Today, having a referral and loyalty program for your DTC brand is table stakes.
Your customers already expect to be rewarded for their loyalty to your brand, and they expect personalized experiences throughout their pre and post purchase journeys. That makes it difficult to continually surprise and delight your customers, and incentivize them to come back.
Watch the event replay or read the article below for details on how you can go beyond cookie-cutter executions of referral and loyalty programs using integrated data and automation. You don’t want to miss the examples from Imperfect Foods, a sustainable, affordable and convenient grocery delivery service that partners with Friendbuy and Twilio Segment to activate their customer data with relevant personalized communication and a referral and loyalty program.
Step 1: Launch Referral & Loyalty Programs using Best Practices
The very first step to leveling up your referral and loyalty program is by assessing what you currently have in place. Let’s start with referral programs.
Why Implement a Referral Program?
There are three main reasons why brands choose to implement referral programs today.
- High margin growth - Every customer that you acquire through a referral is one less you have to acquire through an expensive paid channel such as Facebook or TikTok.
- Identify your best customers - It’s often the case that your best customers are your best advocates, and you usually acquire your best customers through word-of-mouth – a referral program operationalizes that behavior.
- Increase customer lifetime value - Referred customers often convert way faster and at higher conversion rates than other channels, and they deliver higher lifetime value. In fact, Friendbuy customers typically see referred Friends convert five times faster than other channels and their lifetime values can be three to four times higher.
Keeping Low Cost-Per-Acquisition
One key benefit of implementing a referral program is achieving low CPAs. Like, really low. With a referral program, you’re getting an existing customer to bring you a new customer, so it makes sense that your cost per acquisition would be pretty low.
As you can see above, referral programs can deliver CPAs in the low single digits. Now it’s often said that ecommerce CPAs on average hover around $50, so anything below $10 is very compelling.
And when it comes to return on investment, marketers usually consider an ROI of four to five times as pretty solid. With Friendbuy powered referral programs, we see ROI from 20 - 25 times, making referrals far and away one of the most efficient and profitable ways to acquire new customers.
Referral Program Formula for Success
So how do you set up a referral program to achieve those kinds of results? Friendbuy has developed a set of best practices to get you there. What you need to always remember is that consumers like to refer on impulse.
Which basically means they’re most likely to refer when they’re having a conversation about your brand with a friend or when they think of someone to refer. Friendbuy calls these “impulse referrals,” and to get them at scale, you need three ingredients:
- You need strong program awareness, because your customers need to know that a referral program actually exists.
- You need accessibility, such that your program is really easy to get to.
- It has to be really easy to use, we’re talking super, super simple to refer via text or email, or to copy / paste your referral link and share it via Slack or Teams.
Best Practice Number One: Primary Call-to-Action
One of the most important best practice recommendations is a primary call-to-action (CTA). You need a CTA that your customers can get to within five to ten seconds of having that impulse to refer. You can put the CTA in your main menu navigation, or for a mobile app, in the drop down hamburger menu. In the below example, Spanx has a ribbon on their homepage that says ‘Get $20’, which then triggers the overlay for people to share.
So imagine two friends are talking at a bar, your brand comes up in conversation, and one of them says, “here, let me refer you.” With an easy-to-find primary CTA, your customer is able to refer within seconds. But without a primary CTA, your customer has to dig, which creates friction that will lead to you losing a lot of referrals.
Friendbuy typically sees 46% of referral revenue coming from a placement like this. Plus, a primary CTA is also great for building program awareness.
Best Practice Number Two: Dedicated Promotions
Another best practice is promoting your program consistently so that it is top of mind when the impulse to refer occurs.
In this example, Away promotes their program with a dedicated email. Away sends this email to every new customer to introduce them to the program. When the customer clicks through, they arrive on the dedicated landing page on the right, which describes the referral program. Away also puts CTAs for this page in all newsletter emails, and they promote it on social media.
If you follow this approach, you can generate 30% of your referral revenue from off-site promotion.
Best Practice Number Three: Seamless Referred Friend Experience
Now let’s look at the experience for a Referred Friend. You should now be set with your Primary CTA, have a great offer, and your customers are sharing a ton. To convert all those Referred Friends into customers, Friendbuy recommends a funnel that is simple and compelling.
