A Guide to the Psychology of Referral
Discover how to apply behavioural science to harness the power of your brand fans.
A Guide to the
Psychology of Referral
How to apply behavioural science to harness the power of your brand fans
Understanding these principles is your own marketing cheat code.
It’s an unfair advantage. A way to figure out your customers’ motivations, behaviour, and the reasons they refer.
Read on to discover the key psychological principles that affect your referral programme, as well as how you can successfully apply them to your campaigns, including:
- What motivates your customers
to refer a friend?
- Caldini’s 6 weapons of influence
(and how to use them)
- Nudge Theory
- Referral checklist: putting psychological principles into action
Every day, underlying psychological principles
impact the decisions your customers make.
Part 1.
What motivates your customers to refer friends?
What motivates your customers to refer friends?
Through delivering more than 4.5 million referrals, we’ve distilled referral marketing into the exact science of Referral Engineering®.
During this time we’ve picked up an in-depth knowledge of the psychological principles that can either compel your customer to refer, or stop them in their tracks.
As we’ll explore, successful referral schemes go beyond incentives. They understand the deep pull of social rewards. They consider the complexity and delicacy of the social relationships they’re trying to tap into.
Because, ultimately, successful referral marketing relies on connection.
More than features, more than benefits, we are driven to become a member in good standing of the tribe. We want to be respected by those we aspire to connect with, we want to know what we ought to do to be part of that circle."
Seth Godin
Human beings are inherently social - we crave connection.
We’re hardwired to seek out community and become part of “our tribe”. Our appetite for kinship means we’ll accept the risks involved in taking a social action if we can anticipate the recognition. We’ll take a leap of faith.
But there’s a limit. Because we’re also inherently scared of rejection. If the risk of not getting a positive response from our social action outweighs the potential reward, our self-preservation kicks in. We go into our shells, reluctant, more inclined to stay quiet.
The choice between taking a leap of faith, or retreating into our shells, is based on one thing. Trust.
It all comes down to trust
93% of customers trust recommendations from friends and family
Kantar, 2020
People most trust brand information from their friends and family
Whether we’re aware of it or not, any time we weigh up a social action, we have an internal narrative. It goes something like this:
"How big is the risk of this action being rejected?" vs. "How confident am I that this action will be recognised and rewarded?"
And it’s this exact psychological dynamic that’s at play in referral marketing. After all, referring a product or service among friends is an act of social belonging, reciprocity and trust.
That’s why the attraction of refer-a-friend-programmes goes far beyond financial benefits. They tap into a much deeper human need for social recognition and belonging. And that’s why understanding your customers’ psychology, and tailoring your referral campaigns accordingly, is so important.
Psychological balloons & weights
We like to look at the psychology behind a customer's propensity to refer as balloons and weights.
Two things play a decisive role in increasing the chances your customer will commit to a referral programme: referrer incentive and social capital. These are our psychological balloons. They trigger positive emotions for your customers.
On the other hand, there are also two factors that can decrease your chances of a successful referral: effort required and social risk. We call these psychological weights. They trigger uncertainty and doubt in your customers’ minds.
The more you can inflate the psychological balloons for your customers, while lightening the psychological weights, the more likely they are to refer your brand.
Referral incentive vs effort required
Referrer incentive:
do I really want this?
Your incentive needs to be something your customers really want. It has to be worth their while. You can entice customers to refer with a range of rewards – from discounts and third-party gift vouchers, to loyalty points and prize draws.
You can even use your incentive to emphasise your brand values, like meal delivery service allplants, which vows to plant a tree for every successful referral.
Unsurprisingly, discounts are popular and usually perform well. But it’s by no means a case of one-size-fits-all. Your most compelling referral incentive will depend on your customer segments, as well as factors such as seasonality and stage in the customer lifecycle.
allplants plants a tree for every successful referral
Once you find an incentive that drives customers to refer, you can drill deeper; experimenting, for example, with offering £10 off versus 10%.
The only sure-fire way to know which incentives work well with your customers is to test. Start with a hypothesis about the kinds of offers that could work for your audience. Then, for the best results, segment your audience and run strategic A/B tests by cohort for each to optimise your conversion offer.
