A Guide to Launching a Referral Marketing Program in 2018

Did you know: 67% of Americans say they're more likely to buy a product if someone they know has shared it on social media?

That's the power of effective referral marketing. Referral marketing is getting your customers to recommend your product. This could be word-of-mouth or offering customers an incentive to promote your company. One business that nailed this method was Uber.

The ridesharing app offered existing customers' rewards for successful referrals. For every new person a customer signed up, they would receive money off their next trip.

The concept is pretty simple but the effect was massive. Uber is now available in more than 60 countries and 400 cities. If you're a business owner, you will be wondering how you can launch your own campaign. Check out this guide to launching a referral marketing program in 2018.

Before You Launch Your Referral Marketing Program

It would be crazy to jump straight into a referral marketing program. First, make sure that you're ready to go. Here are a couple of questions to ask yourself.

A. Do you have a great product?

The success of a referral marketing campaign hinges on the quality of your product. If you've got something great, people will want to talk about it. It's as simple as that. If you don't feel like your product is quite where you want it to be, then focus on improving it first.

But how do you know when you're ready?

That's a difficult question for anyone to answer. But as the business owner, there are a few clues you can look for.

-- Positive Reviews: Go online and see what people are saying about your product. Are the majority of them positive? If so you might be ready to launch your campaign. If not, at least you know what to fix.

-- Positive Messages: If your inbox is full of emails from happy customers then you know you're about ready. Again, if many are negative, at least you know where you are going wrong.

-- Natural referrals: If customers arrive at your business by organic referrals, then you know you’re doing something right.

If you can see all three happening — you're definitely ready to go.

B. Do you have an excellent customer support?

Say your referral marketing campaign is a wild success. You double — no triple — your business. You've got orders coming in left, right and center.

Are you ready for that?

Can your business handle the extra stress you are about to put on it?

Because if it can't then you're not ready. There's no point driving tonnes of customers to your business if they're going to leave disappointed with your service. It could be damaging to your brand.

Test all your systems. Can you triple your output? Can you hire more staff if needed? Can you offer the same great product with three-times more pressure? If the answer is yes then you can move on to the next stage.

Talk to Your Customers Before Launch

You will now be raring to go. But a quick Google search will make your stomach drop. There are hundreds, if not thousands, of different referral marketing campaigns. Which should you choose? The key is picking the one that will motivate your customer.

The Uber campaign succeeded because they knew what their customers wanted: cheap rides. Money off journeys was all the incentive customers needed to recommend the app. The more people they recommended, the cheaper the monthly taxi bill got.

But your customers may not care about cheap goods.

Dropbox is another example of a company that did referral programs right. In one year they grew their user base from 100,000 to 4 million. Their method was simple. The company offered more storage space in the cloud to people who referred a friend.

Again, they knew what their customer wanted.

To find out what your customers want you could ask them. Sounds crazy, I know. Speak to your happiest customers. Ask them why they haven't told their friends. Find out what would make them do it.

Your other option is to research what other people in your industry are doing. If it has worked for them, it could work for you.

Draw up Your T&Cs for the Program

One of the worst things that could happen is incurring spiraling costs, thanks to undefined T&Cs. Imagine offering a cash bonus for each referral, only to discover it's easy to sign-up thousands of people. Your costs could be huge. Some companies could afford that, but many can't.

Instead, set restrictions to your promotions and tell your customer early on in the process.

Is there a limit to the number of referrals?

Who can take part in the campaign?

Are there any occasions when the customer can't use the bonus?

Thinking about these early could save a huge shock later down the line. You will also need to work out how to confirm the referral.

Uber uses unique customer numbers but you could do it through QR codes or unique URLs. Many companies also opt to pay for software, which helps to track referral schemes.

Just choose the one that works for you.

Let the Customers Know About It!

As mentioned earlier, customers are happy to refer your product if they love it. But they won't love it straight away. Let's take an organic food shopping app as an example.

When will the customer most likely recommend the app to their friends?

It won't be the first time they log on. They won't have any idea about the quality of the products. Instead, the app could ask the customer to refer after their first delivery. At this point, the customer is (hopefully) happy with the product and so, more likely to recommend it to their friends. It's all in the timing.