You want Referred Friends to know exactly what’s being offered and how to take action, without any distractions. Imperfect Foods does a really good job of this. Below, the email on the left shows what a Referred Friend would receive from their Advocate Friend; the offer is clear and so is the CTA. When the Referred Friend clicks through, they arrive on the well designed landing page on the right that reinforces the offer and how to claim it - with no distractions.
Best Practice Number Four: Optimize Offer Management
For your referral program to succeed, you need a compelling offer. Friendbuy also highly recommends you keep things fresh by boosting your offer from time to time or by running periodic referral contests. Doing so really keeps your customers engaged and is proven to drive performance both in the short-term and long-term.
And with Friendbuy, it’s a piece of cake for your marketing team to change referral offers at will. The example above is a referral sweepstakes from Smile Direct Club, where Advocates can win a $500 gift card of their choice. On the right, we have an example from Bloomscape where they ran a boosted offer on International Friendship Day. Other opportunities for boosted offers include Valentines day, end of summer sales, and of course, Black Friday and Cyber Monday.
Now that we’ve covered how to optimize your referral programs, let’s dive into loyalty programs.
Why Implement a Loyalty Program?
As a brand, you likely know that loyalty programs can help you increase customer lifetime value. But, how?
First and foremost, a loyalty program connects consumers to your brand. If you want to stay top of mind when a purchasing decision is about to be made, a loyalty program is a great way to accomplish that.
Secondly, loyalty is a frequency driver. Most loyalty programs are gamified in some way to drive purchase frequency.
Thirdly, you might release new products from time to time. You can use a rewards program to jumpstart new product sales within specific customer segments.
And finally, collecting first-party data continues to be important as privacy concerns make it more difficult to leverage third party data. A loyalty program is an excellent way to collect first-party data in a value exchange between you and your customer.
Some well-known loyalty programs include Sephora, Nordstrom, Starbucks, Delta, The North Face and more. Each program is unique and tailored to their audience - meaning the rewardable events are different, and so are the rewards.
Starbucks uses challenges in their loyalty program - for example, complete the challenge, earn bonus rewards. AMC rewards you by letting you stand in a VIP line for concessions. And consider Sephora, who has one of the most successful loyalty programs ever. If you’re in the beauty industry, you probably know the importance of product sampling. Sephora’s program is set up so that customers are rewarded with samples of new beauty products. That’s a great way to delight customers and introduce them to products that they may later go on to purchase.
The takeaway from these examples is that truly successful loyalty programs are not cookie cutter. To achieve strong customer connection, you need customizability and authenticity.
How to Build a Loyalty Program
As you’re designing a loyalty program for your business, consider the following three questions:
- What rewardable events matter most for your business?
Standard events include things like subscribing to email & SMS, and collecting birthday information. But you might also want customers to download your mobile app, and make their first in-app purchase. Or if you’re a subscription box, maybe you want users to customize their box because data shows that customizing a box leads to higher lifetime values.
- What rewards make the most sense for you?
Is it redeemable points or coupons? Or do you have a high consideration purchase with a low repeat purchase rate, so maybe third party gift cards are best for you. Or, maybe you’d like to offer truly custom rewards, like monograms if you’re selling luggage, or special access to events just for your VIPs.
- What business rules do you need in place?
You’ll want to establish a set of business rules to ensure that your program is profitable. Such rules can include things like minimum purchase thresholds or limiting rewards to certain SKUs.
Once you’ve asked those questions and have buy-in from your leadership team, you can look at building your custom loyalty program. Below is an example of Friendbuy’s interface for configuring rewardable events. All the most common ones are included such as making a purchase, taking a survey, and subscribing to SMS. You can also send custom events like downloading a mobile app or buying a specific SKU.
Customer Experience and Loyalty
In terms of customer or user experience, you want to make it really easy and obvious for your customers to redeem their rewards. It can be at the checkout, where the customer applies points to their cart. Or maybe a customer redeems a basket of goods with the simple click of a button. And no matter, your customers should also always have an easy way to track their rewards and see how they can earn more.
