The Psychology Behind a Referral Program

March 1, 2018
Psychology-of-Referrals-Feature

Referrals are everywhere.  Chances are you share referrals with your friends and they share referrals with you. You might even follow random referrals shared on social media, but why do you do that? Turns out there is a psychological explanation for the effectiveness of a referral program, and even a few tricks you can use to bolster your own.

Here are the three driving psychological principles behind a referral program.

1. Social Proof Shows New Customers That They Can Trust You

In spite of our bold claims that we all like to be individuals and ahead of the curve, we actually prefer to do things that have already been done before. The more something has been done by others, the more we want to do that ourselves.

"Social proof is a social phenomenon where we assume the actions of others in an attempt to perform the correct behavior."

A referral program helps you create social proof for future customers in two ways:

  1. The more they see people referring your store to others, the more familiar your brand and products become. If they think a large group of people already love and buy from you, they are likely to do it themselves.
  2. If those referrals are coming from those that are already in their social groups (friends, family, co-workers) the power of social proof becomes even stronger. We all want to be included in a group, especially if that group is close to us.

Clearly social proof is a powerful concept in ecommerce, especially with referrals.

2. The More Authority of the Person Sharing, the Stronger the Referral

We trust and value the opinions and suggestions of those in a position of power. If someone is in uniform, you are much more likely to trust them and comply.  However, how does this idea of  a person in uniform work in a referral program?

"Social proof is a social phenomenon where we assume the actions of others in an attempt to perform the correct behavior." "The authority principle states that we feel a duty or obligation to comply with those in a position of power."

The authority principle does not just apply to police officers and army generals. If someone is perceived to be more knowledgeable about any topic or subject than us, we are more likely to take their advice.  This goes for brand recommendations, too!

The strongest representation of this psych tactic in a referral program would be from a celebrity endorsement. If Justin Bieber were to post your referral link to his Facebook page, new customers would come pouring in. Thankfully you don't need Bieber to replicate the same effect - you just need your best customers to be sharing!

"Getting your best customers to refer your store can have the same impact in their social circles as a celebrity endorsement."

When your best customers are sharing your store, their friends and family will trust it. After all, these customers are experts on your products and the industry. When my wife shares her thoughts on makeup with her friends and family, they listen! Not only is she passionate about this industry, but she also has a lot of experience as a beauty expert from her work as a makeup artist.  A referral from her about a product is just as powerful in her social groups as an endorsement from a celebrity - maybe even more so.

3. Reciprocity Creates a Two Way Exchange of Value

We business folk love to talk about win-win outcomes. A referral program that rewards the sender of the referral is truly a win-win for you and your customers: they bring you a new customer (win for you), and you reward them with value at your store (win for them). This is known as the reciprocity principle.

"Reciprocity means that we pay back what we receive from others."

When asked, many customers are willing to share your business with others.  The problem is that very few actually do, and that’s simply because they are not given a reason to. Offering a reward for a referral is the best way to encourage action according to the American Marketing Association.

You can make customers more likely to refer your brand by offering both the sender and the receiver of the referral a reward. If a friend tells you to check out a store, you might. If a friend tells you about an amazing new shoe store and they give you 20% off, now you are really interested!

 

Psychological Tips to Supercharge Your Referral Program

Everything we’ve talked about up to this point explains how a referral program works from a psychological perspective. The tips below will help you use the way people think to get even more out of your referral program. Follow these tips and checkout our expert guide to referral strategy to get your program performing its best!

referral guide icon
Learn the referral strategy used by the best programs.
There is a huge difference between an average referral program and an elite one.  Let us show you how to make yours the best it can be.

Encourage Public Commitment from Customers

Have you ever raved to your friends about an amazing restaurant or store? After you told them to go, did you notice that your attachment to that place became higher? Maybe they got your order wrong but you were more understanding.  This behavior is because of the consistency principle.

"Once we make a public statement, we try very hard to stay consistent with what we have already told others."

You can easily make the consistency principle work in your favor with a referral program. Most referral tools allow you to craft a default share message for your customers to use. When crafting this message, be sure to use statements that create a public commitment. Words like “my” and “I” are key to this commitment.

Here are a few phrases you can try in that message:

  • I love the products at [your store].
  • Follow my referral link to get 20% off at [your store].

Encourage public commitment from your customers to not only get more referrals but also to get those that refer to be more loyal to your store and brand.

Create a Branded Referral Message

Familiarity breeds affection. Be sure to include your logo and name in any social referral messages that are sent by your customers.

greetabl includes their logo in their referral messages

Even if people are not clicking the links, they are still getting exposed to your brand.

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Learn to create a totally branded referral experience.
The best programs seamlessly match the brand that is running them.  Learn to design your own program that is uniquely you.

The average American has 634 social connections in their network. If you put your logo and brand messaging into each social referral shared, you are getting significant and inexpensive brand impressions. Not only that, but you can turn your existing customer base into powerful marketers!

Give a Reward to the Person Being Referred

A very powerful force to motivate someone’s behavior is to show them what’s in it for them. People are willing to refer friends when they are given an incentive to do so, and the same is true of those accepting the referral.

Reward both the sender and the receiver to get the most from your referral program.

referral guide icon
Create the best referral program with our strategy guide.
The use of psychology is one of just a few key tips to boost your program's effectiveness.  Read them all in our expert's guide!