Convert More Customers to Affiliates

  • — January 18, 2018

    Bringing on a single new affiliate partner can mean opening up your products or services to 338 new people. Why that specific number? Because according to Pew Research, that’s the average (mean) number of friends a person has on Facebook.

    Convert More Customers to AffiliatesAnd 330 of them only post baby photos.

    While most of those “friendships” are acquaintances at best, that person can still refer your business to his/her network just by posting a positive review or link. Moreover, this ratio simply illustrates how important it can be to bring just one more affiliate partner on board. So how can you convert more of your customers into becoming affiliate partners?

    No-brainer: great customer experience is a must.

    We don’t need to spend time on this one. If your business doesn’t make your customers happy, you’ve got bigger problems than optimizing affiliate marketing. Providing great customer service is the best way to get people referring your business, bar none.

    So let’s assume you’ve got that part down pat.

    Give aggressive referral incentives, using LTV

    DropBox, Netflix, Uber are all incredibly successful examples of how “refer a friend” can catapult a business. You can bet that in each instance, each referral program’s core stat was the Life Time Value of a customer.

    Once you have a grasp on what a customer’s LTV is (here’s a good primer on how to derive it), you can calculate the amount of the incentive you can offer when they refer a friend. For example, let’s say the average LTV of a customer is $ 500 over 3 years and the overhead (cost of business) per customer is $ 350 over those 3 years. That means you have $ 50 per year ($ 150 over 3 years) you can use for your Customer Acquisition Cost (CAC) to be at break-even.

    So maybe for the first years of your business, you can be very aggressive by offering a $ 100 cash-back incentive ($ 50 for the current customer, $ 50 for the expected referral) for bringing a friend on-board. If the price of your service is about $ 160/year (hence the $ 500 3-year LTV) that’s a crazy good incentive. But you’ll know you can offer it because you did the math.

    Convert More Customers to AffiliatesOr you paid someone else to do it for you.

    In short, staying on top of your numbers will help you provide the aggressive incentives that your customers won’t be able to resist. Continually refine your LTV to see just how juicy their incentives can get.

    Make the process dead simple

    Too many referral programs or bad affiliate marketing programs make people jump through hoops to refer a friend. Keep in mind, your company might be offering great incentives, but you’re still asking customers for a favor. Here are some red flags that tells you that the referral process is too difficult:

    • They have to email your company. Your customer might email a referral link to a friend, but that should be the extent of emails. Bad programs force either party to send an email to someone at your company to get credited. This process should be streamlined by having dedicated referral sign-up pages and forms for becoming an affiliate partner.
    • You can’t refer on mobile devices. This is a case of not keeping up with the pace of technology. In a mobile-first era, your referral process should be as easy on a 4 inch screen as it is on a laptop. Uber’s app is an example of an easy mobile referral process.

    Convert More Customers to Affiliates

    • Asking too early. Some companies ask their customers to refer friends and family way too early. Sometimes, the ask comes even as they are in the process of registering for the first time themselves! Satisfied customers are the ones that will convert to becoming referrers and affiliates. Don’t jump the gun and provide a bad experience from the start.
    • Capping incentives. Putting a limit on how much a customer can earn back is a bad idea. As long as your business earns money, they should earn too. If your incentives are premium features, there may be a limit on what more you can offer there, but you can always offer more cash back.

    Of course, the biggest red flag is your program not seeing any success even with the right incentives in place. This means there is usually something fundamentally wrong with the referral process. Even lowering the referral hurdle by just a small amount can mean the difference between a successful and unsuccessful program.

    Prime their pump with a small initial referral

    If you’ve ever played a mobile game that has in-game microtransactions, you may not even realize that you’re being primed to spend money. Here’s how they do it:

    Convert More Customers to Affiliates

    When you start the game, they give you in-game currency to use to buy an item. They don’t just give you the item; instead, they are 1) teaching you how to use the currency, and 2) conditioning you to be “ok” with spending money. That second point is the most important because once the players have opened themselves up to spending, even when it’s not initially their money, they’ll be more likely to do it again.

    It’s effective psychology, and one you can use to “prime the pump” of your customers as well. This comes in many different flavors:

    • Share their purchase on social media for 10% off their next purchase.
    • A $ 20 coupon to give to a friend for them to use.
    • “Like” the brand on social media for a coupon code.
    • And more.

    All of these are small asks, easy to accomplish; but it has the effect of getting customers over that initial hurdle of becoming an affiliate. “Hey, now that you’ve done it already, why not do more for better incentives?” Get your customers to do any small action related to referrals, and you’ll have a much better chance of converting them to full-fledged affiliates.

    Again, growing your affiliate base by just one new partner can mean big for your business’s reach. Invest more time into converting great customers into great affiliates, and reap the benefits.

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    Author: Robert Woo

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