The bigger, the better… right?🤔
Airport lounge provider No1 Lounges experimented with a £10 versus £7.50 incentive for referrers and their friends.
Much to its surprise, it discovered the lower discount acquired 29% more new customers and generated 42% more revenue.
A lower discount proved more effective for No1 Lounges' referral programme
PrettyLittleThing's referral reminders increased acquisition by 9%
Effort required: how easy is it to get this reward?
Whether we’re on or offline, we’ve become accustomed to convenience. So, today, anything that creates extra effort or hassle is a big barrier to commitment.
This gives you a simple but significant takeaway: the quicker and easier you make it for customers to get your offer, the much more likely they are to share it.
This means serving up a smooth user experience is non-negotiable. How many steps does your customer need to take to sign up? Are you asking for data you don’t really need? Streamline each step to make life convenient for your customers (and boost your referrals in the process).
Amplify performance across your martech stack
Make it even easier for customers to introduce friends by integrating your referral programme into your martech stack.
When fashion retailer PrettyLittleThing integrated its customer engagement platform Emarsys with Mention Me, its automated referrer reminder emails improved performance almost instantly. 9% more referees bought for the first time and average order value went up by 4%.
Read on to learn how social capital and risk can influence referrals for your brand.
Social capital vs social risk
Social capital:
will this make me look good?
While incentives and smooth experiences are important, social capital – and connection – is the beating heart of any successful referral campaign. If your customers are confident they’ll come out of the interaction looking good (while getting the added bonus of a reward), they’re likely to share your offer.
You can increase your campaign’s success by reinforcing these positive feelings throughout your copy, messaging and design of the referral journey. Put yourself in your customers’ shoes and play up to their inherent desire to look good.
Social capital vs social risk
Social risk: will this be received negatively?
If it isn’t crystal clear how your offer will help your customers increase their social capital, they’re liable to start considering the social risk.
These feelings of risk, characterised by tension and reluctance, can outweigh the rewards of recommending your brand and decrease your conversion rate. They manifest themselves in your customer’s mind through thoughts like:
The best way to shake off social risk?
Don’t let it cross your customers’ mind in the first place. Create such a clear and compelling offer that your customers won’t doubt themselves for a moment.
Turn the page for psychological principles you can use to fill your campaigns with emotion and harness the power of social capital.
Social capital should sit at the
heart of your campaigns
To create successful referral marketing campaigns, you have to hit your customers’ sweet spot.
First, this means finding an enticing referral reward that grabs your customers’ attention. But, even more crucially, you need to craft compelling messaging that sows the magical seed of imminently increasing social capital in your customers’ minds.
Social capital is the most influential psychological trigger to referral success. But it’s often overlooked by marketing teams distracted by the mechanics of an incentive and the user journey around it.
While undoubtedly important, these elements miss out on the true heart and soul of the offer. The human connection and emotion-fuelled psychological factors that convince customers of its socially beneficial outcomes.
Part 2.
Cialdini's 6 Weapons of Influence
Cialdini’s 6 Weapons of Influence
We’ve looked at the motivations behind why your customers might refer friends and family. But how can you make sure your campaigns convince customers to take action and share your brand?
The best referral marketing relies on a mix of persuasive ingredients to convince and compel us to act. In this section, we’ll cover some key psychological principles that you can use to do just that – including persuasion, positive reinforcement and compelling calls to action.
We’ve drawn inspiration from the OG of influence, Robert Cialdini. Cialdini’s book, Influence: The Psychology of Persuasion, may have been published back in 1984, but it remains a must-read for any marketer looking to better understand their customers’ motivations.
Let’s look at Cialdini’s six “weapons of influence” – and how you can apply them to your referral marketing.
Key takeaway for your refer-a-friend programme
Always clearly communicate the mutual benefits of your referral reward. If a person knows the friend who referred them will also benefit, it makes them more likely to buy.
That’s something this Ted Baker referral offer taps into, highlighting the win-win of a successful referral.
Ted Baker promotes the benefits for both referrers and their friends
People like to return favours. Cialdini showcases this principle by citing an infamous social experiment.
In 1974, sociologist Phillip Kunz sent out Christmas cards to 600 complete strangers. Despite not knowing a single recipient, Kunz received over 200 (largely enthusiastic) Christmas cards in return.
