Consumer companies spend a lot of money in advertisements, promotions, marketing etc. on a basic premise that customer “believe” in what is being told to them by these companies. Does this premise hold equal significance in the interconnected world we now live in which is so influenced by the social circle of a person? Let’s look at the following scenarios:
– Do you book a hotel without reading online reviews no matter how beautiful the online hotel pictures are?
– Do you make a large purchase of TV, Refrigerator, AC or any other household appliance without asking friends or reading user reviews?
– Would you take a club membership or a vacation homes membership just by looking at brochures and advertisements?
– You are planning to buy a car impressed by the ad of that car by a film star, but the next day a friend of you recommends a car that he has been using, what will you do?
Let alone big purchases, people do not even go for a movie without checking the reviews or consulting friends. The increase in the influence of social circle on all purchases of the customer now is overwhelming. This is specifically true for high value or lifestyle related purchases. One may buy chocolate or a soap without asking somebody but that is about it!!
Clearly there is a shift in consumer influence and purchase cycle.
Second aspect of the shift is that media is getting cluttered. With so many channels to watch, the customer is spoilt for a choice and attention span is low. Capturing attention of a customer by an ad is a momentous task and costs a lot of money. To make things worse for any marketer, DVR enables the person to record the programs and watch them at leisure completely skipping commercials!!
The need of the hour to tap that social influence of the customer to gain new customers. There are a few ways of doing it
• Entice a customer to write a review of your product or service after he has purchased and is happy with it.
• Engage in deep social media campaign. This is still elusive to lot of companies since linking of a customer on social media with your internal customer database is an uphill task, although solvable to an extent.
• Evolve loyalty programs to have the customer use your service and products again and again.
There is another interesting way to get that personalized recommendation is to have a robust Referral Program. You identify your happy customers and ask them to refer his friends and win referral gifts/discounts. Many companies including lifestyle, hospitality, financial services etc. companies have embarked on referral programs. Many studies have indicated that that a customer acquired through referral channels has much lower acquisition cost and a much high Life Time Value (LTV). Still referrals are not as widely used as other things like loyalty program.
Clearly almost all consumer businesses can have robust referral programs specifically in the business segments related to lifestyle or high value purchases. Some of the examples are as below:
• Hotel and hospitality
• Bank accounts / credit cards
• Consumer durables
• High value purchases like Cars, motor cycles etc.
• Restaurant chains, SPAs, beauty saloons, health clubs etc.
The scope to increase the effectiveness of referral programs is immense. Companies who have embarked on such programs can make them far more effective by applying analytical techniques and build models that can help in targeted campaigns. These analytics models can predict
• Which customers are most likely to refer?
• Which customer can provide multiple referrals?
• When is the right time to contact a customer to provide referrals?
• What product or service to be pitched to the referred prospect?
• Which referral programs are more effective?
With cluttering of media, shortening span of customers, increased influence of social feedback on a customer purchase, referral program can be very effective means to acquire new customers.
For further information, pls contact at firstname.lastname@example.org. Kloutix has a referral analytics platform ReferPRO™ that can help increase the effectiveness of a referral or loyalty program.