You’ve heard of the boiling frog theory, right? Put a frog in boiling water and it’ll jump right out. But put it in cold water, then slowly bring that water to boil, and Mr. Frog will happily sit there until he’s cooked to death.
It’s completely wrong, of course. Put a frog anywhere and it’ll jump out – that’s just what frogs do – but, as a metaphor, the boiling frog theory’s pretty helpful. Because, as people, we act like boiling frogs all the time: unaware that the circumstances surrounding us are getting more urgent, but failing to do anything about it until it’s too late.
And that’s exactly what’s happening in the digital marketing space right now. The water’s been getting steadily hotter and hotter for years now, as old tactics like SEO, PPC, affiliate and social are generating worse and worse results. But no one’s jumping. You’re not jumping. And, with all honesty, you should be.
Like so many brands around the world, you need to jump towards referral marketing and add a first-class refer-a-friend program to your marketing mix – and quickly.
Now, you might have already entertained the idea of launching a refer-a-friend program. So here are just six reasons why you should make the leap toward referral marketing.
- The average cost of acquiring a new customer is skyrocketing, and while it varies wildly between industries – it can be as low as $10 for retail and as high as $315 for banking or telecoms – one thing’s consistent: that cost is rising and fast. Meanwhile, competitive pricing and high acquisition costs mean lifetime value remains static at best, meaning that your margins are being squeezed to the point of crisis. Here at Buyapowa, our clients’ referral marketing programs drive down CPAs by up to 80%, maximizing the margin from each new customer. If you’re finding that new customers cost more to acquire than they’re worth in year one, you absolutely need to catch up with the likes of T-Mobile, AXA and Sky by launching a referral program.
- Traditional acquisition channels often bring in the wrong kind of customer, like window shoppers or bargain-hunters who shop once and never return unless there’s a deal to exploit. But that’s completely reversed when it comes to referral. Because it’s not a banner ad or a short-term deal that gets the customer interested – it’s a trusted friend – loyalty comes as part of the package.
- Now, loyalty’s not the only benefit. Referred-in customers are also much more likely to convert and, when they do, they tend to spend significantly more than customers acquired by more traditional channels. As recent research from from Rachel Gershon of UC San Diego and Zhenling Jiang of the University of Pennsylvania, which analyzed the anonymized data of 41.2 million customers of a large US mobile brand over a ten year period, found that referred-in customers were 32% more valuable based on their increased spending alone. However, by failing to take into account that referred-in customers are themselves more likely to refer in new customers, we risk underestimating their value by a third.
- Your customers are demanding it. According to our Referral Codebreakers research, eight out ten customers expect to be able to refer their favorite brands. But, incredibly, some brands still don’t let them. That’s a risky strategy because, when a customer who’s full of goodwill and energy is denied the opportunity to refer their friends, all that advocacy and potential new business is quickly turned into bitterness and disappointment. Simply put — with consumers eager to refer but no means of doing so beyond generous word-of-mouth, a rich sales channel goes to waste.
- Now, referral marketing’s come a long, long way from the days of Uber and Dropbox. Advances in technology mean it’s now possible to offer omnichannel referrals, so your customers’ friends can transact online, on mobile, over the phone or even in person – all while maintaining the vital tracking that underpins the referral process. Meanwhile, next-gen features like intelligent rewards are becoming increasingly commonplace, allowing smart brands like The AA, EDF and Koodo Mobile to offer different rewards and incentives depending on the type of product or service purchased, or even the demographic and behavioural segments of the referrer and their friends. So, even if you are running a referral program, it’s time to ask yourself whether it’s doing everything it possibly can… and, if not, why not?
- Referral can be incredibly inexpensive, provided you do it properly. Some brands make the critical error of attempting to develop a solution in-house. Advanced features are expensive to build and dedicating a development team to build a solution from the ground up takes crucial resources away from other areas — and we haven’t even gotten to constant debugging, patching and optimisation. Now, building a solution in-house is perfectly fine if you have the time and money to do so. But, the truth is, shy of having infinite resources and development time, no company can do everything, and it’s crucial that you allow yourself to focus on what you do best and makes you worth referring in the first place.
And that final point is key: there’s a lot of reasons why you need to start doing referral marketing.
Seriously, you need to.
But like anything, there is little point in doing it unless you do it properly. Because, just like SEO, PPC, affiliate and social – referral only yields scalable results if you do it right. And the quickest, most affordable way to do that is to work with people who know this stuff inside out.
No names, but we’ll just leave this get in touch link right here…