Growth Newsletter #065

Referral programs have three phases of maturity. Understanding yours will help you maximize your referrals ROI.

• Phase 1: Test—when your referral program is starting out
• Phase 2: Prove—when you’re optimizing it
• Phase 3: Scale—when you’re growing and streamlining it

Phase 1: Test. The point of this phase is to test your referral program incentive as quickly and cheaply as possible. Iteration is the action, profitability is the goal.

Here’s what this phase might look like:

• Find your top 10-20% most engaged customers. Run a pilot with them by sending them individualized emails describing your referral program.
• Fulfill the incentives manually. Engage with new prospects 1:1 and learn from them.
• Refine your messaging, incentive, and process over time.

Spend time on this phase. Early-stage referral programs are not yet “set it and forget it.” Just like any other marketing channel, they must be actively monitored and improved before you start scaling up.

Test, then invest.

Phase 2: Prove. Once you find an incentive that converts and messaging that resonates, start removing friction from the process.

• Optimize the experience to make it as few clicks as possible (for the customer first, then the prospect, then your internal team). Start using low-cost automations for repetitive tasks.
• Continue to refine your messaging and learn from your new customers.

Phase 3: Scale. When your referral program is predictably generating prospects—and the economics still make sense—it’s time to invest in referral program software, like Rewardful, GrowSurf, or Referral Rock.

Create feedback loops so your referrers know their efforts are paying off. Even if their sharing doesn't yield a referral, seeing that their friend clicked and viewed is still encouraging (and might spur another referral).

Keep an eye on your economics to make sure customer acquisition cost (CAC) is comparable to your other acquisition channels. Monitor the quality of your prospects to keep out any fraudulent gaming of the program.

Check out this Patagonia ad:

(Image source: @dailyadcoffee)

Copywriter Jon Morrow defines power words as “persuasive, descriptive words that trigger a positive or negative emotional response. They can make us feel scared, encouraged, aroused, angry, greedy, safe, or curious.”

If you “sprinkle in a few, … you can transform dull, lifeless words into persuasive words that compel readers to take action.”

What’s remarkable about this ad from Patagonia isn’t that it uses power words. All great copywriting does.

The remarkable thing about it is that those power words tap into different emotions depending on the order you read them in.

Reading from top down, they cause anger and fear: screwed, it’s too late, we don’t trust anyone, we don’t have a choice.

From the bottom up, the emphasis changes entirely, to hope and encouragement: choice, livable, imagine, healthy future.

Brilliant.

The poem is followed by that kicker of a tagline: “Buy Less, Demand More.” That’s shocking from a retailer—and extremely affecting.

The takeaway? Appeal to your readers’ emotions. We tend to think of decision making as being connected to the rational part of our brain, but the opposite is true. Decision making is emotional.

Feelings dictate decisions. Emotional responses are why we share things that go viral, why we donate to causes, and why we buy what we buy (or don’t buy what we don’t need, in the case of Patagonia).

Refer back to Morrow’s list as you write your copy. Consider how your writing instills fear, encouragement, arousal, anger, greed, safety, or curiosity. If, instead of triggering a high-arousal emotion, it makes you feel merely content, a little bit sad, or just kind of bored, it’s time for a rewrite.

That Patagonia ad is one in a collection of the strongest copywriting examples we’ve come across. You can check out the full article here.

Repeat customers spend ~67% more than first-time buyers. And it costs 6-7x more to turn a new visitor into a customer than it does to retain an existing customer.

Improving retention can fix a leaky-bucket business, yet only 18% of companies focus on it.

To increase profitability and lower marketing costs, consider implementing the following four retention strategies.

1. Start a loyalty program. Loyalty programs incentivize customers to return to your site to buy, reengage with your product, and promote your product on your behalf.

Tools like Loyalty Lion or Smile.io can get you started.

Here are a few loyalty models to explore:

• Free newsletters: Encourage sharing in exchange for premium content or shoutouts.
• Paid newsletters: Reward your top advocates with comped subscriptions.
• B2B: Offer training, tools, and invitations to members-only events.
• Ecommerce: Create a tiered membership program that rewards customers with points, perks, or discounts. For example, Sephora's Beauty Insider has over 25 million members, and those members account for ~80% of Sephora's annual sales.

2. Collect feedback throughout the sales process. When implemented, customer feedback can help lower CAC, improve your marketing's effectiveness, and improve retention.

How to implement:

• Collect feedback from on-site forms, social media, email and post-purchase surveys, and heatmaps.
• Look for repeat questions and complaints about your product or website, as well as requests for new features and products. Apply the most common feedback.

3. Follow an omnichannel engagement strategy. Compared to single-channel marketing, an omnichannel approach can improve retention rates and engagement by 90%.

Quality engagement always starts with quality content. Here are a few ways to encourage omnichannel engagement via content and community:

• Reply to social media and blog comments.
• Host special events (webinars, workshops, AMAs, interviews).
• Start and maintain a well-organized Slack or Discord channel.
• Personalize email as much as possible.
• Involve your audience in content creation (crowdsourcing).

4. Provide exceptional customer support. Anticipate all the different ways someone might need support (see point #2), and implement as many as make sense for your business.

• Add a prominent live chat to your website that shows when your team is available and ready for questions.
• Create a well-organized knowledge database that lets customers search for answers themselves.
• Create and moderate a community forum that allows users to help each other.
• Write comprehensive blog posts addressing common issues and questions.
• Create video tutorials or educational courses about your product or service.

Keep track of what you learn, and make gradual changes that address your target audience's goals, pain points, and interests. Accomplish that, and you'll have no problem boosting your retention rate.