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How your customers can add extra profits to your bottom line
A number of years ago, I was the marketing manager for a well-known book club. Twice a year the direct marketing department met with the president to review accomplishments and plans for the next marketing season. During this meeting, we shared the results of our programs and campaigns—direct mail, magazine advertising, package insert and member-referral.
He looked at the line-by-line profit-per-customer acquired of each marketing initiative and declared, “Let’s do more of the member-referral program.”
Those of us in the direct marketing division chuckled to ourselves. There were, after all, only so many members to whom we could offer a referral-bonus program. We’d done everything to generate results from our member-get-a-member referral program, and we had the profits to prove it. These profits became very important to the overall bottom line.
But the president’s point has never been lost on me: Referral, or member-get-a-member programs, likely will be the most profitable program you’ll ever create. So why aren’t more companies engaging in referral programs?
A referral program can become quite involved if you give a gift or other incentive to the customer who referred a new customer to you. Complications can occur due to multiple layers of tracking. For instance, if you treat a referral as nothing more than adding a name to a mailing list, but you have promised a reward to the referring customer if the referral makes a purchase, you’ll need to track the referral name to see if he or she converts from a prospect to a sale. That might be one reason you don’t see referral programs more often.
Erroneously, too many marketers think that to make a referral program work it must be complicated. That usually is not the case. You don’t necessarily have to give a gift to the referring customer. The book club I managed didn’t offer an incentive to customers. We simply asked them to pass along a flier to friends who might be interested in our products. We relied on engaging customers with emotion over our product and pointing out in our message the goodwill in sharing our product with their friends.
Positive Position
How you position your referral program—that is, why it’s in the customer’s interest to promote your product for you—and the creative developed for the program is essential. Success is most influenced by two elements:
A number of years ago, I was the marketing manager for a well-known book club. Twice a year the direct marketing department met with the president to review accomplishments and plans for the next marketing season. During this meeting, we shared the results of our programs and campaigns—direct mail, magazine advertising, package insert and member-referral.
He looked at the line-by-line profit-per-customer acquired of each marketing initiative and declared, “Let’s do more of the member-referral program.”
Those of us in the direct marketing division chuckled to ourselves. There were, after all, only so many members to whom we could offer a referral-bonus program. We’d done everything to generate results from our member-get-a-member referral program, and we had the profits to prove it. These profits became very important to the overall bottom line.
But the president’s point has never been lost on me: Referral, or member-get-a-member programs, likely will be the most profitable program you’ll ever create. So why aren’t more companies engaging in referral programs?
A referral program can become quite involved if you give a gift or other incentive to the customer who referred a new customer to you. Complications can occur due to multiple layers of tracking. For instance, if you treat a referral as nothing more than adding a name to a mailing list, but you have promised a reward to the referring customer if the referral makes a purchase, you’ll need to track the referral name to see if he or she converts from a prospect to a sale. That might be one reason you don’t see referral programs more often.
Erroneously, too many marketers think that to make a referral program work it must be complicated. That usually is not the case. You don’t necessarily have to give a gift to the referring customer. The book club I managed didn’t offer an incentive to customers. We simply asked them to pass along a flier to friends who might be interested in our products. We relied on engaging customers with emotion over our product and pointing out in our message the goodwill in sharing our product with their friends.
Positive Position
How you position your referral program—that is, why it’s in the customer’s interest to promote your product for you—and the creative developed for the program is essential. Success is most influenced by two elements:
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