So what gives? Why did so many people respond to a total stranger? In short, it’s down to the rule of reciprocation. We’re conditioned to follow the rule of “give and take”.
We are obligated to give back to others, the form of behaviour that they have first given to us. Essentially thou shall not take without giving in return."
Robert Cialdini, psychologist
Key takeaway for your refer-a-friend programme
Don’t be afraid to ask for repeat referrals. When a customer commits to referring your brand, the rule of consistency and commitment means they’re more likely to refer again.
Why? Because doing so reinforces their belief that the initial referral was a wise decision. Better yet, referred customers are 5x more likely to refer onwards, creating a powerful cycle of growth.
In this example, jewellery brand Monica Vinader offers bigger rewards for customers the more friends they refer.
2. Commitment & consistency
People want to be seen as consistent. It stems from a desire to align our external behaviours with our inner beliefs and values.
So, when we make a promise, we feel obliged to follow it through. When we make a decision, we like to feel like that was the right one. And when we commit to something, we like to justify it.
This rationalisation is why when someone does someone else a favour, they tend to view the recipient of their good deed more favourably after the fact.
Referred customers are 5x more likely to refer onwards
Monica Vinader offers tiered referral rewards
Human beings are tribal by nature. If we’re uncertain how to act, we take our cue from those around us. It’s known as the bandwagon effect.
To demonstrate just how strong this urge is, Cialdini references an experiment where one or more people in a public setting suddenly fix their gaze up into the sky.
Steadily, a growing number of bystanders would join them, looking up to see what the others were staring at, until the point where crowds would form… all looking at nothing in particular. Social proof in action.
Did you know...?
We integrate with both Trustpilot
and Feefo so you can drive more referrals and positive verified reviews for your brand
Key takeaway for your refer-a-friend programme
Look at ways you can instil social proof in your campaigns to nurture customer advocacy. You could use customer quotes, feature your overall review score (see Honest Brew’s example on the right), or display the number of satisfied customers who’ve taken up your offer so far.
Honest Brew's referral offer includes its Trustpilot score
To demonstrate his next rule of influence, liking, Cialdini turns to Tupperware parties. These get-togethers were engineered by a Tupperware sales rep and acted as an opportunity for friends and neighbours to share, discuss and endorse Tupperware products.
Party-goers proved far more likely to buy Tupperware because it was being praised by people they knew and liked.
These shindigs teach a simple lesson – we’re prone to buy a particular product just because we like the person selling it.
Key takeaway for your refer-a-friend programmes
Remind your potential new customers of the relationship between your brand and their friend. Prominently feature the referring friend’s name to instantly associate their potential purchase with positive feelings toward that person. These feelings are more powerful than the emotions even the most brilliant brand can inspire alone.
A customer at Bought By Many gets their reward after entering their friend's name
Key takeaway for your refer-a-friend programme
The seal of authority from your referrers is a powerful tool. Using testimonials, quotes and case studies are all proven strategies to boost your conversion rate.
Try including any positive feedback you’ve collected from the referring friend in the referral offer page (E.g. 'John gave this product 5 stars').
Ultimately, selling your product is about building trust. And one of the primary ways to do this is by positioning your brand as an authority.
Cialdini writes that we all have some inherent sense of duty to authority. As a result, people tend to obey authority figures.
Building an authoritative identity relies on demonstrating your professional credentials and expertise. But authority can also be earned through recommendations from other trusted parties or people.
The less of something there is, the more you want it. This is scarcity, a principle used by the majority of e-commerce sites for one reason: it works. From flash sales to limited product runs, the principle of scarcity taps into our fear of missing out.
Sites like booking.com use scarcity to tell customers how many people have viewed a hotel, how many have booked, and, vitally, how few rooms are left. Tactics like this heighten anxiety we could miss out and generate a sense of urgency to spur us on to take action.
A recent Experian report found that compared to the average marketing email, those driving a sense of urgency resulted in 2x higher transaction rates.
Key takeaway for your refer-a-friend programmes
In referral, scarcity can be used in several ways. From restricting how long a new customer has to claim their referral reward, to limiting how long a referrer can share that offer.
