Reward Me!

Programs that reward product referrals are a nice perk for consumers. Customers may get a cash reward, a discount on future purchases, or other types of prizes if they recommend a product to someone who eventually buys it.

Before jumping on the rewards bandwagon, though, it's best to know what tactics work best, based on the latest research. Here are a few tips to consider:

WHO you reward matters. If the referral is between people with strong ties, such as "friends and family," it is advisable to reward the new customer, or both people. With weak ties, rewarding the existing customer has the most impact on increasing referral likelihood.

WHEN the pal is close, the referral is more likely. When there is a strong tie between the consumer and the referred person, there is a greater likelihood the recommendation will be acted upon. Close friends may well make referrals without the offer of a reward at all. On the other hand, if there is not a close relationship, a reward will increase the likelihood that the customer will make a referral.

HOW to bolster weaker referrals. Since consumers make referrals to people with whom they have strong ties first, incentives matter over time. What can you do to boost their referrals to weaker ties? Increase the size of the reward as the number of referrals increases, or reward the consumer who makes a certain number of referrals. 

The Po!nt: Savvy marketers can boost referral rates. The key is knowing the who, when, and how of a good rewards program.

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