Often marketing strategies focus so much on attracting and netting new customers, that it’s easy to forget about the ones you already have. But with so many companies now making incredible use of creative referral and loyalty programs, it’s essential for businesses to consider rewarding their existing customers.
By implementing these schemes, you can improve relationships with your customers, offer them something new and exciting to build up your brand, improve word-of-mouth, and bring in new business too. So just how do you go about building an effective rewards program into your marketing strategy, and what are the benefits?
Recommended reading: Blueprint for an Automated B2C | ECommerce Lead Nurturing Campaign
This blog post is part of “Your Definitive Guide to Lead Nurturing “blog series.
Referral and loyalty programs – what are they all about?
Although there are key differences between the two, referral and loyalty programs are essentially both marketing tools to issue rewards for customer behavior and improve repeat purchases, brand reputation and create new business. In the case of referrals, customers are rewarded for referring a friend who becomes a customer and in loyalty programs, customers are rewarded for their repeat business.
If you want a prime example of a successful referral program, take a look at file-hosting service Dropbox. Started in 2008, the company began with just 100,000 users, but after 15 months with a referral scheme in place, their users soared to an unbelievable four million!
Loyalty programs too, have been known to not only make current customers happier with your service, but if your loyalty scheme is enticing enough, it may also sway customers away from competitors and net you some new business.
Why You Need to Implement a Referral and Loyalty Program
In a world full of online bargains and multiple spending options, now, more than ever, customers are choosing to put their money in brands they know and trust. Consumers are more savvy when it comes to advertising and instead are looking for recommendations and referrals before they feel confident about making their purchase.
According to Nielsen’s Trust In Advertising report, 84% of those surveyed said they found referrals to be the most trustworthy source when making a purchase. The same can be said of loyalty programs. Once a customer has purchased from you and received a service they are happy with, it stands to reason that they will be even more confident purchasing from you again, so encouraging repeat business is essential.
And it’s not just existing customers who’ll see the benefits. Sure, loyalty schemes will make your current customers happy, but they’ll also draw in new customers who see the benefits of spending with a company who appreciates their customers.
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Different Types of Loyalty Schemes
So just how do you encourage your customers to spend more with you (and possibly gain some new customers too)? Here are some ideas for enticing loyalty schemes:
1. Exclusive Discounts
One obvious way to encourage your existing users to spend again is to give them something extra when they next shop with you – you could consider a discount code for their next purchase, a free gift, or perhaps free shipping. This is probably the most simple type of loyalty scheme, and it does get results, but it is commonly used by lots of different brands, so you may need to get more creative if you want to stand out from the crowd.
2. Points Mean prizes
If you’re looking for a way to make your customers feel like they are part of their own exclusive club, a points system could be they way to go. Encourage them to earn more points by making more purchases – the more they accumulate the more benefits they receive.
Points could equate to discounts, but think about what your customers really want. Do they want first access to new products? Rewards on their birthday? Limited edition products, or simply to grow their status in the members program (i.e. going from a silver, to a gold member). According to Cone Communications, 83% of Americans want more products and retailers to be more charitable and support good causes, so maybe donating to charity is something you could consider to reward loyalty and create amazing referrals too?
However, you want to play it, don’t make it too complicated – your customers will be put off by anything that feels like too much hard work.
3. Big Benefits
Take a more proactive approach and ask customers pay to pay an up-front fee and receive benefits for that stated time period. Companies like Amazon Prime, who offer special delivery and streaming services to their Prime customers are top examples, but bear in mind that your offer will need to be pretty enticing to get customers to spend more upfront.
Different Types of Referral Programs
What does a referral program look like and which one is right for you? Well, that largely depends on the type of business you have, but here are some of the most common options:
1. Customer Referral
One of the most simple and popular referral types for online marketers is the customer referral. It works by offering your existing customer an incentive (such as money off their next purchase) in exchange for recommending your service to a friend or family member. It is generally regarded as the most trusted form for referral, as it comes from a known source and according to research by McKinsey, word of mouth recommendations generate more than twice the sales of traditional paid advertising. So, you customer gets a bonus, you get a new customer and your new customer gets a service they know is reliable – win, win!
Once you’ve decided you definitely need a customer referral program in your marketing strategy you need to work out what incentives will work best for your customers. Of course, cash and discounts work well – but again, it’s essential to make your referral scheme unique. Offering additional points if you’re running a concurrent loyalty scheme, customer exclusives and special experiences (such as access to unique online content) could also be really effective when asking your customers to make a referral. Dropbox offered more storage space to get their customers motivated – get creative and think about what your customers really want.
When you’ve settled on how you want to reward your customers for their referrals it’s just a case of installing an app. ReferralCandy comes with a 5-star customer rating and if you’ve created your online store using Shopify you can incorporate it into your business strategy for free. So, by spending nothing, you can start to reap the rewards of your customer referral scheme.
2. Affiliate Referrals
Rather than taking the personal approach, affiliate referrals rely on other affiliated businesses for recommendations. These then drive traffic to your website and the affiliate is given a cut of the profit if purchases are made.
3. Influencer referrals
These work in a similar way to customer referrals, but rather than using a personal link, you use one social media influencer to recommend your business to their many followers. This is perfect if you’re aiming at a younger market who you know have a lot of interest in influential online bloggers and vloggers – believe it or not one positive word from them can send sales through the roof. In fact, a Bloglovin’ survey revealed that 54% of female consumers purchased a product after seeing it being recommended by an influencer and 45% have followed a brand directly from an influencers post.
How to Implement Referral and Loyalty Programs
Now you know the value of referral and loyalty programs, you need now your existing customers to engage with them and help you build your business. Here are some things to implement in your marketing strategy now:
1. Send Out Email Campaigns
It’s a basic first step, but if you’re not doing it already, you need to harness your existing data and send out personalized emails pronto. Ask your customers what they like about your business, what they don’t, point them towards referral and loyalty schemes and encourage engagement.
2. Get Social
Can’t wait to start shouting about your referral and loyalty programs? Then look to your social media accounts. Use Facebook, Twitter, Instagram and Pinterest to spread the news about your new programs and create your own hashtag to encourage sharing and conversation.
3. Keep Your Marketing on Brand
Before you begin to plan your marketing strategy you need to ensure it is aligned with your brand. If you customers spend a lot more time on Facebook than Twitter, target them there. If they not very tech-savvy, keep you referral and loyalty programs as basic as possible, or if they can handle something a little more complicated, give them lots of hidden treats and rewards to hunt out. The possibilities really are endless.
When it comes to implementing your own referral and loyalty programs don’t just copy, what you’ve already seen other companies do – be unique. Think about what your customers really want from your business and how you can deliver it to them.
Perhaps they want exclusive access to new releases, maybe they want a little help when it comes to delivery or perhaps they want to save the world? Whatever their needs, you have to create your own unique marketing strategy that plays to their interests to make your referral and loyalty schemes valuable to both you and your customers.
About our guest author
Victoria Greene is a branding consultant and freelance writer. On her blog, VictoriaEcommerce, she shares tips, advice, and updates about marketing. She is passionate about helping brands enhance their digital strategy.