4 Principles Of Psychology To Boost Your Customer Referrals

This is a guest post from Sharanya Manola.

Word-of-mouth marketing or referral marketing is
one of the most trusted forms of advertising
. In fact, referral
marketers will agree that it’s extremely profitable.

Don’t believe it? Take a look at the following statistics.

  • 92% of people will trust a recommendation from a peer.
  • Referral marketing generates twice the
    compared to paid advertising.
  • 87% of frontlines sales reps, 82% of sales leaders, and 78% of
    marketers surveyed say that referrals are the best leads your
    business can get. (Heinz
  • Referred customers have a 16% higher lifetime value. (Wharton)
  • Every referring customers makes an average of 2.68 invites.
    SaaSquatch Data Science

Now, if WOM marketing can be such a huge success why do some
customer referral programs fail? The answer is simple. It is your
sheer lack of understanding of the psychology of the human mind. To
understand better, let’s learn about four principles of
psychology in marketing.

Principles of psychology in marketing 1. Social currency: Will it
make me look good?

Let’s say your friend wants to take a client out for dinner.
She asks for your recommendation. Since it’s a high-stakes event,
you suggest a top-notch restaurant by factoring in food, ambiance,
value, and hospitality. Next day, the same friend calls to thank
and praise you. You can’t help but gush because your happy
hormones kick in.

From this example, it is evident that your happiness is
a result of the social reward
(in recognition of your
brilliant choice) handed over to you by your friend. You are also
relieved because your reputation is unhurt.
Apparently, this longing for recognition reveals how deeply we
value our friends’ and family’s opinions of us. And this is
exactly what forms the premise of the social currency theory.

Being a referral marketer, you should certainly familiarize
yourself with the psychological pull (between the reputation risk
and social reward) your customers undergo. Your job is to make
their decision-making easier and guarantee they will receive a
social reward from their tribe.

Here are two ways you can achieve it. As a Harvard Business
Review article suggests, the following will help you convert
social capital into economic capital

  • Craft a simple, transparent and straightforward
    referral program
    . Your referral program shouldn’t
    include any twists or unexpected fine print. Otherwise, readers are
    likely to question your sincerity and pass up your offer. Notice
    how Vistaprint keeps their program simple.

Referral Program example

  • Have trust signals on your website. This will
    amplify your trustworthiness and your customers will feel secure
    (meaning no risk of referring your brand).

Gather all the social proof (media mentions, ratings, reviews
and customer testimonials) you can, because according to Bright
88 percent of consumers trust online reviews as much as personal

Dollar Shave
has an entire page dedicated to club reviews.

Club Reviews example

2. Instant gratification: It’s now or never!

Do you know why some people are willing to spend a few extra
bucks to get same day delivery? It’s the instant gratification
principle. Generally speaking, all of us want things to happen now
rather than later. The moment we realize we have to wait longer, we
experience psychological discomfort.

If you see referral marketing through the lens of this pleasure
principle, then it will be clear to you why you cannot delay

If you delay the reward for your customers, you will decrease
the reward’s value and dissuade customers from signing up.
Already guilty of delaying a reward for your customers? Don’t
stress. You can fix it.

One of your best strategies is friction reduction. Let’s dive
into some options.

  • Feature your referral program on your
    : Your customers shouldn’t have to search for
    your referral program. Make it easy for them and have a clear
    call-to-action button on the homepage.

Featured Referral Program example

  • Create a simple sign-up form: A lengthy
    sign-up form looks like a chore. Remove irrelevant fields (fax
    number, alternate email id, etc.) that discourage them from signing
  • Give simple codes and immediate rewards:
    Assign easy-to-remember codes, (possibly their names). This way,
    when their friends get the referral message, they’ll easily and
    quickly know who it’s coming from.Moreover, enable advocates and
    new referrals to collect rewards immediately. It will keep their
    motivation to refer high.
  • Make it easy to share: Give your future brand
    advocates options to share via email, text, or other messaging
    apps. You can pre-draft a message, making referrals completely
    effortless.Notice how Airbnb gives the option to share on Facebook
    and Messenger. Customers can easily import contacts rather than
    adding them one by one.

Sharing options on Facebook and Messenger

  • Add a FAQs section: Publish a list of
    questions and answers, so no guesswork is required. As we discussed
    above, people don’t like to wait. Having answers readily
    available will simplify your users’ experiences.
  • Be available for LIVE chat: But first, make
    sure your staff knows everything about the referral process. They
    should be able to clearly explain and address every query, instead
    of passing half-baked information.They should also know when to
    advertise the program to new users.

3. Social proof: If everyone’s doing it, it must be right

Social proof is based on the idea of normative social influence.
We use other people’s actions as social evidence, often assuming
it stands for correct behavior.

This could explain why we use services like Airbnb, Rover, or
Lyft. We trust these businesses because they have massive

The question now is this: How do you, as a referral marketer,
build social proof?

  • Engineer a compelling program. Be clear on
    your value proposition (i.e. what is the “referral reward” and
    the “friend offer”). This will boost your customer’s
    excitement and trigger a sign-up and share. Over a period of time,
    more shares will result in a stronger social proof (safety in
    numbers + wisdom of friends, remember?). Eventually, this can
    result in a win-win situation for you, because you create more
    sales opportunities without spending a dime on customer
    acquisition. Besides, the sales process gets shorter, and who
    doesn’t love a short, effective funnel?
  • Get creative. Don’t be in a rush to roll out
    a generic “10% off on your next purchase” kind of offer.
    Remember the social capital theory? People want to look good and
    prefer to pass on exciting/interesting offers.
  • Rope in industry influencers. We already know
    influencers are a brand of their own. If they share your referral
    program, your brand’s reach will automatically boost. However, if
    you are worried you might have to shell out $$$, don’t worry.
    Seek out influencers who are happy users of your brand. Then, see
    if they’d be willing to advertise your company for a discounted
    price or promotion.

4. Cognitive dissonance: Out of sight, out of mind!

Encyclopedia Britannica defines cognitive
as “the mental conflict that occurs when beliefs
or assumptions are contradicted by new information.” In the
context of referral marketing, it means you stand a terribly low
chance at converting your past customers as referrers if you reach
out to them after a long time.

Previous customers may not remember why they’re receiving an
email from you. Questions such as, “Did I ever buy from this
brand?” or “Why now?” could stop them from purchasing with

To tackle this hurdle, time your referral program

  • Prompt cue after a purchase. You want to catch
    your customer when they’re most excited. During this window,
    they’ll be more likely to tell others about your program. This
    could be immediately after a purchase or a positive review.
  • Set email triggers based on website activity.
    For example, you can send an email to someone who has just left a
    product review. In the case of an abandoned cart, draw them back
    with a reminder and information on your referral program.
  • Make it available on their account dashboard.
    This will encourage them to refer a friend each time they log

Spread the word on social media. Referral marketing cannot exist
or deliver in isolation. So, align your marketing efforts and make
it seamless across all channels. In other words, the messaging
should be consistent across all marketing channels.

Wrap up

There you have it. Four principles of psychology in marketing
explained to help you become better at referrals. Just make sure
you keep them in mind whenever you are drawing out your referral
marketing blueprint. After all, if you can preempt your
customer’s behavior, then you stand a good chance of converting
your happy customers into revenue drivers.

Sharanya helps businesses gain visibility through content that
informs & educates. In other news, she’s a plant hoarder.

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4 Principles Of Psychology To Boost Your Customer Referrals

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4 Principles Of Psychology To Boost Your Customer Referrals