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Case Study: How One Company More Than Doubled Customer Referrals

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In this article, you'll learn...

  • One company's success story about its customer referral program
  • Four tips for creating a referral program that'll boost sales

Company: Roku
Contact: Lomit Patel, senior director of direct marketing
Location: Saratoga, Calif.
Industry: Electronics
B2B/B2C: B2C
Annual revenue: Confidential
Number of employees: 110

Quick Read

Have you heard of Roku? You likely have if one of your friends or family members is a customer, because Roku offers its customers a free month of Netflix for each online purchase they refer.

Plenty of companies have referral programs, but how many can say theirs converts at about three times the rate of other online marketing campaigns and brings in over 500 new product sales each month? Read on to learn what Roku did to make its customer referral program a huge success.

Challenge


Roku Inc. is the maker of streaming entertainment players that connect to consumers' televisions via wireless high-speed Internet to enable streaming of hundreds of thousands of movies, TV show episodes, sports shows, music, photos, and more. It does so via partnerships with Netflix, Hulu Plus, Amazon Instant Video, Pandora, UFC, Facebook, Flickr, among others.

Roku customers are passionate about the company's products, and they aren't too shy to talk about them, either. The company often receives enthusiastic feedback via email, and customers chatter about its products on social media sites. But what surprised the company most was when it surveyed its base and found that roughly a quarter of its customers learned about the product via family and friends.

Clearly, word of mouth was playing a key role in Roku's success, and the company sought an effective way to amplify those activities.

"With competition increasing in the marketplace, our goal was to encourage more people to talk about our products by making it easy for customers to share referrals and recommendations, especially online and in social media," said Lomit Patel, senior director of direct marketing at Roku.

Campaign

Roku worked with San Francisco-based social engagement marketing platform provider Extole to implement a formalized referral program that offered current customers a free month of Netflix for each new customer they referred who then purchased from the company's e-commerce site. (The company's products are also sold in retail outlets, but Roku can track referrals only for purchases made on its site.)

The program was introduced to customers via mentions on the company's Facebook page and Twitter account, and in its monthly e-newsletter. In addition, new customers began receiving an automated email about 45 days out, informing them of the program; and now, all customers receive a dedicated email approximately once per quarter.

"Email is the main driver, and the automated email to new customers works best," Patel noted. "They're in that 'excited about the new shiny toy' phase, and they want to talk about it."

All promotions include a link that drives customers to a Roku-branded registration page on the Extole site. The registration process has been kept simple: only customers' names and email addresses are required before enabling them to import or manually enter friends' email addresses or post to their Facebook pages, Twitter accounts, and blogs. The page also provides custom links and embed codes for additional sharing activities, and it gives users the option of personalizing the messages they send or using canned text. Customers then receive an automated email confirming each referral they make, and another if the person they referred purchases from the Roku site.

Results

Within one year, more than 40,000 customers joined the referral program, and registrations have continued to grow at a rate of about 8,000 new accounts per month.

"Our placements are working to generate awareness," Patel said.

Customers now make around 10,000 referrals through the system each month, and conversion rates for the referral program are about three times higher than those for Roku's other online marketing activities, including display advertising and search.

The program now results in an average of 500-600 new product sales per month, and Patel says it directly accounted for more than $230,000 in revenue generated over the previous six months.

Lessons Learned

Patel's advice for launching a successful customer referral program includes the following:

  • Test your incentives. Initially, Roku offered a choice of rewards for referring a sale, ranging from cash to gift cards to charity contributions. But in surveying its customers, the company found that 80% of its base consists of Netflix users—a key reason they buy the Roku product. When Patel's team later reached out to customers to gauge their interest in various incentives, a free Netflix subscription was the winner, hands down. Approximately three months after program launch, the company changed its reward structure so that only the Netflix option was offered, helping to make the program more successful by increasing registrations (which grew from about 1,000 per month to 8,000 per month), referrals (which doubled), and product sales (which increased about five-fold).
  • Simplify the registration process. Make it as easy as possible for customers to get started, and avoid asking for too much information, which can scare them off.
  • Don't discount email. Social media may be the hot channel everyone's looking to for customer recommendations, but Roku found that more than 70% of its program registrants chose email for referring their friends.
  • Follow through. Keep customers happy and motivated to refer more of their friends by ensuring you have the proper systems in place to track referrals through to the purchase stage, and reward customers once the purchase is made.

Related Links

Roku referral program signup page

Roku website

Extole website


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Kimberly Smith is a staff writer for MarketingProfs. Reach her via kims@marketingprofs.com.

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Comments

  • by Dan Soschin Wed Aug 3, 2011 via web

    It's easy to generate referrals when there are incentive programs in place. Remove the incentive and referrals become a real challenge.

  • by Erin Anne Beirne Wed Aug 3, 2011 via web

    What a geat example of finding a "perfect" fit between the product and the referral incentive! Funny thing is, looking back the choice seems so obvious, but looking forward before they landed on this idea, I'm sure it wasn't so clear, as suggested by the range of options they used to provide. I will definitely keep this example of the value of finding a great incentive (and not a gimmick) in mind because this case study shows it's worth the effort.

    What's even more challenging, though, is how to earn referrals when incentive programs are not allowed, such as in the financial services industry (Canadian regulations).

    Any thoughts on that front?

    Thanks,

    ea/

  • by Lori Bush Shepard Wed Aug 3, 2011 via web

    Erin, in cases where incentives aren't allowed, think about services you can provide the organization itself -- additional consulting/support, discounts on future purchases, opportunities to speak at conferences, etc. It requires more creativity, but it is possible to come up with a compelling hook if you know your audience well.

  • by Dan Soschin Wed Aug 3, 2011 via web

    I think everyone is missing the point. I discount is an incentive. Additional consulting is an incentive. Conference attendance/speaking is an incentive. There are many industries where you cannot provide incentives. That's where true marketing comes into play. Emotion, passion, the things that really make people want your product/service... and appealing those these types of positive experiences and emotions to compel others to refer you... Things like sharing videos, testimonials, case studies...

  • by SpencerBroome Wed Aug 3, 2011 via web

    Largely agree with Dan.

  • by Erin Anne Beirne Wed Aug 3, 2011 via web

    Hi Lori,

    Thanks for your suggests. Unfortunately, no incentives can be given in my client's industry, and, as Dan says, discounts or additional services are included in that category.

    My clients' clients love them, and many have been with them for many years, but somehow getting that next step of earning a referral is a little more challenging than we might expect. People are very private about their financial matters, and many even keep the fact that they have an advisor private from friends and family.

    Dan, I'm going to reflect on your suggestions about case studies, etc. There might be something to your suggestion; maybe some clients would be willing to share just how much benefit they have derived from my clients' services if we just find the right way and time to ask.

    Thanks for your thoughts, everyone!

    e a/

  • by Sarah from PostcardMania.com Fri Aug 5, 2011 via web

    Great article, interesting that 70% chose to share via email over social media. Good to know! We currently offer customers $100 credit with us when they refer someone who buys and we are rolling out an improved referral program giving them more ways to share content and refer so this article came at a good time!

    -Sarah Kicinski
    www.postcardmania.com

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