How to Set Up a Member Referral Program: Step-by-step Guide

We first introduced this content in video form, but due to popular demand - we've now included an adapted version as a blog post. Enjoy! 

Table of Contents

A. Introduction

B. What is a Member Referral Program?

C. Reasons to Start a Member Referral Program

• Acquire Targeted Growth
• Creates a New Marketing Channel
• Saves Time & Month

D. Steps to Create a Member Referral Program

1. Building a Solid Foundation
2. Choose your Rewards
3. Design a Referral Program that Converts
4. Select your Referral Software

E. Conclusion

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Introduction

If you own a membership business, it’s time you stop spending thousands of dollars on ads to acquire new members. 

There are more affordable and sustainable acquisition channels for you to tap into, and today we’re going to introduce you to one: Membership Referrals? 

Research shows that referred customers are 18% more likely to stay loyal and, in fact, 4 out of 5 B2B marketers say that a referral program generates excellent leads (source). 

What is a Member Referral Program? 

First of all, what exactly is a referral program and why should you start one?

Let’s just say that a member referral program is something that turns your customers into advocates. 

Here's how it works in simple words: So you ask your existing customer to recommend your business to people in their extended network.

This includes a tracking mechanism which can be a unique identifier, like a referral code maybe, that connects the referred friend to the recommending customer.

And when a referred person makes their first purchase, or whatever conversion goal you’re tracking, everyone gets a reward. Isn’t this an easy way to spread the word through happy customers?

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Reasons to Start a Member Referral Program

Alright now that we’ve defined referral programs in more details, let’s talk about 3 major benefits of starting a referral program.

1. Acquire Targeted Growth - When I say Targeted growth,  it’s all about getting new customers who are more likely to become regulars. Here’s an example of a German bank who turned to its happy customers for its growth. By offering a reward for successful referrals, they attracted people who were more likely to convert and stick around. The results? A 16% boost in profits and an 18% increase in customer retention. Isn’t that amazing?

2. Creates a New Marketing Channel - You unlock a new marketing channel that you’re currently not tapping into. Happy customers are your biggest fans, so you should give them a reason to share. You can offer perks like - exclusive discounts, early access to new products, or even freebies! A referral program lets them earn exciting rewards while spreading the word about your company so it's a win-win for everyone!

3. Saves Time & Month - And thirdly, finding new customers through traditional methods can be costly and time-consuming drain on resources. This is where a referral program is truly going to save you money. Studies like one conducted at Wharton Business School reveal that referred customers offer significant advantages for your business, not just in terms of acquisition, but also in long-term profitability.
   
   

So now that we have seen why referral programs are great, let's get down to business! We'll now be exploring how to build a simple referral program that turns your happy customers into valuable, long-term ones.

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Steps to Create a Member Referral Program

There are 4 simple steps for creating a member referral program.

Step 1: Building a Solid Foundation

The first step is to build a solid foundation. Before launching your referral program, ensure you have a solid base in place. Are your products or services loved by your customers? Think about it - would your customer recommend it to their friends?

The trust is that even if it’s the best referral program - if it’s sitting on top of a product that no one wants, it’s not going to work. Make sure you're prioritizing your customer’s overall experience. 

Step 2: Choose your Rewards

So, now that I have covered the very basics, the next step would be to carefully choose your rewards. But wait, who gets rewarded? There are two ways to go about it. 

The first one is one-sided rewards. You can reward either the existing customer or the referred friend, but this might lead to less engagement.

The next option, and in my opinion, the better option would be two-sided rewards that are rewarding both the parties – the existing customer and the new one. This usually results in the highest engagement.

So what type of rewards can you give them? Consider what your customers value most, whether it's discounts, free products, or other perks. 

Something to consider when determining your gifts. Studies suggest that gifts are often perceived as higher value than their cash equivalent. This even applies to gift cards. 

A very important point is to make sure the reward isn't higher than the marginal profit of each member. So if a new member contributes $100 in marginal profit each year, you can’t be offering a $500 gift to join. 

As you grow, you can increase the complexity of your Referral program 

• Accelerators - Introduce a method where 'rewards' increase over time when your advocate makes more successful referrals. This keeps your best advocates engaged over time.
• Lottery programs - Introduce a lottery, where every successful referral is an entry for a chance to win an even bigger prize. This can incentivize your advocates that are just getting started.

Just Remember the key is choosing the structure that aligns with your budget and goals while keeping your customers happy. 

Step 3: Design a Referral Program that Converts

Now that you have some idea about the rewards system, let us talk about step number 3. How can you design a referral program that converts? 

This ties back to something that we discuss on this channel quite a bit - you need to know your organization’s unique selling point - why did you existing members join? What makes them stay? 

In addition to building creative assets that highlight your organization’s unique selling point, at the risk of sounding like a broken clock, remember here is that your landing page is optimized for mobile phones. Once the program is designed and launched, you must continue monitoring performance and identifying areas for improvement. 

Step 4: Select your Referral Software

This brings us to our final step: How to boost your program with software? Here you might ask, is it necessary to use software? The answer is, yes you should because a software streamlines setup and referral tracking. It automates reward delivery which means customers get their rewards instantly without manual processing. And also, it offers customer support. 

Now, there are several types of software available - and we’ve put together a short-list for the Best Referral Software for memberships. 

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Conclusion

And there you have it, the roadmap to creating a referral program that not only attracts but converts. To effortlessly manage and supercharge your referral program, consider trying out Join It. We are offering a limited free trial, so hurry and sign up today for membership software that just works!

If you wish to quickly grow your member count, don’t forget to check out our video on 9 Proven Tips for a High-Impact Campaign Membership Drive.

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