The cost of customer acquisition can fuel successful growth or lead to the demise of companies, particularly startups that have limited capital. Competition has never been fiercer, especially on mobile, with brands jockeying for higher search positions, spending more on actionable advertisements and fighting to attract their target audience.
This competition often elevates customer acquisition costs. It pressures businesses to attract customers with a high lifetime value immediately to help prove ROI. However, if not kept in check this expense cuts deeply into profit margins and taxes your company’s resources.
Businesses can reduce this cost. A well-designed mobile referral program combined with a strong product-market fit can exponentially increase growth of your business in a more cost-effective manner.
A strong, ongoing referral program is a key strategy for the growth of many businesses. Nearly 70 percent of consumers trust the opinions from a public referral or word-of-mouth recommendation.
Like other marketing strategies, creating a successful referral campaign with a high chance for reproduction or virality is no mistake. It requires an in-depth understanding of your product value, customer preferences, user flows and many other factors which can be determined through comprehensive a/b testing and the data analysis of your campaigns.
Additionally, product market fit should be overlooked when building a referral program of any magnitude. It is difficult to achieve optimal results when your customers are not satisfied by your products. Referral campaigns work best when they are associated with a good product that satisfies the target market’s needs.
Studying recent mobile growth trends can show you how to reduce customer acquisition costs, compound results that grow your business and reveal tactics for a successful mobile referral program.
Align referral campaign strategy with market segmentation.
Ongoing reproduction of your offer throughout your market can determine the success of a referral campaign. The chances of your referral program impacting your bottom line are best when your product provides enough value that your customers naturally want to share within their network. However, even a strong product/market fit does not guarantee success. Some users need a push.
Before you launch your referral program, identify which customers you want to attract and what you can offer that maximizes the likelihood that they will refer their network or colleagues. If you launch a misaligned referral campaign, you risk wasting resources targeting the wrong audience.
Group your audience into specific segments. Identify customers with the highest lifetime value, influencers with large social followings, your most engaged users, customers within an isolated geographic region (for geo targeted referrals) and other factors that indicate your ideal customers.
Segmenting your best customers will help you market to similar consumers and build stronger networks to market your referral programs.
For example, chances are your customers with the highest lifetime value will know someone else who would find your products useful. These are the customers you want referring your business. They’ve discovered your value proposition and can relay this message to the appropriate audience.
Incentives that generate referrals and create collaborative value.
It’s a shame, but people don’t generally share your company for the hell of it even if they’ve had a wonderfully positive experience. Often times, they need an incentive or a good reason to give a recommendation.
The idea of giving your customer a reward for a positive public referral is commonly known as a reciprocal incentive. Basically, you say great things about my company and I’ll give you some sweet deal.
Reciprocal incentives are much more common than you may realize. In many cases, to access a company’s premium content you first need to give up your name, email address and phone number. These exchanges provide the user with immediate value and is usually an easy concept for them to understand.
Often times, to download an ebook a reader first needs to exchange information. To replicate this concept to a mobile referral program, identify a valuable, well-targeted incentive that your audience immediately understands, then make it stupid simple for them to share.
For example, Uber has developed a powerful mobile referral program. A page with the call-to-action labeled “FREE RIDES” allows Uber users to easily invite their friends to join the service for a free ride in return. When a customer taps on, “INVITE FRIENDS” they see a variety of sharing options, depending on the app installed on the mobile device.
While this seems fairly straight forward, this design is particularly strategic for a mobile device; here are a few important aspects worth mentioning.
Clear CTA with value proposition.
Users can see that there is an incentive for both themselves and their friends upon sending an invite. Since there is value for both parties, this increases the likelihood that users continually sending referrals to receive the incentive. This can create a viral loop of sharing.
Concise options to narrow user path.
When a user lands on this page there are only three options: go back, learn more information about the promotion, or invite friends. The page isn’t complicated and the only options either provide information to influence a conversion or complete the conversion.
Intuitive ways to invite friends.