You can also use scarcity during promotion periods when you increase or change the referral offer for a limited period (a week or a weekend, perhaps) to drive activity.
On Black Friday, for example, luxury beauty brand Charlotte Tilbury ran a time-limited promotion giving referring customers and their friends the chance to win £200 worth of products.
Charlotte Tilbury runs a time-limited referral promotion for Black Friday
Read on to learn how you can apply Nudge Theory to convert more customers into referrers.
Seemingly small nuances in language, tone and design are proven to drive outsized changes in human behaviour.
And this subtle art of influence is actually the most reliable referral conversion strategy at your disposal. But how can you use it to influence your customers?
It starts with understanding human behaviour. Specifically, the way that unconscious habitual thought processes shape our decision making.
Once you have a grasp on these principles, you can start applying them to “nudge” your customers’ decisions in the desired direction.
Let's take a look at the small changes you can make to your referral campaigns to drive big results.
The starting point: heuristics and cognitive bias
Our lives are non-stop. We’re bombarded with information and choices every day.
So much so that it’s impossible for us to consciously think about every decision we make. Instead, we rely on shortcuts to help us make sense of things without getting too overwhelmed in the process.
These shortcuts have been crucial to our survival as a species (see lion = danger; run away; don’t get eaten; winning).
But in today’s world, our hardwired logic can often mislead us into what behavioural economics calls cognitive biases: an inflated or inaccurate perception of the reality of a situation.
In behavioural economics, these quick-fire mental rules of thumb are dubbed heuristics. They are snap judgements that might not always prove to be accurate or sensible.
There are a number of defined heuristics, but we’re going to start by focusing on one: anchoring.
Anchoring
Anchoring is a renowned heuristic that can both positively and negatively shape decisions. It’s the concept of mentally steering the value of something, based on an initial benchmark (or anchor). Let’s look at a couple of examples to see anchoring in action.
Anchoring and perceived happiness
A study asked a group of students two questions: ‘How happy are you?’ and ‘How often are you dating?’. When asked in this order, the correlation between the two questions was low. But, when reversed, the correlation was much higher.
Even though all participants were asked the same two questions, those who were asked about their dating activity first anchored their assessment of happiness in relation to their love lives.
Anchoring and pricing
Customers’ purchasing decisions can be heavily influenced by how the price has been anchored within a set of choices.
For example, people are far more likely to make a higher charitable donation if the options presented on a web page range from £100 up to £5,000, than if the options range from £50 up to £150. And anchoring works in commercial situations too.
A famous marketing myth,
rooted in anchoring💍
Perhaps the most famous marketing example of anchoring in pricing is De Beers’ campaign that suggested spending two months’ salary on an engagement ring.
This marketing myth now seems to be an accepted benchmark – one that’s proved costly for countless romantics ever since.
The power of anchoring
In Arizona, a set of estate agents were given a tour of a home, along with its information pack. They were all given the same information, apart for one thing. Half were told the list price was $65,900, the other half that it was $83,000.
The agents with the lower list price estimated the value at $67,811, while those given the higher anchor said the property was worth $75,190. An 11% swing among a group of trained professionals, with no emotional attachment to the property.
Nudging people in the right direction
Nudge (verb): To push slightly or gently in order to attract attention
Once we understand our susceptibility to mental shortcuts and habits, we can start to use them to shape and influence decisions.
This is where we get the term “nudge theory”. The renowned book Nudge by Thaler and Sunstein shot to prominence discussing this subject in 2008. Since then it’s had a huge influence on governments and businesses around the world.
Nudge theory argues that positive reinforcement and indirect suggestions can influence a person’s motives, incentives and decision-making more effectively than direct instruction, legislation, or enforcement.
We prefer to be cajoled, rather than coerced.
Nudge theory in action ✉️
The UK government realised that making small tweaks to public-facing communications based on indirect suggestions could have huge positive impacts on people’s behaviour. They set up a Behavioural Insights Team, better known as the “nudge unit”, to put these tweaks into action.
The nudge unit’s tests placed an emphasis on implied instructions rather than explicit orders. The nudges have been used across pensions, unemployment, army recruitment, charity, adult education and much more.
