Loyalty & Rewards

A Referred Customer Is A Better Customer

Consumers are more willing to trust a referral that comes from a friend.

That’s an axiom that Extole, a San Francisco-based company that offers a refer-a-friend platform for mobile and web devices, has built an entire company around.

And with a list of clients that includes Petco, Microsoft, Starbucks and many more, the company certainly seems like it is onto something.

Matt Roche, founder and CEO of Extole, said that a peer-referred customer — which Extole usually entices by offering consumers a coupon or discount to refer their offer to friends — is the most effective customer acquisition and reactivation channel.

“Advocate marketing is the most reliable and effective method of digital and social marketing for retailers today,” Roche said in a statement. “With Extole’s premium retail package, marketers can provide a more efficient sharing experience for their customers, while improving tracking through the customer’s journey. With these capabilities, retailers can harness the power of everyday advocacy to connect with their best customers and to benefit their bottom line.”

Roche noted that struggling retailers, like Aéropostale and American Apparel, have invested in Extole’s advocate marketing technology to engage their existing customers and build their brands back up.

“If you view your customer list as an asset to be mined for new purchases, what you’ll find is that, every year, your customer lists gets a year older,” Roche said. “It’s not just that a certain percentage of them stop buying; they just get older. So, you wake up one day, and you’re this useful brand, and the youngest customer on your customer list is 28. And you’re like, ‘What the hell? Where are the 19-year-olds?’ Well, you’re not bringing them in. You’re not reaching them.”

In one example of how Extole’s referral platform works, Roche noted that Ulta Beauty, the largest specialty beauty retailer in the U.S. with 886 retail stores in 48 states, uses the platform to encourage loyalty by rewarding loyalty.

“The Ultamate Rewards program consists of Ulta Beauty’s best guests — they purchase more frequently, spend more and act as brand advocates,” according to an Extole case study. “Always striving to increase its share in the beauty market, Ulta Beauty looked to leverage its Ultamate Rewards members to acquire new, equally valuable guests. Because members were already actively referring their friends and family organically, Ulta Beauty decided to invest in a referral marketing platform that would not only reward them for the efforts already being made but would incentivize them to refer better guests more frequently than ever before.”

In Oct. 2015, Ulta Beauty used Extole’s platform to roll out its loyalty program: An Ultamate Rewards member refers a friend, and the friend joins the program. The friend gets $10 off their first purchase of $30 or more at Ulta Beauty, while the referrer also gets $10 off their next purchase of $30 or more.

The program proved highly effective right off the bat, garnering more than 100,000 referrals since last October and resulting in 27,000 new members to the program, with 10 percent of all online Ultamate Rewards signups coming through referrals.

About 70 percent of those referred also redeemed their $10 rewards bonus at a brick-and-mortar store, “highlighting the value that referrals bring to brick-and-mortar.”

The case study also noted that Ultamate Rewards members spend about 50 percent more than the typical customer, furthering the point that referrals bring in better guests and customers.

“Referrals can actually go places that media can’t, so if you think about the course of your day when you have your iPhone open when you’re driving, you’re probably not on CNN. You’re probably texting, or on email, or Snapchat, Instagram, etc.,” Roche said. “These are places where it’s unbelievably hard for a brand to get. But it’s super-easy (as a user) to get my stuff on Instagram. I just post something. So, in a sense, you’re getting access to media that is extremely expensive or extremely inaccessible by just asking your customers to put you there.”

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