Referral Marketing Software 2020: Complete Guide

A delighted customer’s recommendation is hands down, the best way for a business to acquire new customers. A referral happens when a customer recommends your product or service to a friend or peer. Not only does referral bring new business to you, but also it lets the new customer on a definite positive note.

While some of your customers may refer your product on their own, to get most of the referrals, you need a referral marketing approach to facilitate and increase customer referrals. Referral Marketing usually involves a reward of some sort to be earned by the referring customer for successful referrals. However, referral marketing is not just about referral rewards. It should be built like any other marketing campaign including targeting strategy, implementation, analysis, and iteration.

Referral Marketing brings in aspects of relationship marketing which helps to keep the current customers engaged and motivated, thereby improving overall retention.

Referral Marketing vs Loyalty Marketing vs Affiliate Marketing

Referral Marketing helps in acquiring new customers through existing customers and also is the most cost-effective way of driving growth. Referral Marketing should become your key marketing strategy, when you have a sizable customer base, cost of new customer acquisition is high and takes a long time. Often, referral marketing is seen intertwined with loyalty marketing. Referral Programs and Loyalty programs have different purposes and serve different business goals. Referral Programs are for acquiring new customers and Loyalty Programs are for retaining and rewarding existing customers. Loyalty programs help in driving repeat sales, cross-selling, and upsell. They help in increasing the share of the wallets of customers. Referral Programs help in broadening the customer base.

Other related programs like Affiliate Marketing and Influencer Marketing will also drive referrals. But Affiliate and Influencer programs involve usage of third party brand advocates to drive customer acquisition by paying commission, incentives, or a flat fee. Compared to Referral Marketing, the trust factor in Influencer or Affiliate Marketing is low.

B2B Referral Programs

Referral Marketing is not limited to B2C. It is equally important in the B2B world where purchase cycles are no longer and the cost of customer acquisition is higher. Businesses that have the best in class products and services, high customer satisfaction, high NPS scores, and sizeable customer base should definitely invest in Referral Marketing. Unlike B2C, the stakeholders in the B2B world are many and they are part of the decision-making process and the process of selection is more formal, structured, and has long cycle time. B2B buyers want personalized and customized experience dealing with sales. Hence Referral Program has to be combined with the existing sales process. However, businesses can make it easier for their existing customers to participate actively in Referral Program by creating attractive and visible campaigns, promoting it actively, and making it easier for customers to provide referral customer information through simple forms and CTA. It is equally important to make the product and service information easy to share among their business contacts.

Referral Marketing, while simple in concept, can get quite unwieldy to manage as programs encompass several parameters and are deployed to a large, diverse customer population. Deploying Referral Marketing Software is essential to retaining basic control around your referral programs. As an example, the software will automate activities like enrollment, referral commission payouts at scale, workflows across different systems such as Magento, and Shopify. The software will also make your referral programs far more customer-friendly through mobile experiences, positioning your referral programs firmly in the digital world that customers largely inhabit today.

But beyond just maintaining basic program hygiene, the newest crop of Referral Marketing Software can use machine learning capabilities along with multi-channel presence to observe and analyze customer behavior, present behavioral insights to you, and recommend referral program types most apt to target particular categories of customers. They can combine this with the ability to synchronize and operate across devices and platforms, including both online and offline transactions, offer customizable options to gamify the user experience of each referral program, and thus present to the user a unified and exciting brand experience. This elevates the referral game to a new orbit, one that is hardly possible without such software.

As we saw above, Referral Marketing Software is very handy to keep the operational sanity of your referral programs intact as well as to support greater complexity in the programs.

Enables Higher Converting Traffic Source

Referral Marketing provides scalability for the word of mouth to happen. Word of mouth is one of the highest sources of leads for marketers and Referral Marketing Software enables word of mouth to happen. Referral Marketing Campaign helps marketers to reach a large pool of people and also helps to leverage social channels. Personal recommendations by friends are always the best forms of advertisement and are known to be trustworthy.

Data Use

Companies collect transaction data routinely through loyalty cards, POS software, websites, etc., which, however, remain segregated in silos that don’t talk to each other and remain underutilized. The latest Referral Marketing Software systematizes data collection, as its analytics modules have a definite plan to use this data.

Effective Targeting

This kind of software employs fairly powerful analytics engines to profile users by purchase behavior and device/channel use-patterns to determine the best time and manner to engage them with appropriate referral program communication. This is a veritable superpower for referral program success.

Improved Engagement on Owned Channels

Businesses’ owned channels include their website traffic, social media assets, and emails. Referral marketing software help businesses to use their owned channels effectively to engage with their customers and turn them into referrals. Referral Marketing Programs allow businesses to use relationship marketing.