Now that you know how to launch referral and loyalty programs using best practices, it’s time to take it up a notch with integrated customer data and building strong relationships with customers.
Step 2: Unify and Integrate Customer Data to Build Strong Relationships
Personalization is no longer a nice to have in marketing.
That’s why customer data platforms (CDPs) have grown significantly in the last few years. Companies are doubling down on being customer first, meaning they need to have personalized interactions with customers. For example, leading CDP provider Twilio Segment, has 5.8 billion end users, and works with over 25,000 businesses.
Today, the average person is overwhelmed with generic marketing messaging, otherwise known as stale marketing. The key to not having stale marketing is really knowing your customer in a personalized way, and building relationships through relevant interactions.
But, as companies transition to a more personalized approach to customer communication, you can come across a range of challenges. First being that the number of touchpoints that contain user data is growing, leading to disjointed customer experiences across channels. Being able to collect data from all different touchpoints, and find a way to link those events and actions to individual customers in order to act on them is difficult.
You also might run into governance challenges, as you ensure that the data is in a consistent and complete format so that it can add value in activation channels.
That’s why unified, integrated customer data is essential to develop a 360 understanding of each customer, helping you build a personalized relationship with them and ultimately reducing churn and increasing return on spend.
Making Data Accessible to All Teams
CDPs like Segment can provide clean and reliable customer data which can benefit every team at your company.
Many businesses today have complex tech stacks, which means important customer data is living in disparate systems. In order to try to make sense of that data, your team can waste countless hours trying to connect each system. And even the most sophisticated of homemade solutions are difficult to scale and expensive to maintain.
Here’s the difference that a CDP can make for individual teams:
- Engineering teams can focus on core products and building personalization into their product experience
- Marketing teams can optimize marketing channel spends, ensure relevant messaging is sent to each individual customer
- Analytics teams can trust that data is accurate and complete, integrated across all sources of customer data, and understand the complete customer journey
- Product teams can focus on building sticky products that continue to add value to customers
A CDP has immense cross team benefits and reduces investment in integration support, so all teams can get clean customer data they need, when they need it.
Using That Data To Personalize Customer Experiences
As seen above, CDPs can help you collect, process, aggregate and activate invaluable customer data, to enhance experiences throughout their journeys. It empowers teams to collect data from any platform, system, mobile, web, or more. It helps synthesize this data, and create a single view of the customer - enabling cross-channel orchestration that deepens relationships with customers.
CDPs also help ensure that data is clean, safe, compliant with data legislations, tracked, and universally consistent across the organization.Finally, it activates this data by sending it to downstream channels and systems like Friendbuy to make the use of connected tools more powerful.
This is where leveling up your programs really begins. As you can send integrated customer data from Segment into your Friendbuy powered Referral and Loyalty Programs.
Top Use Cases for Integrated Data
- Customer Data Infrastructure is fundamental. It ensures that your data flows in a connected way, consistently from source to destination. This creates a unified, data pipeline.
- Stack Modernization. Often times, a CDP like Segment is put in place as part of a digital transformation project. A lot of businesses transition from legacy systems to a more modern stack, and implementing a CDP first makes adding the rest of your tech stack a lot easier. For example, Segment has over 400 pre-built integrations so as you’re building out your stack or moving to a new stack, activating those new technologies is much easier.
- The Customer 360 View. Now this is where the true value of a CDP is unlocked. This is why marketers love CDPs, because we help them create audiences, segments, and cohorts, and orchestrate journeys involving multiple channels.
- Insights and Analytics are another core use case, as most analysts want data that is de-siloed. All anyone wants is data that is connected and tracked properly.
- Data Powered Customer Experiences. This ties back to the customer 360 view, where personalized journey orchestration leads to an increased return on ad spend and retention.
Now that you know how a CDP can help you unify data and build strong customer relationships, let’s look at the final step - connecting your data to your referral and loyalty programs.
Step 3: Level Up Your Referral & Loyalty Programs with Integrated Data
Congratulations - you’re now ready to see how integrated data can bring your programs to the next level!
