Here are 5 best practices for your customer referral program to effectively engage their networks and send more sales your way.
Recession-Proof Your Business with a Scalable Referral Marketing Program
As the US braces for recession, should your business be worried? How referral programs can help you survive, and even thrive, in times of economic uncertainty.
“The name on everybody’s lips is gonna be… recession!”
- Renée Zellweger in an alternate-universe cast of Chicago, maybe.
It’s the age-old question heard around the water cooler; will they or won’t they? No, I’m not talking about Rachel and Ross (spoiler alert: they did), I’m talking about whether we’ll face the ‘big R’ -- recession. The US economy sure looks like it’s headed in that direction given the high inflation and slowing customer spending being reported. Sure - we still have no idea just how deep we might dip, but if we marketers have learned anything after the COVID-19 pandemic, it’s that literally anything could happen at literally any time. There isn’t a boardroom in America that isn’t thinking about cutting budgets and bracing for impact.
And - even while faced with soaring digital ad costs, dwindling organic reach options on social media, and increasing online competition, every marketer is about to be tasked with solving the same problem: how to do more with much, much less. So, how does your brand survive (or even thrive) in a recession? By mobilizing your happiest customers to drive new customer acquisition and meaningful sales revenues through referral marketing programs.
A Wharton University study showed that referred customers can increase your profit margin by 25%. The same study found that consumers trust their friends’ recommendations a stunning seven times more than conventional advertising and that 83% of US online shoppers’ purchasing decisions were influenced by friends’ social media posts.
While those stats are impressive on their own, the biggest impact of referral marketing in a recession is the predictable ROI and the rapid growth potential; it costs less to acquire customers who spend more, and whose brand loyalty makes them a more profitable customer over their lifetime. During the first wave of COVID-19 lockdowns, referrals grew by 425% - shattering perceptions of the power of referrals. Prior to the pandemic, just 3% of global e-commerce decision-makers agreed that referral marketing is a channel that can provide the best ROI. Since then, the number of those who agree has grown to 49%
High, Predictable ROI
Compared to most conventional marketing channels, leveraging your existing customers to find new ones is significantly more cost-effective. Ambassador’s customers see anywhere from the 34x ROI (that one of our travel industry clients earned) to a remarkable 1035x return on investment (that one of our wellness industry clients achieved). Compared to the standard 3:1 LTV to CAC ratio, referral marketing has the potential to achieve growth far beyond expectations at a more than favorable return.The numbers speak for themselves. Just look at these actual results from Ambassador clients across multiple different industries:
Not All Metrics Are Created EqualAnd neither are all customers. In fact, referred customers eclipse non-referred ones in virtually every conceivable way. Referral programs generate customers that are 4x more likely to convert at a rate that is 5x faster than other channels. And, referred customers are more loyal with a 37% higher retention rate and are 18% less likely to churn. But the best part? The lifetime value (CLTV) of referred customers is 16% higher than other customers. To recap; faster sales, loyal customers, and higher spending per customer. What’s not to love?
Referred Customers are More Likely to Refer Their FriendsReferral programs have the potential to increase overall revenue by 10% to20% because of the nature of the program - referring customers invite an average of 2.68 people, and those referred customers are up to five times more likely to enroll in your referral program. It’s the Tesla coil of customer acquisition - incredibly powerful and absolutely renewable. And, the more happy customers you enroll, the bigger your return grows.
Facing Inflation, Cash is King
Free money in this economy? Yes please, thankyouverymuch! Rising inflation is rearing its ugly head on US consumer spending power. If you've been to a grocery store or gas station lately, you know exactly what I mean. Americans have had to find ways to either stretch their dollars thin or cut their spending. The idea of working multiple jobs isn't new, and many are leaning in this direction due to these factors. Some are even as extreme as this guy.
Many people are supplementing income by leveraging their communities for referral marketing programs. Even before prices started to rise, a whopping 36% of U.S. workers were actively participating in the gig economy - and that number is rising, rapidly. Referral programs are turning customers into nano and micro-influencers and with the right cash incentive, you’ll have your happiest customers singing your praises all over the internet.
To learn more about how to successfully launch your own referral marketing campaign, check out our free guide to building a world-class referral program here or request a demo to speak with one of our referral marketing experts.