Unique Acquisition Methods - Customized Customer Referral Programs

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Unique Acquisition Methods - Customized Customer Referral Programs

  1. 1. Unique Acquisition Methods –Customized Customer Referral Programs November |2010
  2. 2. Unique Acquisition Methods – Customized Customer ReferralProgramsWhile customer referral programs are abound, few are conducted below the line,aimed at one single individual, a strategy that can uplift acquisition ratessignificantly vs. traditional referral programs.Referral programs are nothing new. They’ve been around for decades in one formor another, used by sales and marketing teams in various sectors to drive upacquisition or to drive cross-sales of a given product or service.As consumers, we’ve seen them in the telecommunications sector (with AT&T oneof the early pioneers), in banking (where Citibank has embraced the conceptheavily), in broadcast (where Time Warner Cable has turned its customers into aneffective sales force), among other sectors.While above-the-line customer referral programs are an excellent way to reachthe masses and have proven themselves effective, it’s a variation on this approach– customized customer referral programs – that should be the trend in the comingyears.Thanks to business intelligence efforts, companies now know more than everabout their customers – who they are, what they like and dislike, what productsor services they have an affinity to, how, when, and in what frequency they usethose products and services, how they prefer being contacted, etc. With thiswealth 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 aimedat winning over an existing customer to deepen their relationship, so too should itbe used in customized customer referral programs. The goal here is to move awayfrom a mass offering to the entire consumer base, and to shift to customizedofferings to every individual.We recommend a five-step approach be observed in developing and launchingcustomized customer referral programs:1. Analyze Customers to Determine Product / Service Propositions – The firststep is to determine what it is that will be offered to the customer to win themover. Traditional referral programs have just offered one basic proposition to themasses (i.e. a month of free cable for you and your friend, one month free gymmembership for each person you bring in, etc.). The goal here is to reallyunderstand what each customer appreciates and would be motivated by on anindividual level. By conducting analysis to see usage and spend patterns aroundthe entire product and service base, several if not dozens of offerings can bedeveloped. In a telecom, for example, this could be free local / international
  3. 3. minutes, free local / international SMS, free data, free value-added-services, freeloyalty program points, etc. What’s critical here is that companies go way beyondone single mass offering and create many variations to cater to what theirconsumer base truly desire.2. Analyze Customers to Determine Amount to Offer – Based on the estimatedadditional profits that may be generated from the referred lead, the amount tooffer must then be designed in the second step. An assumption must be madehere around additional revenues and profits, such that higher value customers aremore likely to refer similar customers – beyond that, higher value customerswould expect more to be motivated to refer a lead. As such, tiers of offers need tobe prepared around each product / service proposition (i.e. for a bank, 1 monthwire fee waivers, 3 month wire fee waivers, 6 month wire fee waivers, etc.), thenassigned to each customer in terms of what should be offered to them forbringing in leads. Secondary offers should also be prepared, in case the primaryoffer is not attractive enough for the customer.3. Design Overall Program Rules – The rules around how the prizes should berewarded, and most importantly, when they should be rewarded should then bedefined. Most important here is that a reward not be given to a customer until thereferred lead becomes a customer and conducts a certain transaction. Forexample, in one case from the telecom sector, a reward is given to the referreronce 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 afterthe referred customer has kept a minimum balance in the opened account for atleast 1 month.Based on the rules as well as planned offerings and some sound assumptions, abusiness case should then be built to ensure the program makes sense from afinancial perspective. A revisit of what is rewarded to the customers may berequired based on the findings.4. Prioritize Customers to Contact – The next step is to determine the approachstrategy, 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 SMSoffer. Others (VIPs, very high value customers) shouldn’t be contacted at all, assuch an approach / offer may offend them. Those deemed appropriate to callshould be prioritized based not just on value, but also on the potential they mayhold – in some sectors such as banking and telecom, the social circle of acustomer can be estimated, based on the wires and calls they receive – each ofthose interactions represents a possible lead.5. Pilot, Revise, and Go Live – A pilot should then be conducted with a smallsample of the base, so as to determine the effectiveness of the channels used, themessages 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 thecustomer level, changing what is offered, when it’s offered, how it’s offered, etc.
  4. 4. The pilot should also be used to determine if the rules, processes, and back-officeoperations are designed in an effective manner, able to seamlessly handle allaspects of the program. Receiving a lead but not being able to follow through on itwould be the biggest failure possible of such an effort.
  5. 5. About Forte Consultancy GroupForte Consultancy Group delivers fact-based solutions, balancing short and long termimpact as well as benefits for stakeholders. Forte Consultancy Group provides a varietyof service offerings for numerous sectors, approached in three general phases –intelligence, design and implementation. For more information, please contact info@forteconsultancy.com Forte Consultancy Group | Istanbul Office www.forteconsultancy.com

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