or LinkedIn) and stands to gain a profit from the endorsement or testimonial, he or she must at a minimum include a statement such as, “This is a paid endorsement,” or “#paidad.”  Your referral program Terms and Conditions should include this language so you can be certain your program is compliant with the most current statutes and you are protected against legal action.

Second, depending on the amount of the referral reward and the rigor it takes to achieve it, companies need to consider how much money any one customer could potentially earn in a calendar year.  The reason for this is simply the IRS. If a customer receives over $599.00 per year in rewards, to be compliant with US tax laws the company who paid those rewards must collect a W-9 from that person and submit a 1099 to the IRS on the customer’s behalf.  There are referral program vendors that will track 1099 information and disseminate the paperwork as needed to be certain you stay compliant with US tax laws. Be sure to ask if these are features of their platform when talking with a potential referral program vendor.

Questions? Email me at Kmcmurphy@amplifinity.com

Photo Credit: Freedigitalphotos.net

What is brand advocacy?

 

Why CAN SPAM is key for referral marketing

What is CAN SPAM?

CAN SPAM is an Act that was passed by the Federal Trade Commission in 2003.  It covers all commercial messaging—electronic, bulk mail, and otherwise.  It is intended to limit promotional advertising to customers, including those who are current customers of any business.  Everyone who uses marketing automation to create referral campaigns needs to understand CAN SPAM to prevent their businesses from being subject to blacklisting by organizations such as the Spamhaus Project.  The Spamhaus Project is an organization that blacklists IP addresses and diligently keeps watch over the Internet to police and report companies that are guilty of sending spam communications.

Why should you care?

Companies who have products or services to sell and who use email as a main source of advertising have good reason to be concerned about the CAN SPAM Act and the Spamhaus Project.  However, there is a fine line between fearing the blacklist and limiting the functionality of referral marketing programs so severely that companies end up wasting time and money, and losing valuable referral capabilities.

If you are using marketing automation tools to help you set up your campaigns, be sure to review compliance rules so you know you are working within the CAN SPAM guidelines.  However, be careful not to overcomplicate the issue.  Instituting rules for a campaign that further limit the potential audience, like only allowing potential customers to receive referral emails one time-ever-during the lifetime of the program would be taking CAN SPAM a bit too far.

What is the risk?

Potential customers may have multiple friends who would refer them, and they may choose to accept one referral over another for various reasons:  Referral emails can get overlooked.  Potential customers may trust one referrer over another.  They may not be in the market for a particular product or service the first time they receive an email, but at another date and time they may be ready to buy.  These are all great reasons to keep the emails flowing, within reason.

There are many ways to prevent being flagged by CAN SPAM.  If you are talking with a referral program vendor, ask them what defaults they have within their email functionality to help avoid being blacklisted.  If you are using your own marketing automation tools to create a campaign, make a content and compliance checklist so you can rest assured you will never be an accidental spammer!

Questions? Email me at Kmcmurphy@amplifinity.com

 

Photo Credit: Freedigitalphotos.net

What is brand advocacy?