refer a friend marketing

01.09.2020

Customer Service  |  6 min read

Referral psychology: what motivates customers to refer a friend?

Created with Sketch.

Laura Dolan

The most ideal and organic way to grow your business is by referral. Success in any industry can be attributed to “who you know” or “word of mouth.”

There’s a certain degree of responsibility that comes with referring a friend to a business or a product. Can they trust you? What if they end up hating it? What if it ruins your credibility if what you recommend doesn’t yield the same positive outcome for them as it did for you?

There’s also a reasonable amount of psychology behind it. What motivates us to refer a friend to something? Why do we care how they would benefit? What’s the incentive behind it? Does referring a friend to a product strengthen our sense of belonging to society?

The following is a breakdown of why we feel referring-a-friend marketing is not only a natural way to drive success into a business, but how it helps us connect socially.

The motivation behind refer-a-friend marketing

As people, it’s in our nature to be social; it’s hardwired in our psyche to share a personal connection with those around us. We look at our society as a tribe, and in an effort to strengthen that tribal feeling, we’ll risk putting ourselves out there by joining meet-up groups, going to happy hour to connect with colleagues, posting on social media to feel that interaction and bond, we also like it when we share a common interest in certain TV shows, movies and different products.

That’s where “refer-a-friend marketing” comes into play. We want the affirmation that what we enjoy is what other people will also enjoy or think is cool. It creates a sense of acceptance and belonging.

We also want to instill trust in our friends and family members. Recommending something to them yields a certain amount of risk, creating a sense of initial reluctance.

However, without risk, there is no reward. We have to trust our instincts that what we’re recommending will create a positive impact, instilling more trust in the business to which you are referring and in you.

Is it worth the risk?

When we contemplate whether taking a social risk is worth it, we create a conflict within ourselves as to whether or not recommending something will be accepted or rejected.

The significance behind exactly what you’re recommending is directly proportional to the risk. Referring a product or service to your friends can have a huge impact on how it affects your social belonging. Will you experience reciprocity? Will it break your trust? Are your intentions genuine?

Businesses that initiate rewards programs need to take their customers’ social risks into consideration, as this can potentially have an impact on their personal relationships and have a negative impact on companies’ conversion rates.

Consider the following sentiments:

  • My friends will see this as self-serving, and I don’t want to come off as disingenuous
  • I won’t look cool sharing this
  • My friends will think I’m spamming them
  • I don’t want people to think I’m doing this just to get a special offer
  • You can help your customers overcome these emotions by inspiring the idea of social gain that’s reinforced by how reliable your company/product is. If you decide to create a landing page devoted to your customer referral incentives program, include the following motivators in the copy:

  • My friends will appreciate this product/service
  • My friends will be impressed that I’m associated with this company/brand
  • My friends will perceive me as a provider of insider or expert information
  • My generosity (via the reward they’ll receive), not my self-interest (via the reward I’ll receive) is what will be reflected
  • Customer referral incentives

    Once companies understand the motivation behind what constitutes a successful customer referral program, they can implement a solid incentive program that will encourage their customer base to spread the word sans hesitation.

    Here’s where the risk yields the reward. Sometimes it’s as simple as receiving discounts, a gift card, or loyalty points when being incentivized to recommend a product or service to a friend. Don’t think of it as a bribe, think of it as a loyalty program where devoted customers can help find prospects and therefore, you have a built-in lead generation tool.

    The better the incentive, the less resistance you’ll have among your customers’ commitment to your offer. You also want to ensure your business’ intentions are pure and that you are first and foremost treating your preexisting customers as a priority by rewarding them handsomely. The last thing you want to do is put pressure on your already established customers and risk losing them.

    Also, have an efficient metrics system in place that determines how effective and successful your reward program was and how well you can improve it, if need be. Find a reliable process to track how many new prospects you accumulated via your rewards program.

    Is it cost effective?

    Ensure your rewards/incentives program is within your budget and that the ends justify the means. Instilling a rewards program that involves discounts and free items definitely affects your company’s bottom line. Did the referral campaign hit the quota you set? Did it generate the income you needed that motivated you to initiate the program?

    How both parties benefit

    Refer-a-friend programs not only help companies evolve financially, they help their customers gain social recognition and belonging just by recommending a product that instills trust.

    When done successfully, the expected amount of prospects will convert and preexisting customers will benefit with a memorable referral offer.

    Marketing teams that succeed at promoting referral programs strongly consider how social capital is the most influential psychological trigger to referral success, something that often gets overlooked.

    Companies need to be more focused on making their incentive programs as enjoyable as possible for customers rather than the mechanics of the offer itself. The offer needs to take emotion-fueled psychological factors into consideration that really convince customers of its socially beneficial outcomes.


    Was this post helpful?

    Subscribe to our newsletter

    Fresh small business insights and ideas delivered weekly to your inbox, gratis.

    Knowledge is power, get some more...