More and more companies are generating real revenue from referral and affiliate marketing channels. To maximize their effectiveness it’s important to understand how the channels are different, and create specific strategies for each. To create an effective strategy for a word-of-mouth campaign it’s helpful to understand the motivations of both affiliates and ambassadors.
Referral marketing is done via your brand ambassadors. Brand ambassadors are people who will shout from the rooftops, praise your product because there is something about it they love. For some ambassadors, it’s the product itself, or perhaps the company. Other ambassadors just want to be the “first” to let their friends know about your product. Whatever the reason, their motivation isn’t entirely financial.
Affiliates are more likely to be incentivized by a financial gain. They probably have less of an attachment to your brand. Typically ambassadors know the person they are referring the product to, affiliates do not.
One of the easiest ways to inspire referral behavior is to play on their motivation for sharing. An easy way to do this is by adjusting the reward structure of your referral program. Here are three alternatives to a financial reward structure that you can use to incentivize ambassador behavior.
Reward Structure: Dual-Incentive
Works best for: Any
Communicates: “I love this product. You’re going to love this product. Trust me. Here’s 20% off to give it a try.”
Why do we share so much on social media? It’s obvious, because we want to be liked. To many, being liked is more important than financial reward. What’s the easiest way to be liked? Give gifts of course! You can create gifts that your ambassadors can give away by structuring your commissions using a dual-incentive reward structure.
A dual-incentive structure rewards both the referrer and the new customer. An example would be when an ambassador is able to give away a one time 20% discount to the referral for signing up (SaaS), or $10 off the referral’s next purchase (ecommerce).
Reward Structure: Swag
Works best for: Ecommerce
Communicates: “I love this product so much I want to wear it!”
Branded swag is a great way to build trust between ambassadors & referred customers. If the referred customer discovers that the ambassador is earning branded swag as a commission, the discovery will reenforce trust in the recommendation.
Branded swag has the added bonus of being a great conversation starter.
Reward Structure: Product
Works best for: SaaS
Communicates: “You will love this service so much. I love it so much that I want more of it. That’s how much this has changed my life.”
One of the best ways to incentivize user behavior is to determine what is your currency. What value are you providing your users?
Dropbox asked themselves this question and determined that it was extra storage space. Once they understood what their currency was they were able to offer the extra space as a referral commission. As a result the number of referrals dramatically increased.
Affiliate programs and referral programs are similar, but different. To maximize the effectiveness of your campaigns, consider the motivation of your users, and try and reenforce those motivations through your incentive structure.
For more information on incentive structures, including calculating for CAC & CLTV, check out our free resource “How to Choose the Right Incentive Structure.”