Improved Reward Programs

Referral Marketing help in gamifying reward programs. This makes rewards programs fun and ups customers’ interest level by bringing competitive spirit. Starbucks introduced an innovative rewards program by giving stars as reward points that customers can trade. It resulted in happy customers sharing the app, turning the rewards program into a successful referral program. Tesla used a leaderboard based referral program - wherein customers can see where they stand in the leaderboard. This visual aspect motivated them to send more referrals. Tesla keeps innovating every year on its rewards program which keeps the interest level of customers very high. The Referral Marketing software enables customers to bring in such innovation much faster.

Analytics and Reporting

The insights into customers’ purchase behavior that you gain from Referral Marketing Software’s analytics reports can be invaluable in terms of fine-tuning and realigning even other parts of your marketing plan. Referral Marketing Software helps to identify, target, and reward your most valuable customers through in-depth data analysis.

Ease of Implementation

In addition to sophisticated targeting and programming for referral schemes, this Software also fully supports their execution on the ground with the automation of many of the marketing tasks. This helps in improved lead conversion, increased customer value, and reduced churns. The Referrals world is constantly innovating, but competent software teams are able to keep up with the required changes in the Software. Many software vendors offer A/B Testing as well, giving you the benefit of rapid yet proven program support.

Anti Fraud

Referral Marketing platforms commonly deploy their analytical abilities to prevent fraud. Fraudulent transactions are always a costly possibility, unfortunately, since referral programs put money or its equivalent in participants’ pockets, so, fraud detection and prevention is a prized attribute.

Industries that Use Referral Marketing Software

Referral Marketing is a centuries-old idea, and sure enough, versions of it are deployed across all industries, serving both types of markets, retail, and businesses. It is, of course, used to boost sales, but also for brand-building, communications, and even to recruit staff. The use of Referral Marketing Software is indicated in almost all these applications.

As discussed earlier, Software radically improves the execution of referral marketing programs and is instrumental in making many evolved elements of referral programs more feasible. Current Referral Marketing Software can be expected to straddle digital platforms and offline environments with equal ease and smoothly integrate them to present a seamless interface.

Users of Referral Marketing Software

Referral Marketing is ideally a multi-functional exercise, involving Marketing, Sales, and After-Sales departments. Program conception and design, execution, and post-execution follow-up require the active collaboration of these departments. Moreover, referral marketing is most effective if treated as an ongoing evolving program fed by feedback loops from previous instances rather than as a one-off, which too is best-served by a multi-functional approach. Users of the software, therefore, would be spread across these functions.

Referral Marketing Software enables your referral programs to really stand up to their full size and potential.

Underutilized Customer Data

Vast stores of transaction data routinely collected by companies usually lie underutilized. The wealth of customer insight lying tied up in them can be unleashed and harnessed using this purpose-built Software.

Difficulty in Customizing Standard Referral Programs

Businesses no longer need to run blind with a one-size-that-doesn’t-fit-all referral program, risking a lack of interest from much of their audience. Transaction history analytics and dynamic tracking give Referral Marketing Software the power to assist in delivering pinpointed program communication to each recipient according to their transaction stage and the media they are on.

Operational Efficiency

Running referral programs manually - even undifferentiated cookie-cutter ones - can be daunting to track and do suffer many slips. Crucial notifications and updates can be missed. Inadequate communication can cause unnecessary discomfort and loss of brand image, quite the opposite of what the referral program seeks to achieve! It is easy to see the value, therefore, of Referral Marketing Software’s program execution capabilities.

Difficulty in Promoting Referral Programs

Many companies suffer from the bad promotion of referral programs - even though the reward program itself is very attractive. The overall impact is low in such cases. Referral Marketing Software greatly helps to solve this problem. They support targeted email marketing, automation of promotion of referral program to name a few. Some software support social proof wherein the customers take care of promotion through social media sharing that gives a viral effect.

Misuse of Referral Programs

Many Referral Marketing Solutions have built-in fraud detection and prevention features. Misuse of referral programs is common, and the most effective way to prevent it is by careful scrutiny of participant and transaction data. If attempted manually, this is bound to prove too cumbersome to take through to even the critical minimum. It’s a no-brainer to allow specialized Software to be your lookout against fraud.

Customer Analysis

Analysis and profiling customers based on discernible trends in their transaction history is a common Referral Marketing Software feature, the extent and sophistication of which differs by vendor and solution.

Communication Templates

Referral Marketing Software often offers standard templates for drafting communication pieces, e.g., referral letter, which can be used as-is or adapted as required.

Referral Tracking

Tracking each referral of all the currently running referral programs is a necessary but tedious process that is taken care of very well by Software.

Omnichannel Execution

Entire referral program rollouts can be automated, requiring practically no human ‘hand on the till’ on the part of the marketing team.

Gamification of Referral Programs

By creating a referral program that feels like a game, marketers can bring in fun, intrigue, excitement, and buzz. This ups the interest level of customers. Many Referral Marketing tools like ReferralRock, Extole include gamification features to create reward programs. The gamification techniques include features like Points, Badges, Leader Boards, and Contests.

