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Referral Programs That Work
Friday, June 17, 2016 6:30 AM

By Joseph T. Sefcik, Jr., President, Employment Technologies Corporation

Recently, we’ve been conducting a mid-year sales review. The topic of customer referrals is always a key part of that discussion. We value our partnerships and strive to see those relationships stay strong and expand. As we continue to nurture and improve our own referral process, we’ve discovered some great information that I want to share.

As we mentioned in a recent blog on our website, referrals are one of the best ways to connect with new customers. Yet, creating an effective referral program can be tricky.   

There are many specific types of referral programs. According to Entrepreneur Magazine, “Creativity is the key to any good incentive program. People just naturally like to help each other, but especially when they know their efforts are successful.”

The article goes on to suggest several types of referral or incentive programs:

  • Free estimates, samples, or analyses
  • Additional products or services for no extra cost
  • Product or service discounts
  • Product or service time extensions
  • Extended memberships
  • Group discounts
  • Extended warranties
  • Reduced costs on peripheral items or services 

This list is just the tip of the iceberg. We’ve all been on the receiving end of such offers. Some are more effective than others. How do you know what will work best for your business? And is the hard work and attention of a referral program really worth it? 

An article published by the Harvard Business Review says yes. A team at Goethe University and the University of Pennsylvania’s Wharton School, “studied 10,000 accounts in a large bank over a period of three years and found that customers obtained through referrals are both more loyal and more valuable than other customers.” The study calculated that referred customers are 18 percent more likely to stay with the bank and generated 16 percent more in profits.

An exhaustive search of effective programs by the company Referral Candy revealed several companies with best practices in incentives and referrals. Let’s take a quick look at three of the best:

Dropbox gives free storage space to its customers who refer others. This technique has been extremely successful for growing their platform and revenues. People come to Dropbox for storage space and online accessibility of their documents, not for cash or gadgets or other perks. Storage and accessibility—that's it, so that’s what their referral program gives. 

Apply this:  Be sure you give your members what they want.

The Airbnb Referral Program allows registered Airbnb users to earn travel credits toward future travel by referring friends to Airbnb. With this program, travelers can earn a $20 credit for every friend they refer who travels using an Airbnb booking and an $80 credit for every referral that acts as an Airbnb host. They are using this cleverly to recruit more hosts, which is what they need, and to give credit to their customers so they continue to use their service. 

Apply this:  Give your members an incentive to keep using your services or products with their referral.

Internet productivity giant Evernote uses a points system to reward its customers who refer new users. Evernote customers can redeem their points for an upgrade, similar to an airline points system, but for referrals rather than frequency of use. Evernote has a premium product with more features, and they use this to incentivize referrals. They get double duty from this promotion because every referred friend is given one month of Evernote Premium just for getting started. 

Apply this:  Maximize the impact of your premium product or upgrades by using them to reward members who refer and to introduce newly referred members to your very best.

When considering how to craft your referral program for the best possible results, give your members what they want, offer incentives, and maximize your premium services and products. You already have what it takes to create a great program. All it takes is thinking differently and some hard work to reap the valuable bottom-line results of successful referrals.

Have a referral to share? If you know a credit union or organization looking to achieve HIRE Confidence, please send us their contact information. As a thank you, you’ll receive your choice of a new EASy Simulation to try free.