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."
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.
93% of customers trust recommendations from friends and family
Kantar, 2020
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.
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.
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.
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%
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).
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.
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.
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.
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.
