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Reframe How You Think About Referrals

By Evan Snively, Senior Client Engagement Associate

No matter what business you are in, referrals play a critical role in its ability to thrive. Need proof? 

According to Nielsen, 92% of consumers state they trust recommendations from their family & friends above all other advertising channels and Harvard Business Review cites that an overwhelming 84% of B2B decision makers start the buying process with a referral. 

Maximizing the utility of this channel should be a top priority for every marketing team, and understanding this one common misconception will help you unlock a more impactful referral strategy for your brand: 

Referrals are not about the brand or product being referred, they are about the person doing the referring.

Their credibility. Their status. And yes, their motivation – whether that be intrinsic or extrinsic. So, before you write out any rules or incentive structures, challenge your team to first focus on understanding the different dynamics that a customer will experience by choosing to promote your company – and how the way you choose to motivate them will shape those dynamics.  

For instance, only 38% of people say that they trust advertisements when it comes to getting information about products and services. A major influence on that lack of trust stems from the knowledge that a brand is paying money to convince you to buy from them. So why is it so often that brands jump to the same approach when incentivizing referrals, casting away the most powerful differentiator they can leverage from that channel – trust.  

By offering a financial incentive, you are undermining the trust of the person receiving the referral. If they know up front that their acquaintance has a financial incentive to sell them on a brand, the message will lose much of its power. And perhaps worse, if they find out after the fact that their friend or industry colleague received compensation for being your salesman, that could strain a relationship in a way you don’t want your brand associated with. Yes, sometimes paying for referrals will produce the result you want; I am not advocating that financial kickbacks are never the answer – but they shouldn’t be the default answer.   

The alternative is to appeal to the human side of the referrer, rather than the economic side.  

Here is where the power of framing comes into play. Most economic-based referral strategies frame the act of a referral as a favor to the brand. “You are doing us a solid, so I will compensate you for it.” That approach removes power from the company and places it in the hands of the referrer.  

Instead, explore framing the act of providing a referral as a privilege, not a favor.

This activates a different aspect of the brain than the traditional approach. Motivating the ego (in a good way) which is a very sticky (again, in a good way) proposition.  

Here are two examples of how that shift in approach could be executed.  

In a B2C setting: 

Instead of offering $50 to any customer if they can convince one of their friends to buy your product as soon as they join your ecosystem, identify when peak satisfaction tends to occur in the customer journey and *unlock* a personal referral code for them at the moment that they are most likely to be a genuine advocate. And instead of giving that $50 incentive to the referrer, repurpose that budget and leverage pro-social behavior by providing a credit solely for the new customer. Finally, provide a finite number of these pro-social referrals your customers can utilize. Instead of a spray & pray approach blasting their code in a shallow manner on social media, you will see a surgeon-like precision of their utilization – customers protecting their “golden tickets”, and only distributing selectively to close contacts who are honored to be given access to this scarce opportunity.  

While you might think that approach will provide less motivation and lower potential to acquire customers, it actually puts your customers in a better position to make a referral and the customers you do acquire will be of higher quality. Why? 

  • It takes the suspicion of self-motivation off the table from the perspective of the referral and replaces it with a sense of generosity and connection to the person doing the referring.  
  • It imparts status to the referrer, because not everyone even has access to utilize this benefit – which will make them more likely to look for opportunities to do so.  
  • It keeps the power within the hands of the brand all while creating a channel for your company to thank existing customers, by giving them something of value, instead of asking them to source value for you.  

In a B2B setting: 

The cost of purchases in the B2B space can make it extremely difficult to put a dollar amount on the value of a referral and asking for cold referrals can be like pulling teeth – inserting tension and unease into what would otherwise be a very healthy relationship. That is why creating very clear mutual benefit is the name of the game. How can you leverage the professional networks of your business partners while simultaneously elevating their status within those networks? 

One low-pressure pathway to achieving exactly that is to recommend a co-branded webinar between your entities. While not a traditional “referral,” it will achieve many of the same objectives: brand awareness, brand endorsement, showcasing a need, and the development of a clear business case – all while leveraging a partners network. The best part? The mutual benefits are clear: 

  • Validate the value that you are bringing to your client, reinforcing their decision to utilize you as a partner. 
  • Elevate your client contact within their own organization by helping them craft a memorable narrative that can be shared with their management to showcase the value of the projects under their care.
  • Provide your client with an opportunity to raise their own profile within their external business network, by being outwardly validated and showcased as an expert in their field.  
  • Have your client promote your company to a wide audience within their own channels in a low-pressure environment that leads to hand-raisers vs. cold-callouts. 
  • Your company receives the co-branded endorsement of an entity, rather than just an individual. 
  • Create a business case that can be utilized with future prospects. 

 At the end of the day, every company must craft their own unique referral strategy (and it’s the unique ones that usually break through the clutter). When your brand is purposeful about designing a solution that provides just as much benefit for the referrer as it does for your own business you will get better referrals, and you will find that those advocating on your behalf will develop a stronger tie to your brand.  

If this blog has piqued your interest and made you think about ways to optimize your own referral strategy, we encourage you to reach out for a deeper conversation with Chapman & Co.’s Customer Experience Team. Our Team is full of experts in human behavior who specialize in helping companies create pathways that turn customers into passionate, permanent brand advocates. 

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