How Chatbots Can Help You Run A Successful Referral Program

Illustrator: Jana Pérez

Chatbots are usually associated with customer support.

In fact, Statista found 34% of respondents were comfortable receiving customer service from AI chatbots. Likewise, 78% of organizations use AI chatbots for self-service. 

Customers turn to chatbots to communicate and receive product recommendations. Yet, it can also be a useful tool for your referral program. 

How can it help? In this article, we’ll cover how chatbots can help you run a successful referral program.

Before getting started, we’ll explain the basics of a referral program. 

What is a Referral Program?

Think about the last time you visited a restaurant or a hotel for the first time. 

A word-of-mouth referral from your friend or family likely encouraged you to check out the brand. Most of us don’t spend our hard-earned money on unfamiliar brands so we rely on referrals to affirm our purchasing decision. 

A referral program works the same way. 

Brand advocates must refer the brand to their network. The key difference is, it provides incentives and compensation to boost participation. 

Once the referred friend buys from a brand, the brand advocate receives a reward. These may range from discounts, coupons, freebies, and cash.

Why Run a Referral Program?

There are a lot of customer acquisition strategies you can use to grow your business. Yet, having a referral program comes with a lot of advantages.

Here are some of the perks to consider.

1. Brand Advocates are the Best Brand Ambassadors 

Are you more likely to trust a paid ad or a referral from your network? Of course, we’re more likely to believe referrals from fellow customers, especially if they’re from loved ones we trust the most. 

Not only do they have actual experience with using the product, but they’re also aware of our preferences. Unlike sponsored ads, they won’t sugarcoat the pros and cons. 

In fact, people are 2x more likely to pay attention to recommendations from friends. 92% of customers also trust referrals from people that they know. 

Consider toy brand Riff Raff & Co's referral program which rewards consumers with a free toy in exchange for five referrals. By gamifying the referral process and requiring several referrals, moms are encouraged to share the brand with their fellow moms to get a freebie for their kids.

Since moms love to get advice from fellow mums, the brand gained 35% of sales through referrals. 

2. Word-of-Mouth Customers are Loyal 

Referred customers are more likely to be loyal.  They already have a positive perception of your brand because of the assessment of their peers. 

Interestingly, customers referred by brand advocates have a 37% higher retention rate. Since they tend to stay loyal longer, referred customers generate 25% higher profit margins. 

Referred customers are more likely to patronize your brand and spend more money. And because they made their first purchase through the referral program, they can refer your brand to their network, too.

3. Referrals are a Relevant Touchpoint in the Sales Process 

Prior to making a purchase, consumers regularly seek the opinions of people they trust. 

Word-of-mouth was found to be the leading influencer when buying apparel, financial products, packaged goods and big-ticket purchases (i.e., electronics and travel). Also, it is the primary influencer behind 20% to 50% of B2B or B2C purchases. Meaning referrals are a significant touchpoint in the sales process. 

A referral can happen organically through social media posts or brand-related conversations. Yet, a referral program motivates brand advocates to convert their friends to get rewards in return. 

An interesting example is the “Call A Swede” campaign launched by Sweden's tourism association. Potential tourists were encouraged to call a random Swedish phone number and chat with a random local about any topic. That way, they can learn about the culture or popular destinations from actual people living in the country.

4. Referral Programs Lead to More User-Generated Content

User-generated content has proven to be successful in numerous marketing campaigns, and for a good reason. 

We love to view content created by real customers. It gives us an accurate depiction of what we can expect from a brand. 

With a referral program, brand advocates are likely to create user-generated content to motivate their network to move down the sales funnel. Imagine pics of your restaurant or hotel on Instagram or Facebook with moving captions. Some may even create short clips on TikTok which include a hashtag of your brand. 

A notable example is Peloton customers, who post their referral code on Twitter to get £100 off accessories.

Source: Twitter

5. Referral Programs are Cost-Effective 

Of course, you can easily get publicity through social media, PPC ads, or emails, but they don’t always generate the ideal results. 

Getting a first-time customer across the sales pipeline can take time and effort. It may involve sending the right promotional material at the right time—but the referral process speeds things up. 

A study found that 75% believe referrals are their lowest-cost method of acquiring new customers. On top of that, 44 percent perceive referrals as their best customer acquisition strategy, and referrals have a 30% higher conversion rate when compared to other marketing methods. 

Since people are more likely to believe recommendations from actual customers, referral programs provide an effective means to convert leads. 
A notable example is Harry’s, which got 100,000 emails in one week through their referral program. The brand rewarded brand advocates who reached specific referral milestones with a free shave cream (referred five friends), free razor (referred ten friends), free premium razor (referred 25 friends), and free shaving for a year (referred 50 friends).

Source: Viral Loops Blog

How Can Chatbots Help you Run a Successful Referral Program?

As we’ve mentioned previously, chatbots aren’t just for customer service purposes. Done right, it could help you build a successful referral program. 

Here’s how chatbots can help you succeed in running a successful referral program.

