Since the dawn of digital, CMOs have been chomping at the bit to recruit Millennial brand ambassadors in a sustained effort to cultivate brand affinity, build cachet, and garner rapport. In fact, establishing credibility on the backs of Millennials has become far more of an obsession than a tactical approach. Nevertheless, courting them has proven to be a chief strategy that’s paying massive dividends for marketers. In the United States alone, 80 million Millennial shoppers spent $600 billion last year, a tab that is projected to reach $1.4 trillion by 2020. The sheer volume of annual revenue fueled exclusively by Gen Y has entire industries doubling down on mega-marketing initiatives. However, the one surefire strategy that has consistently achieved top-tier results has been referral marketing, which doesn’t actually market to Millennials at all. Instead, it markets through them.
A study by Texas Tech University found that “83% of satisfied customers are willing to refer a product or service but only 29% actually do.” With the power that referral programs wield as a customer-acquisition channel, it seems companies are missing out on a major opportunity. Instead of customer advocates driving acquisition, a lack of customer engagement with your referral program means that you are spending more time and money trying to find and convert new customers from increasingly expensive, complex, and low-quality sources. This raises a question: “If customers are satisfied and willing to share, why aren't they?” To find out why, we have to start by looking at how to design referral programs to encourage sharing and keep them top of mind.
<p>Customer referrals are are among the most sustainable and cost effective ways to grow a business. Referral marketing is the process of proactively managing and accelerating customer referrals. Referrals can be accelerated by prompting customers to share at points of delight within your product and making it very easy to share. A/B testing prompts and sharing steps can help you optimize your referral rates. An NPS (net promoter score) survey is a good way to assess the likelihood that someone is willing to share your product. While referrals are largely a function of customer delight for a product, some product categories are more likely to drive referrals than others. An example of a category that would likely have a low referral rate would be adult diapers, because people may be too embarrassed to admit to using them.</p>
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