Unique Acquisition Methods –

Customized Customer Referral

Programs

November |2010

Unique Acquisition Methods – Customized Customer Referral

Programs

While customer referral programs are abound, few are conducted below the line,

aimed at one single individual, a strategy that can uplift acquisition rates

significantly vs. traditional referral programs.

Referral programs are nothing new. They’ve been around for decades in one form

or another, used by sales and marketing teams in various sectors to drive up

acquisition or to drive cross-sales of a given product or service.

As consumers, we’ve seen them in the telecommunications sector (with AT&T one

of the early pioneers), in banking (where Citibank has embraced the concept

heavily), in broadcast (where Time Warner Cable has turned its customers into an

effective sales force), among other sectors.

While above-the-line customer referral programs are an excellent way to reach

the masses and have proven themselves effective, it’s a variation on this approach

– customized customer referral programs – that should be the trend in the coming

years.

Thanks to business intelligence efforts, companies now know more than ever

about their customers – who they are, what they like and dislike, what products

or services they have an affinity to, how, when, and in what frequency they use

those products and services, how they prefer being contacted, etc. With this

wealth of information on hand, it warrants that referral programs can be bettered

– bettered to cater to each and every individual’s needs.

Just as business intelligence is being used to tailor one-to-one propositions aimed

at winning over an existing customer to deepen their relationship, so too should it

be used in customized customer referral programs. The goal here is to move away

from a mass offering to the entire consumer base, and to shift to customized

offerings to every individual.

We recommend a five-step approach be observed in developing and launching

customized customer referral programs:

1. Analyze Customers to Determine Product / Service Propositions – The first

step is to determine what it is that will be offered to the customer to win them

over. Traditional referral programs have just offered one basic proposition to the

masses (i.e. a month of free cable for you and your friend, one month free gym

membership for each person you bring in, etc.). The goal here is to really

understand what each customer appreciates and would be motivated by on an

individual level. By conducting analysis to see usage and spend patterns around

the entire product and service base, several if not dozens of offerings can be

developed. In a telecom, for example, this could be free local / international

minutes, free local / international SMS, free data, free value-added-services, free

loyalty program points, etc. What’s critical here is that companies go way beyond

one single mass offering and create many variations to cater to what their

consumer base truly desire.

2. Analyze Customers to Determine Amount to Offer – Based on the estimated

additional profits that may be generated from the referred lead, the amount to

offer must then be designed in the second step. An assumption must be made

here around additional revenues and profits, such that higher value customers are

more likely to refer similar customers – beyond that, higher value customers

would expect more to be motivated to refer a lead. As such, tiers of offers need to

be prepared around each product / service proposition (i.e. for a bank, 1 month

wire fee waivers, 3 month wire fee waivers, 6 month wire fee waivers, etc.), then

assigned to each customer in terms of what should be offered to them for

bringing in leads. Secondary offers should also be prepared, in case the primary

offer is not attractive enough for the customer.

3. Design Overall Program Rules – The rules around how the prizes should be

rewarded, and most importantly, when they should be rewarded should then be

defined. Most important here is that a reward not be given to a customer until the

referred lead becomes a customer and conducts a certain transaction. For

example, in one case from the telecom sector, a reward is given to the referrer

once and only once the referred customer makes a top up over a certain amount.

In another example from the banking sector, the referrer is given the reward after

the referred customer has kept a minimum balance in the opened account for at

least 1 month.

Based on the rules as well as planned offerings and some sound assumptions, a

business case should then be built to ensure the program makes sense from a

financial perspective. A revisit of what is rewarded to the customers may be

required based on the findings.

4. Prioritize Customers to Contact – The next step is to determine the approach

strategy, both in terms of who to contact in what order, and how to contact them.

Some lower-end customers, for example, should be approached with an SMS

offer. Others (VIPs, very high value customers) shouldn’t be contacted at all, as

such an approach / offer may offend them. Those deemed appropriate to call

should be prioritized based not just on value, but also on the potential they may

hold – in some sectors such as banking and telecom, the social circle of a

customer can be estimated, based on the wires and calls they receive – each of

those interactions represents a possible lead.

5. Pilot, Revise, and Go Live – A pilot should then be conducted with a small

sample of the base, so as to determine the effectiveness of the channels used, the

messages delivered, the timing of the messages, and the propositions themselves.

Findings from the pilot should then be used to revise the overall plan down to the

customer level, changing what is offered, when it’s offered, how it’s offered, etc.

The pilot should also be used to determine if the rules, processes, and back-office

operations are designed in an effective manner, able to seamlessly handle all

aspects of the program. Receiving a lead but not being able to follow through on it

would be the biggest failure possible of such an effort.

Forte Consultancy Group | Istanbul Office www.forteconsultancy.com

About Forte Consultancy Group

Forte Consultancy Group delivers fact-based solutions, balancing short and long term impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety of service offerings for numerous sectors, approached in three general phases – intelligence, design and implementation.

For more information, please contact info@forteconsultancy.com