Customers have the ability to drive the stickiest and highest quality leads. But customers have a lot going on on a day-to-day basis. So how are companies keeping each customer’s head in the referral game? They are providing irresistible referral incentives that motivate customers to dominate the referral play. This make understanding the type of referral incentives that drive success vital to your referral strategy.
By analyzing current companies’ customer referral incentive practices including the type of referral incentives offered, the average amounts, and the highest converting amounts, benchmarks were created to inform customer referral incentive practices and measure against.
The referral incentive data sighted here comes from the new data report, The State of Business Customer Referral Programs. These benchmarks are a result of millions of customer referrals made in business customer referral programs run on Amplifinity’s referral software.
What type of incentives are companies offering customers?
One of the hardest parts of managing successful referral program is determining what type of reward will motivate advocates to take that leap and refer. And while many who start a referral program want to start small with merchandise, the data shows that cash is still king with:
- 52% offering gift cards
- 29% offering check
- 5% offering bill credit
- 5% offering merchandise
The majority of companies that used gift cards utilized them digitally. Checks, which came in second, were normally used when customer referral programs had variable reward amounts or offered a percentage of revenue.
But you may ask that if cash is king why did bill credit tie for last place with merchandise? Both bill credit and merchandise place an extra burden on the business to fulfill. Gift cards and checks can be automated so the burden is taken off the business. These are also both monetary rewards that go straight back to the customer for them to use at their own discretion as opposed to bill credits which can be easily overlooked on a statement.
What is the average amount of referral incentives companies are offering?
Once the type of incentive is established it’s time to dive into the incentive amount. The amount of the referral incentive companies were offering ranged from $20 to $2,500 with:
- 82% offering $41 – $100
- 2% offering $20 – $40
- 2% offering $101 – $1,000
- 4% offering $1,001 – $2,500
The overall average reward amount was $111. While $111 can be considered high for a referral payment when compared to the common cost per acquisition of a new customer it is actually quite budget friendly. Looking at the 82% majority who offered $41 – $100 it might be deceptive that many are offering the lower end of the spectrum but most were much closer to $100 than $41.
What referral incentive amounts are most successful?
While it is always good to see the types and amounts of referral incentives other companies are offering, it means very little unless you can see the success of these incentives. The conversion rate of incentive amounts from leads to deal was:
- 13% for $41 – $100
- 9% for $20 – $40
- 6% for $1,001 – $2,500
- 5% for $101 – $1,000
When looking at these conversion rates, the question is that if incentives are such an import part of generating customer referrals than why do the higher incentives have lower conversion rates? The reason behind this is that larger deals require more work and are more highly rewarded but due to the nature of a larger deal they consequently have a lower success rate even when more profitable than smaller deals. This data doesn’t show that lower reward will get you better result, but that the referral incentives need to be in proportion to the size of the deal and the amount of work it will take.