1. Boost Referral Program Membership

Are there only a few sign-ups to your referral program? Chatbots can raise awareness by encouraging visitors to sign-up. 

Chatbots can briefly mention the referral program rewards that brand advocates can earn. Unlike referral emails and website banners, bots keep it simple. Their conversational nature lets them promote in a non-intrusive way. 

For example, Uber’s chatbot lets customers know that they can request a ride. It also gives bargain hunters the option to earn $20 in ride credit by referring their friends with the tap of a button. 

Source: Business 2 Community

The low-key promotion can easily capture people’s attention. Plus, they can send ride credits quickly by tapping the option.

2. Quick Surveys

Run surveys and collect feedback to identify customer perceptions about your referral process. That way, you can effectively figure out how to boost referral program membership and participation. 

At present, brands use Google Forms or Typeforms to send out survey forms. However, you can also use chatbots to ask questions in an interactive and conversational way. 

A good tip is to give customers options to tap to make it quick and easy. In case you want to ask open-ended questions, make it optional or skippable to boost completion rates. 

Consider IKEA’s ORC chatbot, which lets customers answer the survey in a fun and casual manner. They offer free ice cream or hot dog vouchers and use emojis to keep respondents engaged.

Source: Smartinsights

Along the way, perhaps you’ll discover the need to spice up your rewards. Maybe some will even suggest adding social sharing buttons or email buttons to make the process more convenient for brand advocates. Whichever the case, you’ll never know the most effective means to improve unless you ask. 

3. Answer Frequently Asked Questions (FAQs)

Even with a FAQs section on your website, customer service may be frequently bombarded with questions about the referral process. 

To guide brand advocates in making their first referral, a chatbot can answer FAQs. They can also provide links to tutorials to provide helpful tips and in-depth information. Unlike human agents, they can also answer customer inquiries 24/7. 

In fact, a study found that conversations handled by a chatbot received an astounding 87.58% satisfaction rating. 68% of customers like chatbots because they provide instant answers. 

For example, the Burberry chatbot enables customers to explore various categories in the FAQs section. Instead of browsing through various FAQs pages, they can be instantly redirected to the relevant sections.

Source: Toptal

4. Filter Customer Inquiries for Sales Agents 

Chatbots can evaluate customer inquiries and resolve common issues about your referral program. However, they won’t be able to answer everything. 

If issues are not resolved, redirect them to your sales team or customer support agents. With this strategy, agents will only deal with consumers experiencing unique issues with your referral program. You also save time and money because agents only focus on resolving highly problematic issues. 

For instance, the HOAS (The Foundation for Student Housing in the Helsinki Region) has a chatbot named Helmi. It can respond to inquiries page 24/7 and handle 59% of customer service inquiries. Yet, when a bot is unable to provide the right answers, it checks whether a live customer service representative is available and redirects them. 

Source: GetJenny

5. Open Referral Emails

People receive several emails on a daily basis. As a result, emails about your referral program may be left ignored or unnoticed by consumers. 

How to boost email open rates? A chatbot with email marketing integration - or an email marketing platform with chatbot integration - lets you remind customers about their unopened email. Meaning if you sent a crucial email highlighting the launch of your referral program, subscribers would be reminded to read the email the next time they visit your website or log in to their account.

6. Reward Brand Advocates

Referral programs are meant to reward consumers who go above and beyond to patronize and promote your business. So, how do you keep your loyal customers satisfied to encourage them to stick around in the long run?

Surprise them with a reward delivered by bots. 

Chatbots are perfect because they can aggregate customer data and identify your most frequent referral sources. As a result, you can give outstanding referral program members coupons or freebies. 

If you have the budget, you can also reward brand advocates for signing up to join your referral program to boost membership.

7. Push Promos and Promote Incentives

Modifying your incentives and having special promos may boost referrals during peak months. 

A good tip is to provide brand advocates with gift boxes as referral rewards for the holiday season. You can also provide different rewards options as incentives so brand advocates can pick whether they’re more interested in a discount or a freebie.

The good news is, chatbots can easily push promos and promote new incentives to customers who interact with it. If you have various reward options, you can also let brand advocates answer a pop quiz so they can get their preferred prize. 

For example, American Eagle Outfitters chatbot recommends products based on customer responses. In the process, they use emojis, pop culture references, casual slang to keep their younger audience engaged.

Source: GetJenny

This marketing strategy promotes awareness of your promos and incentives. 

Summing Up 

Chatbots have plenty of use cases when it comes to your referral program. 

It can answer customer inquiries, promote incentives, and boost membership. In addition, they can encourage customers to answer surveys and remind them to check emails. 

If you’re launching a referral program for the first time, it can conveniently get users onboard and redirect them to relevant tutorials. Since they’re fast and efficient, they can improve the customer experience by leaps and bounds. 

Referral programs with chatbots also save time for customer support teams because it lets them focus on relevant customer inquiries. On top of this, it can run 24/7 and resolve hundreds of customer inquiries about your referral program, allowing your business to save time and money. 

Do you have a referral program? Start integrating it with chatbots to experience the aforementioned benefits.