Let’s begin with the point about best customers. The referral programs that we see today do not factor in the differences between their customers. As such, there is a lowest common denominator element across these programs. Thus, they are limited to offering small incentives.
Just as brands should use CLV to segment their customers and create a differentiated experience for their best customers (what I have termed as Velvet Rope Marketing), they need to do similar for their referral programs – use the same segmentation and create a different program for their best customers.
The key reason for this is that while all customers may not have an affinity towards the brand, the best customers do! They are the most loyal, highest spenders and have the greatest lifetime value. As such, they are willing to overlook all deficiencies with the brand or products (if any) and ignore competitors. They will thus be also willing to champion the brand to others – if asked and if given an incentive. Some may do so on their own – but recognition of their contribution can give a fillip to the referral activity.
And yet, no brand that I have come across has a referral program that is focused on just their best customers. In fact, most brands do not know who their best customers are. Solving both of these problems can be a big booster tor revenues. This is because not only will the best customers appreciate the special experiences, they will also help get more like them – more future best customers. This will be many times more cost-effective for the brand than running ad campaigns to a wider audience.
All we have to do is to think about ourselves as customers. We know people like us. And if we are the best customers of a brand, it is very likely that the people we know could also become best customers of that brand. This is the growth flywheel brands need to create.
Tomorrow: Rethinking Referral Marketing (Part 9)