You can't save the world, but it can't be saved without you.

Three things you'll learn:
  • What a referral program is.
  • How Abel helped a business make a referral program.
  • Reasons why you need a referral program.

A referral program is a systematic technique that encourages customers to advertise on behalf of your brand. It is usually done by offering different types of rewards to customers who recommend the business’ products to other people.  

A referral program is one of the most trusted ways to get your business in front of potential rivals. At Abel we have helped Essential Foods to incorporate a referral program into their marketing.

The program offers a flat cash payout - high enough for the customers and friends to make a purchase, and still keep the cost per lead low. Within the first month they had already gained 18% new customers by adding a call-to-action link attached in a newsletter (e-mail), they targeted customers who had purchased within the last 180 days (paid social) and made a reminder after checkout.

A referral program does not work for all companies. But if it does, we have listed five reasons below to help you assess whether or not a referral program is something that is an advantage for your company.

Reasons why a referral program is an advantage

1. Recommendations from friends and family are the most trusted form of advertisement.

“More than 8-in-10 global respondents (83%) say they completely or somewhat trust the recommendations of friends and family.”(1) shows a study from Nielsen. Referrals are known to be one of the best and the most trusted forms of advertisement and as the study from Nielsen also revealed, approximately 92% of customers are more inclined to believe people who are already in their circles. This because the people you know and trust are less likely to mislead you into purchasing a bad product. On top of that referrals even keep costs low while raising profits.

Tip: Before establishing a referral program you have to make sure your product has been tested by customers, so you know they like it. If the customers do not like your product, they will not recommend it to others.

2. Low cost per lead

The main benefit of referral programs is that you only give rewards for successful referrals. Referral programs are one of the lowest cost per lead growth channels available today when it comes to getting your business to generate as much return of investment (ROI) as possible.

3. Drives repeatable purchases

Having a referral program can increase your overall number of returnable customers no matter if you do it through e.g. rewards, percentage discounts or flat cash payout. It is all about increasing loyalty through rewards. A customer will refer you because (a) they really like you and sincerely want to share or (b) they want to get rewards and can think of people who will most likely like your product.

4. Simple to operate and execute

Referral programs are - compared to other types of advertising - simple to operate and execute. You will not have to put in a lot of effort or time. The program only has to be developed once and it is limited how much money you spend on advertising. To get this program to work your product needs to be shareable and when customers share a link it will be easier for you to track and measure, meaning you have a convenient way to figure out what works best to gain leads for your business. Thinking about the outcome and the hours you spend on establishing and the program compared to the amount of money and new customers it will be a win-win situation.

5. Referrals show that your business is performing well

It is easier to refer to someone if the company they are referring, offers quality products. The fact that a customer is able to encourage their friends to make a purchase shows that your business is good and reputable. The program allows customers to scout for potential new clients while giving them reasons to make a purchase and reminds themselves why they previously had chosen to buy your products.

These are just some of the many advantages, but before you start planning how to incorporate a referral program you will have to make sure it actually benefits your business.

How much will offering referral rewards cost?

If your product is shareable, there are many different ways to reward your customers. You can either:

  1. Offer a percentage discount or a flat cash payout for the referrer and (maybe) their friend(s).
  2. The customers can save credit points to their own account.
  3. Offer a free product.

These are only a few examples and with all of the options you can either allow unlimited recommendations or make a limit.

The options are endless and it is up to you to decide just how much value you want to offer your customers. But choose your rewards carefully because they usually are the “make it or break it”-factor that determines whether or not someone will refer their friends. Most importantly, focus on satisfying your customers, so they have a reason to refer their friends in the first place.

Feel convinced yet?

At Abel we think it is pretty clear to see why referrals are a good way to boost businesses with shareable products. Though if customers are not willing to share your product a referral program is not a solution for you. Either way do not hesitate to contact Marcus Feldthus here if you are interested in learning how we can help you.
+45 28 89 70 63

List of references:
1: The Nielsen Global Trust in Advertising Survey have conducted 30.000 online respondents in 60 countries on their attitudes towards trust, value and engagement of advertising and concludes that recommendations from friends and family, as well as consumer opinions posted online, is the most trusted form of advertising. Link