Customers of Friendbuy and Segment can integrate, launch and optimize a referral and loyalty program seamlessly.
Friendbuy integrates with the Segment web destination and cloud destination actions frameworks, which allows merchants to easily integrate Friendbuy directly from the Segment workspace and map events that you’re already sending to Segment from Friendbuy. Segment will also notify Friendbuy when a Referred Friend converts, so Friendbuy can attribute the conversion and reward them accordingly.
This eliminates the burden on your team to track conversions because it all happens automatically behind the scenes.
Now, let’s take a look at this in action, with examples from Imperfect Foods.
How Imperfect Foods Has Levelled up Their Referral And Loyalty Programs
Imperfect Foods is a grocery delivery company on a mission to fix the food system. They were founded in 2015, and are at the forefront of eliminating food waste and building a better food system.
How? They work directly with farmers and producers to rescue, redistribute, and develop goods across grocery categories, including their own private label offerings. Their customers enjoy a fully customizable service that is more affordable and more environmentally friendly than the average trip to the grocery store.
Here are some of the amazing things Imperfect Foods has accomplished since launching:
Imperfect Foods has partnered with Friendbuy on their referral program since 2018. They started with an evergreen program to give customers a way to tell their friends and family about their service and therefore acquire new customers.
In 2020, they began experimenting with multi-channel referral program campaigns to support moments that are really important to their brand and customers, such as Earth Month. In 2022, Imperfect Foods is moving to Friendbuy’s next generation platform with Segment to enhance capabilities and improve customer experience.
“We’re really excited, we’re going to be revamping our referral offering, experimenting with new moments and new rewards, and much better personalization with Friendbuy and Segment.” - Ben Kane, Senior Growth Product Manager, Imperfect Foods
For Imperfect Foods, the referral program has been extremely successful for both their business, and their customers. Below is a quick snapshot of some of the results they’ve seen to date.
One way they accomplish these numbers is through their partnership with Segment. There are three main things that Imperfect Foods is currently doing with Segment:
- Unifying customer data. By sending all their customer data to Segment, they’re able to provide downstream channels such as Iterable, Qualtrics and Optimizely, as well as their own services, a unified understanding of their customers.
- Decreasing data silos. That unified understanding of customers means they’re decreasing data silos across the team.
- Faster time to activate new tools, features and services for their customers. We’re able to launch tools and run tests at a much faster rate than we’d be able to if we were building and maintaining their own data platform.
What’s Next for Imperfect Foods’ Referral & Loyalty Programs
After talking to customers, there are three main areas where Imperfect Foods sees opportunities with their referral and loyalty programs: scale, personalization and delight.
- Scale - Lets dig into that first. While they executed a few ad hoc campaigns around brand moments over the years, they now want to increase the velocity of campaigns and testing. Another way they’re looking to increase results with Friendbuy and Segment in the future is through a tiered referral program. By developing a tiered reward structure, they’ll be able to gamify the experience so that Advocates can earn increasing rewards for referring more friends. As an example, they can reward customers $10 for every referral up to seven referrals, then increase the reward to $20 for referrals seven to ten, and so on.
- Personalization - The second opportunity area is around personalization. By sending customer data and events such as purchases, sign ups and other important events from Imperfect Foods to Segment to Friendbuy, they’re able to experiment with personalized landing pages or specific rewards for moments. For example, they can reward a customer that’s been purchasing for over a year. They’ll also be leveraging Friendbuy’s integration with Iterable to incorporate referrals more deeply into their cross-channel marketing strategy, including SMS, email and push notifications.
- Delight - Finally, the third opportunity is around delighting their customers. Today, their referral program only has a single reward. In talking to customers, it was clear that they want more rewards.
They’re starting with the new tiered referral program, which unlocks increasing rewards based on the number of referrals a customer generates. They’ll also be exploring other ways to delight customers with rewards for actions they take, like items purchased and more.
If you’re interested in learning more about how Friendbuy can help you level up your referral and loyalty programs, feel free to book a meeting here. If you’re interested in learning more about how Twilio Segment can help you unify your data and build customer relationships, reach out to their team here.