One example saw the unit play on the principle of conformity to forward the payment of £30m a year in income tax. So how did they do it? A simple letter reminded recipients that most of their neighbours had already paid.
“Nine out of ten people with a debt like yours, in your area, pay their tax on time. You are in the minority...”
The letter emphasises that people who don’t pay their taxes are in a minority in their area, nudging them to avoid the embarrassment of not doing “the done thing”. Governments around the world have since been using this tactic to great effect.
Using nudges in referral marketing
There are two types of nudges popularised by Thaler & Sunstein that are particularly relevant to your referral marketing: framing and herd behaviour.
Framing
Heuristic concept: Contextualising a concept or issue can dramatically influence decision-making.
Example study: A doctor says, “Out of the 100 patients who have this operation, 90 are alive five years later” vs. “Out of the 100 patients who have this operation, 10 are dead five years later”.
Even though the odds are exactly the same, the number of patients agreeing to have the operation in each scenario are radically different. The framing makes all the difference.
Key takeaway for your refer-a-friend programme
There are multiple ways of framing an offer to include some nudges.
Skincare brand Paula’s Choice, for example, A/B tested two call-to-actions inviting customers to refer friends: ‘Give 7.50 off’ versus ‘Share this offer’. Despite the rest of the offer being identical, it found the former increased both the number of customers sharing and the number of these shares converting into new customers.
Try different ways of framing your
referral offer, ensuring that its value
is communicated in the most
compelling way.
Paula's Choice tested different call-to-actions in its referral offer
Heuristic concept: We’re tribal by nature, so we seek out opportunities to conform. We’re easily influenced by what others say and do. This makes social influence one of the most effective ways to nudge behaviour.
Example study: A student is asked to participate in a puzzle alongside five others (who are all secretly collaborators in the study).
When the student decides the correct answer, the other five participants purposely declare the wrong answer; making the real respondent doubt their own response.
In numerous tests, the real respondents conformed with the others, knowingly agreeing to the wrong answer between 20-40% of the time.
Key takeaway for your refer-a-friend programme
Don’t underestimate the power of telling customers how many people have already referred. This reduces feelings of social risk and sets the expectation that introducing a friend is the expected thing to do among peers.
SimpliSafe encourages customers to join the hundreds who have already referred
Part 4.
Your Referral Checklist
Putting psychological principles into action
To wrap up, here’s a checklist of the key psychological principles we’ve covered.
Before you set up your next referral campaign, run down this checklist to build out a psychology-backed testing matrix.
If you’re a client, speak with our team for best practice guidance based on what we’ve seen work for brands like yours.
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Reciprocation
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Spell out the mutual benefits of the referral. Test whether it works better to emphasise ‘giving’ the reward to friends, or the customer ‘getting’ for themselves.
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Confirmation & consistency
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Encourage repeat referrals to reinforce the initial decision. Send reminders to both referrers and referees about the rewards on offer, and experiment with building then targeting different segments of your customer base.
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Social proof
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Reinforce endorsement of the campaign using customer quotes or simply show the number of other customers who’ve taken up the offer.
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Authority
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Build trust in your brand for the referred customer by including testimonial quotes or ratings.
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Scarcity
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Encourage take up of your referral offer by putting a time limit on when it can be redeemed.
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Framing
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Experiment by framing your referral offer in different ways to see which performs better. Are your customers more likely to share when offered £10 off or 10% off?
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Horizn Studios customers can keep track of referrals in their account section
About Mention Me
We use referral to harness the power of brand fans
Mention Me empowers brands to harness the exponential power of fans through referral.
Backed by Octopus Ventures and Eight Roads, we’ve raised $32 million in funding since 2018.
To learn more, visit mention-me.com or find us on the SAP store.
Since 2013, our unique Referral Engineering® approach has delivered more than 4.5m referrals totalling USD $1.5bn in revenue for 450 brands, including Charlotte Tilbury, Farfetch, Nutmeg, Pret a Manger and Puma.
We make brands think advocacy-first by turning referral into a strategic acquisition channel that enhances wider marketing activity and the customer experience. This vision is supported by our fast-growing partner network, which includes Emarsys, Ometria, Klaviyo and Trustpilot.
