How To Create Referral Programs That Work

What do the three highest-paid marketing consultants in US corporate history - Seth Godin, Jay Abrahams and Chet Holmes constantly talk about that no one else even gives a head nod?

Referral marketing programs.

You could teach a 10-year-old how to build one of these things.

They're boringly simple to create, easy to replicate, almost always work, and most importantly, they make bank.

It took us a long while to get one of these going at World Fitness (our gym). We've used them for years - but they never really made the impact we hoped. A lead here and there, with the occasional big week of multiple referrals dotted in between, was about as good as it got.

That was until May, when we launched what is probably version 4 point something of our program.

In the 6 weeks since - we've gained ~23 members from referrals and ~ $16,000 in new annual revenue at almost 4 new members a week. In one instance, a new member led to 6 more via a daisy chain of new referrals.

Previously we tried merch rewards, supplement rewards, membership discounts and even freebies from other businesses.

We tried tiered programs where rewards got better the more referrals someone sent, points systems where people could spend the points they earned and even a leadership board of referrers.

We used physical cards to record referrals, codes for digital referrals, and email vouchers members could use to recommend us.

But most of that was pointless.

Now, Every time a new lead comes into the gym on a free trial - we ask them how they heard about us - they tell us who referred them - we say congrats, here's a $50 credit when you join. Then we reach out to the current member and say thanks for referring ____ here's $50.

And you know you're onto something when the first thing they do after receiving their credit is ask - "If I refer more people can I get another $50?"

We use similar programs across all our businesses to get even better results. Still, none took as long to get right as the one we've set up for our gym, and this is where the lesson is.

A successful referral marketing program has to get these three factors right. When you miss one (which we kept doing at World), they don’t work anywhere near as well.

Reward - Our previous versions offered better rewards, like free running shoes, free floats and other products, so our incentives were high enough but needed to be more malleable. A float is worth $90, but only a few of our members cared for it. All of them care about $50.

Friction - Physical cards, digital cards (email forms) and referral codes created too much friction for members. "Mention me when you signup" takes no effort for the current or referred member.

Simplicity - Tiered rewards programs, referral codes, online signup forms, points systems and whatnot are hard to understand and recall. "Get $50 every time you refer a friend to us" is super easy to understand and remember.

Notes:

We've created referral programs that worked well first go and others, like the one for World Fitness that took a couple of years of playing around with. Just because they don't work on your first go doesn't mean they won't.

Negotiating With Optimism

This week we closed a 6-figure distribution deal for Rugby Bricks.

Here is the message we received from Kevin (distributor) after we agreed to terms.

Many businesses and sales folks like to win at all costs via various methods that, at best, can be described as sleight of hands.

K&J Growth was caught out by one of these nefarious types not so long ago. We left the table assuming a good agreement had been reached; they left the table thinking we would be easy to take advantage of.

That resulted in a very public dispute that cost K&J Growth $20,000 in legal fees and all sorts of operational problems as we scrambled to make up for a $160,000 shortfall.

The win-at-all-costs mentality is not the best way to play this game. It's a short-term mindset - if you leave a negotiation with the other person feeling like they've lost, long-term, you will too.

What we do that has served our companies well, regardless of the outcome above, is try to leave the table with both parties feeling like we've won and an intent to succeed a lot more together long-term.

Game theory enthusiasts call this the win-win mentality.

To reach win-win opportunities and the enthusiasm displayed here by Kevin to work with us - you have to operate in good faith and assume the other party has your best intentions in mind.

Kale, negotiating on behalf of Rugby Bricks, received a reasonable amount of pushback internally due to trepidation about certain terms requested in the agreement.

But negotiating from the assumption of good faith led us to be able to compromise until a fair outcome presented itself.

If you're not careful, choosing to see the worst in everyone can create self-fulfilling prophecies, and your negativity can foster a negative outcome regardless of initial positive intentions.

You end up being the cause of the negative outcome your sceptical self was trying to avoid.

Notes:

An optimistic mindset, for the most part, makes being in business more enjoyable and leads to a happier entrepreneur. In our example above, we left money on the table, but we feel better about being in business with Kevin due to it.

There are a couple of things Kale does to foster his optimistic mindset.

1. Mediation - He does a guided meditation each morning using the WakingUp App

2. Gratitude - He calls friends and tells them he's thinking of them and that they're important to him.

3. Coaching - He helps others by sharing knowledge from his journey. Their succeeding form his help provides positive reinforcement.