Customization

While standard-issue templates are available for campaign teams to plug and play, programs can usually be customized too to suit every business’ particular needs.

A/B Testing

Many platforms offer the ability to conduct A/B Testing before full rollout of programs.

Campaign Management

Multiple referral programs can be run differently yet simultaneously in a Software-backed campaign. The Software enables smooth management of the campaign as a whole in addition to flawlessly executing each program.

Analytics and Reporting

Analytics and reporting features enable monitoring and insight generation along with all relevant campaign performance parameters.

Fraud Prevention

Referral Marketing Software comes equipped with the ability to detect various forms of referral fraud and prevent them.

Artificial Intelligence in Referral Marketing Software

Artificial Intelligence already does and will play an ever more important role in Referral Marketing Software. AI’s utility in customer profiling by parsing through vast data from diverse sources is rather obvious. AI may also be employed to pick out the most relevant program-seeding communication for all customer types in different situations. The AI capability of pattern recognition can be handily deployed for fraud detection in referral programs.

The market offers several good Software options for Referral Marketing. Some of the factors to consider as you zero in on your choice are as below.

Industry Vertical

The needs of different industry segments vary considerably while implementing Referral Marketing. The software should be able to provide industry-specific solutions. Though most of the Referral Marketing software are built on a common technology foundation, many of them provide tailored solutions for popular verticals like e-commerce, retail, and financial services. These ready-to-use solutions reduce time-to-value and eliminate deployment and integration challenges.

Integration

Seamless integration with other third-party systems used in your company like CRM and Marketing Automation and Email Marketing systems is important to track the referral journey from sales pipeline/funnel to acquisition. Referral Marketing solutions for e-commerce should provide out-of-box integration with popular e-commerce platforms like Shopify, Magento, WooCommerce and BigCommerce to name a few. You may also want to verify interoperability with your finance systems to ensure smooth rewarding.

Omni-channel Support

The business might need the support of multiple channels to execute their referral programs. It is important to assess the channels supported by the Referral Marketing Software to ensure that it aligns with the marketing strategy.

Scalability

Verify the maximum capacity supported by the Software and compare them with likely campaign loads at your company - such things as, how many referral programs can be run simultaneously, transaction limits in number or size if any, customer communication, and peer communication options, wallets, omnichannel capabilities.

Flexibility/ Customizability

The software should afford the option to add/remove elements as per outreach and referral programs without affecting overall performance. The software must be scalable with respect to speed and features.

User Segmentation

The Software must allow for manual sorting and segmentation when required, in addition to its own in-built capacity to automatically categorize users per transaction history.

Campaign Analytics

What you cannot measure, you cannot manage. The solution must have the analytical ability to generate insights such as program participation, top influencers, referral rates per channel, and total revenue generated. Scheduled and ad hoc reporting capability is also a necessary consideration.

Customer Support

The Software vendor must have your back. You should be able to avail of the services of a strong customer support team, who can promptly guide and resolve issues. This is particularly important, as referral programs are run and changed/improved frequently as per seasons and trends, and need frequent updates almost by definition.

APIs and Scope of Data Usage

Make sure of the authenticity of the referral solution. It must have appropriate API capabilities and associated rights for the businesses to run the program to full potential. API documents also ease the interoperability with other systems. The goal is to own the information collected via authentic APIs and email addresses, as unclear usage rights may lead to legal hassles and losing customers’ trust.

Data privacy concerns

Especially with hosted solutions, the brand’s customer data such as purchases, revenue, customer journey, order values, and others would reside offsite. While this is common enough to have been proven a functional and safe option, company culture can put paid to the prospect of allowing data to reside outside the company’s IT bounds.

Program restrictions

Despite customizable referral program options, sometimes, not all campaign design ideas can be achieved within the Software’s limitations in terms of campaign logic, design, and channel integration. Also if marketers are using different systems for other marketing campaigns, then referral campaigns should seamlessly integrate with the overall marketing systems.

One may argue that the above can be addressed by opting to create and deploy in-house software, but that could require an altogether different level of expertise and budget compared to vendor solutions. This is especially true when it comes time to scale or update the system, which is fairly often as referral programs evolve across user industries.

ROI - Most Effective Customer Growth Strategy

When compared to other marketing programs, referral programs have shown very high results time and again. An often-quoted statistic is how Dropbox grew nearly 40 times on the back of a successful referral campaign and got 4 million users in 15 months. With that kind of returns, the investment on referral campaigns is recouped many times over.

The justification for the cost of setting up Referral Marketing is easy to see when the difficulty of running referral programs without software assistance is considered. Complex programs would be deemed too infeasible, and even those considered feasible would suffer from low participation, incorrect tracking, inadequate communication, and low effectiveness and morale overall.

The software doesn’t just give a shot in the arm to your referral program. The software transforms your programs and makes them far more advanced while keeping them easy to run. The analytics-driven insights that you get access to informs your approach to other aspects of marketing such that your returns are markedly enhanced in those too.