Why it’s important to offer the right rewards with your referral scheme.
Unless you’ve been living completely off the grid, the chances are you’ve seen a fair few referral schemes by now, and they usually follow the same format. “Buy our product or service and then encourage your friend to the same, and we’ll reward you both.” It’s simple, it’s straightforward and it should be a win-win for everyone involved.
However, we’ve noticed that brands don’t always structure their reward scheme in a way that seems to reflect what they’re selling. In doing so, they’re undermining what would otherwise be a great way to bring in new customers and keep their current ones happy, all at the same time.
For example, perhaps you’re a stationery supplier, providing things like paper and pens in bulk to other companies, and you’re running a referral scheme: for every successful referral, you offer a 10% discount to the new customer and a Marks and Spencers voucher for the referrer.
On the one hand, the discount is an excellent idea. No company is going to be unhappy with having a bit of money knocked off their bill, and it won’t matter how large or small their needs are: the incentive remains proportionate. But on the other, the voucher might seem nice on the surface, but what is a business customer supposed to do with it? Vouchers might be appropriate for an individual who doesn’t have to justify their spending, but if your advocate is a company, you should be rewarding them with things a company needs. A smaller brand might be able to use it to buy some fancy biscuits for the break room, perhaps, but it still means someone has to go out of their way to go and get them. What if the total comes to a bit more than the voucher? Or a bit less? And the larger the company, the less useful and more likely to get lost in the system it becomes.
In fact, the reward is likely to end up feeling like more of a hassle.
That being said, if you’re the kind of brand who makes a lot of one-off sales, money off is also not going to work. After all, if you’ve just bought a car, the last thing you’re going to want to do is buy another one. In that case, a voucher might be exactly the right answer, or maybe a nice after-care package might do the trick.
And if you are going to offer a voucher, make sure you pick a brand that aligns well with yours. Customers of an upmarket boutique might prefer money off a meal in an upmarket restaurant or fancy wine to a free snack box, but someone making a more practical purchase might like an equally practical reward. Who is your target market? If they’re interested in buying your product, what else - or who else - might they like?
Finally, as is the case with all word of mouth marketing campaigns, it’s important to ensure that the reward you offer your advocates must be equal to or less than the reward you offer to their friends. Counter-intuitive though it may seem, reward schemes that benefit the existing customer more than they do the people who are referred are less successful than their balanced or opposingly-weighted counterparts. It’s uncertain whether it’s altruism, guilt or something else that drives this behaviour, but it’s consistent across different industries and types of consumer. People like to be generous… or perhaps they just don’t want to get caught being mercenary.
Some brands hit the nail on the head. Oliver’s Travels, for example, offer their customers a champagne breakfast if they successfully refer a friend. (For those of you who don’t know, Oliver’s Travels offers their customers a choice of luxury holiday villas.) Someone who’s just booked a holiday probably isn’t going to be planning to book another one in the immediate future, so money off might not be much of an incentive. However, the kind of clientele Oliver’s Travels attracts would almost definitely appreciate a bit of bubbly to kick their holiday off in style. It’s the kind of thing that feels like a reward: it doesn’t require any effort, it’s simple and it’s a treat.
A reward should be just that: rewarding. If it requires extra effort to enjoy it, or simply isn’t appropriate, it can actually become more of a deterrent. After all, if a brand doesn’t know it’s customers well enough to offer them something appropriate, why would we put in the effort to recommend them? And are they really the kind of brand we want to be championing?
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