Know-How Exchange : Strategy

Hi Matthew,

This is a very tricky question indeed. On the one hand, referral programs typically are very effective; eg:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1129351&rec=1&s...

Because of several reasons:
1) prospects respond better to referral from friends than to paid marketing activities
2) your members tend to refer folks who are like them, increasing your chances of serving them successfully
3) referred members tend to stick longer with you; as the social relation with the referring member makes them think twice about dropping the membership.

On the other hand, PAYING members to bring in other members (i.e. 'fertilized WOM' in the above article) may be less enticing for the referred member as 'organic WOM'. Your own customers, who were driven only by their love for your services before, may now go out of their way to refer zillions of acquaintances, many of whom may not be profitable for your company. For these reasons, companies are typically very subtle about the payment; i.e.
1) do not broadcast it extensively so that prospective members figure it out easily. Instead, communicate and give it discretely to refering members
2) instead of giving a large amount of money, give membership related services (eg fast checkin, preferential treatment,...) which reward your best members and further enhances their loyalty

Would love to hear what our colleagues have to say on this....

Cheers,

I have a friend who works at Geico. Their Cash 4 Quotes program is for employees to refer friends and family. It is wildly successful. Some associates have referred hundreds alone. So here is a case study.

The attributes I credit its success to are these: it's unobtrusive. We all know friends who work with insurance companies where their best friends avoid them cause they are pushed to sell their friends. In fact, at Geico, you cannot quote (much less sell) someone you know.

2nd-- associates are paid whether they make the sale or not. An associate earns $15 just for the quote. Rules are: you just can't lay the cards on the counter at the gas station. In fact, if another Geico associate sees it, they are instructed to pick them up and give them to the gal heading the program -- and they'll counsel the associate. They are clear you must have personal contact with this person.

They have a signature creator feature allowing referrers to create a Geico signature that is used on personal emails.

Next, associates have used this as a fundraiser. The #1 referrer in Macon GA donates almost all his bonus $$ to various nonprofits.

Now, the "paid whether they buy or not" may sound fishy to you. Nationwide, this program has directly contributed to over 100K policies.

Which brings me to the last point. All the effort you do in the MGM program is lost if the person on the recieving end doesn't know how to close the sale. Its not about the $$, their training is "the price is the price, you still close the sale no matter the price" and they are confident their agents are trained to close the sale. And the culture of the org must be one to support this program.

Now I know this is an associate program but I am sure you can see how adaptable it could be for a MGM program. And while you are at it-- include the associates! Instead of rewarding $15, give them a month (or whatever) paid forward.

Hope that helps