“Building a successful referral program means using tactics. Remember, incentives are an important part of the equation,” – Luther Mosley
Commercial referral programs are often created and operated by brand and businesses as a low-cost approach to expanding business. These programs are primarily instituted with a view to leverage relationships with existing customers and to gain important business objectives over the long term. These programs can help businesses and enterprises to acquire more customers and therefore, to grow and expand their operations. We must note that the modern customer must be suitably incentivised for referring friends, colleagues, and family members to preferred business enterprises. Therefore, businesses must reward customers for such activity and beyond material terms, this should be undertaken primarily to encourage more referrals. Observers have noted that the best referral programs often tend to cement relationships between a business and its customers.
We must bear in mind that every commercial referral program represents an extension of a business transaction. In light of the above, businesses would be well advised to scrupulously administer such programs so as to leave no scope for ambiguity in the minds of their customers. Regular and consistent professional stewardship should be applied to the administration of referral programs. In addition, the business requirement to reward customers should not be weighed in purely transactional terms. A referral should be viewed as a customer’s resolute vote of confidence in a business enterprise. Therefore, the business should view participating customers as business ambassadors that elevate the brand (or business) through their advocacy activities. That said, interested business enterprises should reward customers by deploying preferential treatment regimes, institute special discounts, disburse personal gifts, etc. An accretive approach to a referral program could include the regular addition of a certain percentage to special discount offers. This implies that the business rewards its customers for each individual referral.
Businesses should consider a diverse approach when they formulate a referral program. This would enable business planners and managers to think out of the box and devise genuine referral programs that offer tangible value to participating customers. For instance, a software manufacturer can institute a referral program that encourages regular customers to add fresh customers to the business. One part of the mechanism is the business’s ability to reward customers with a software upgrade on their preferred device. This approach can impart significant momentum to the said business enterprise based on the success of the referral program. However, we must note that the flavour of said reward program does not hinge on the customer’s material gain; instead it pivots on a software upgrade for an already installed software package in the customer’s preferred computing device. This approach to a referral program is distinctive because the business incurs no additional cost or expenditure in its chosen procedure to reward customers.
Banks and financial service institutions can deploy referral programs during specific times in a calendar year. This strategy can be considered by said businesses because it offers an immediate boost to the bottom line of the business at no additional costs. The said businesses can choose to reward customers by offering them a free add-on credit card, or the discounted use of a bank locker for a period not exceeding six months. Additional modes to reward customers can include the creation and presentation of a personalised cheque book, preferential treatment during loan disbursal, etc. These actions may attract new generations of customers to the said businesses, may help the businesses to amplify the offered value proposition, and create a distinct competitive edge in the market. We must note that banking remains a heavily regulated industry in most countries. Therefore, business managers in such institutions operate under certain constraints when they design referral schemes.
Context plays a significant role in the construction of referral programs and the institution of reward mechanisms. For instance, a travel and tour planner can offer discounted travel tickets to customers that bring in fresh references. Participating customers may be offered the choice to accumulate their discounts over time and use the same once a certain threshold is achieved. We must note that the ability of an enterprise to operate referral programs and to reward customers indicates sound commercial health of said business. It also indicates that the business enterprise remains interested in further expansion and therefore, is likely to engage with an expanding roster of existing and new customers.
Small referral programs may not be able to muster significant business resources. These programs can deploy the use of small gift cards to reward customers. The implied dollar value can be printed on each card and participating customers may redeem said value during future business transactions. Small denominations of such cards can be used to boost the referral program at regular intervals and integrate the strategy into overarching business plans. The use of small gift cards to encourage customer referrals may be operated over the years and the program may acquire a life and identity of its own. We must acknowledge that small-scale referral programs can be engineered and re-engineered without the risk of incurring substantial costs. These programs can prove their efficacy to business management groups when monitored at regular intervals. In addition, we must note that this approach to rewarding customers for creating referrals may be termed “small time” but reflects positively on the ambition of the business enterprise.
Certain business organizations may espouse a social cause in the operation of their in-house referral programs. For instance, a furniture retail business may choose to donate a pair of shoes (or other footwear) to a non-profit organization every time it entertains a referral customer. We may note that this is an obtuse approach to reward customers because customers are not personally benefited by the reward. However, the customer may identify closely with the social cause being pursued by the business and this could help to create further motivation for active participation in the referral program. This technique invokes morality and human emotion, both of which remain powerful emotions that can be harnessed to drive business outcomes. Businesses that choose to endorse this approach may also claim tax benefits from the competent authority on the basis of operating the said program. In addition, word-of-mouth publicity may also ensue and enable the brand or business to acquire the halo of a socially responsible corporate enterprise.
In the preceding paragraphs, we have examined some of the techniques that can enable businesses to reward customers for participating in referral programs. We must note that the typical commercial referral program is located at the intersection of competing interests. The business seeks to enhance its pool of paying customers, while participating customers are interested in the reward (or payoff) that follows a successful referral. Some scope for abuse certainly exists in these arrangements, but brands and businesses should attain hygiene standards in such transactions in the wider interests of the business enterprise. In addition, businesses can work to ignite healthy competition among customers in a bid to accelerate the implementation of referral programs. The means to reward customers can also undergo an evolutionary process because not every reward needs to be pecuniary or tangible. There is serious scope for educating customers in this regard and every business should work with customers to create an enduring value proposition over the long term.