Rather than forcing users to only invite via text, email, Facebook, etc. Uber opted to tap into the sharing capabilities of the apps on the user’s mobile device. This means that the user can share the referral wherever they are most comfortable and avoid alienating users that don’t want to share on specific networks.
Additionally, to influence the referral message and help avoid their message getting misconstrued before the invite is sent, Uber prepopulates the copy for their users. Again, the idea is that Uber made the entire process very easy for their users to complete and even eliminated the need for their users to open their mobile keyboards to create a message for their invites.
While this monetary incentive works very well for companies such as Uber, there are many other options for your business. Don't settle on one option without first experimenting. Research how your audience responds to a variety of incentives by testing different tactics in two to four week periods. This process can help you find which incentives drive the most referral conversions and align best with your overall business goals. Offers could include:
- Free shipping for customers who refer a friend—and give the invited friend free shipping as well.
- Give 20 percent off or a gift card for customers who influence new members to try your products.
- Provide access to exclusive content and additional content if they email a colleague or share.
- Extend trial memberships for users that invite others try your product.
There are a variety of tactics that can incentivize your customers to invite their connected networks and you should always be testing to find the most effective solution for your business.
Reproduce referrals with mobile delivery methods.
Perhaps an equally important element that can determine the success and growth of your business is the reproduction rate of your referral campaign through efficient delivery methods. While any tactic that can generate new customers from a referral is a boost to your business, some of the best companies that grow exponentially fast, aim for a 1:3 referral to customer ratio.
This means that for every one user that shares their referral, they should receive an average of three new customers. This is no easy task as very careful attention needs to be given to each aspect of their referral funnel to properly design a viral loop.
When focusing on the delivery of your referral campaigns, your sharing techniques should be transparent to your audience. You should give your customers the power to select who they want to share your program with and avoid populating their contact lists to influence them to send to all of their connections.
Think carefully about the pros and cons of distributing your referral program through mobile delivery methods to determine whether or not your branded message will be understood correctly. Mobile devices are considered very personal, which is ideal for hitting your target audience, but requires extra tact to avoid violating or spamming your customers.
Consider the following mobile delivery methods when designing your user acquisition strategy through referral campaigns:
- SMS text: Text message marketing is becoming increasingly popular due in part to high open and conversion rates, when combined with a word-of-mouth referrals, this can be a very powerful distribution message for your campaigns. Your SMS message should have a concise call-to-action with a clear incentive and any outbound links should direct your users directly to their incentive to influence a signup.
- Email: With email, you have more creative freedom to display your referral; you can display images, embed a value proposition video, or include copy to encourage more sharing. Keep in mind that your email could be opened on a mobile device or on the web—pay careful attention to design your referral around both possibilities by planning around these format considerations.
Additionally, when sending emails through referrals, it is possible that a customer could receive your referral from multiple connections; this may anger the recipient. You should always put a very clear unsubscribe option in the top fold of the email to reduce the chances that the recipient reports your campaign for spam. Too many spam reports will lower your email score and could result in your email and internet service providers blacklisting your accounts.
- In App Incentives: If your company has a mobile app, offering your referral incentive to your most engaged users through a pop up, drop down banner, or a page in the navigation could entice them to share. Tap in data collected from your user’s devices and test these techniques to determine which influence your audience best.
- Social Media Sharing: When asking your customers to share through social media, your message and design should adapt to the format considerations of each channel. For example, referrals shared through Twitter should have a clear message in under 140 characters and Pinterest content should include visually compelling images etc.
When optimizing your referral campaigns, look for any areas that create friction for your customers. Anything that slows down the referral process, sounds confusing, requires user input, or is personally invasive can greatly reduce the reproduction rate of your campaigns and negatively impact the virality of your efforts.
In conclusion, to create a more cost-effective customer acquisition strategy, consider leveraging your best customers to act as your brand ambassadors with a mobile referral program. Empower them with easy to use techniques, backed by incentives to promote your company, products, or services in an intuitive manner through social media, text messages, email, in app promotions, and word-of-mouth advertising.