Psychology Of Referral: What Motivates Customers To Refer A Friend?


In order to convince your customers to recommend your brand, you need to make them feel that they have more to gain than to lose. There are a lot of social risks and rewards that influence your customers’ decisions. There are certain questions in their mind that you need to answer before you build a successful scheme. Read along to know more about what they are thinking before making a decision.


Man Is A Social Animal

Let me tell you a story. In 2008, Professor Jens Krause and Dr. John Dyer of Leeds University conducted an experiment where groups of subjects were told to walk on a random path inside of a big hall while not communicating with the other subjects. However, the researchers told a few of the subjects exactly where they should walk.


Guess what happened? They discovered that the people who were told exactly where to walk started being followed by the subjects walking “randomly.”


You can use this herd mentality of your customers to your advantage. People deciding between similar brands are more likely to go with the brand which has been tried by the people they know. This will happen even if they are more inclined towards the other brand.


They will accept the risk of their social action in order to feel like a part of “the tribe”. It feels emotionally rewarding. But this isn’t always true. Reluctance kicks in when the risk is bigger than the reward and the only factor that can change their mind is trust.


Do Your Customers Trust This?

When a customer recommends your brand, there are a lot of factors to weigh in. By recommending your product to a friend, they take responsibility for your product.


Is there a chance of being socially ignored or rejected? What are the odds that it will be socially recognized and rewarded?


Your referral program should focus not only on finding the right financial incentive but also on understanding the power of the social reward. After all, recommending a product is a process involving social belonging, trust, and reciprocity.


Before making a decision, there is a set of psychological enablers and barriers that your customers go through. Once you are able to analyze them for your business, you can use them to your advantage. Some of them are given below.


Do They Really Need Your Rewards?

Your reward, in order to become an incentive, has to be something your customers genuinely want.


There are many incentive possibilities like discounts, third-party gift vouchers, loyalty points, or entry into a prize draw. Discounts are working out well for a lot of businesses. However, each business is different and has a different customer base.


Did you know that customers receiving money off their next purchase as a referral reward are over a third more likely to shop within the following three months than regular customers?


On the other hand, in today’s world where even 90% off is not an unusual offer, customers have become inured to percentage discounts. That’s where cash savings have suddenly become more attractive on a psychological level. $10 is a real thing, something you’d put in your wallet.


If you’re confused about what reward to choose, always ask yourself if you would want this reward. If the answer’s no, then think again.


How many efforts Do They Need To Put In?

The easier it is for customers to redeem their rewards, the more will be number of customers you attract. On the other hand, if the steps involved in completing a task are complicated, then the customers will be reluctant to follow them.


One of the common mistakes made by brands is making these rewards difficult to earn. By structuring their programs this way, they inadvertently reduce their reward redemption rate and make it less desirable to join.


You can start by rewarding them for completing a simple task like signing up. This is an effective way to provide them with an immediate value that boosts the overall appeal of your program. If your customers can see that earning rewards is easy, they’re more inclined to join your referral program. You can also reward them for celebrating a birthday or engaging with your brand on social media. These are great ways to make your brand more accessible.


For example, Cracka Wines offers customers incredible discounts on their first purchases. In addition to $25 off your first order, they also offer 250 points (redeemable for $5) if you like them on Facebook, or even just sign up! Being able to earn points so easily makes the program irresistible to the customers.


Will This Make Them Look Good Or Bad?

Since you represent the brand your customers will be advocating, it is important for you to take into consideration what they feel about your products and services. Your customers need to feel confident about looking good after recommending your brand. If there is even the slightest social risk, it will lead to reluctance.


For example, if your customers think that their friends will love the product; that they will be perceived as knowledgeable and trending; or generous for sharing their rewards with their friends, then you are on the right track.


But if they feel that they will be perceived as a spammer; someone who is profiting from his friends; or a cheapskate “special offer” person, then you need to rethink your strategy. Make sure you don’t let these social risks weigh down your conversion rate.


In conclusion, referral marketing is much more than a financial strategy. It deals with understanding your customers’ emotions and state of mind before they make a decision beneficial to your business. Your customers’ social need to be a part of “a tribe” can be of huge advantage to your business if you play your cards right.