Study: 39% of Customers Make Referrals If Directly Incentivized

Our friends over at Software Advice, an evaluation company for marketing software buyers, shared some findings with us that correspond very strongly with our experience here at ReferralCandy. Thought we'd share!

What are the most effective tactics to encourage word-of-mouth referrals?

Which of the following core tactics would most successfully encourage customers to refer a friend or colleague to use the product or service of a “brand they love”:

1. Direct, monetary or material incentives such as discounts, free swag or gift cards.
2. Social recognition (e.g., the company thanking the customer or sharing their posts on social media).
3. Inclusion in a customer loyalty or VIP program, offering perks such as product previews and the chance to give the company direct feedback.

After evaluating more than 2,300 respondents who were willing to give referrals, Software Advice found the following:

39% of customers say they're much likelier to make referrals if given direct incentives.

Customers’ Likeliness to Give a Referral for Incentives

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Material or monetary incentives have the most direct impact on customers’ likeliness to give a referral, with 39 percent of customers saying they’d be “much more likely” to refer a friend or colleague.

• 66% of respondents under the age of 34 are more likely to give a referral after receiving social recognition.
• More than 50% of respondents are more likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program.
• 39% of respondents say monetary or material incentives such as discounts, free swag or gift cards greatly increase their chances of referring a brand.

So if companies had to choose a single method to drive a spike in referrals, offering discounts or gift cards is an effective, low-effort choice.

44% of advocates aged 18-34 admitted they'd be much more likely to refer if given social recognition.

Impact of Recognition on Likelihood to Refer by Customer Age

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There's a very clear trend over the generations– only 16 percent of respondents over 55 feel the same way.

In fact, for those older customers, this tactic was more likely to backfire than to succeed at all: 27 percent said it would actually make them less likely to refer.

And as our data shows, in the case of younger customers, offering recognition online (e.g., replying to their comments or thanking them for their referral or testimonial on social media) is a particularly easy, effective way to encourage continued advocacy.

Conclusion: Incentives work – segment your advocate base into distinct groups to get maximum value.

Direct incentives, social recognition and involvement in loyalty programs ALL had a significant, positive impact on potential brand advocates’ likelihood to give referrals or write reviews, testimonials or blog posts.

Although direct monetary or material incentives had the largest influence, breaking down the data by demographics suggests that different types of advocates (e.g., younger customers vs. older customers) will respond differently to different types of enticements.

So, it’s important to:

• Segment your advocate base into distinct groups
• Tailor a combination of these incentives to most effectively entice each group
• Consider even creating "brand advocate personas", similar to buyer personas

Read Software Advice's full survey to get more details, including how these incentives affect customer reviews!