In the Trenches: Handling Referrals
Referrals have always been a big part of the our business model at Cranky Concierge. We've spent nearly nothing on paid marketing, so our growth has come primarily from my blog about the airline industry and via client referrals. While we see referrals as being absolutely integral, how we reward people for providing them is something that has changed over time.
Until recently, we simply gave credit to any existing client who referred a friend. I don't recall how we settled on the number, but it ended up being $30 per referral. We set it up so we would track the credit on our side, and the next time that client needed help on a trip, we would just automatically apply it.
This seemed like a good plan, but after years of using this method, we realized it really wasn't.
First, we realized that a lot of people weren't using their credits. Over the years, we've had plenty of people refer their friends, but they themselves don't seem to come back. This actually makes some sense. There is a group of people who use us for special occasions, once-in a-lifetime trips. If they really used us for that one trip of a lifetime, then we shouldn't be surprised if we don't see them again. Clearly they liked the service because they told their friends, but they must not be thinking about us for their regular travels. And their credits sit on our books, waiting to be used.
Second, we found credits were pretty tough to track. We put them in our accounting system, but the clients who did use credits rarely remembered to tell us they had any on file. These are people who may have signed up online, so they paid before we had a chance to consult our accounting system. That meant we had to go back and refund the difference. Things got messy.
After reviewing all this, it became clear that a change was needed. We decided the solution was to create coupon codes. When someone referred a friend to us, we would give them a unique discount code that was valid for $15 off any service, valid for six months.
This took the tracking problem out of our hands. Now we just have a spreadsheet with the coupon codes, so we can validate if it's a legitimate code when someone tries to use it. We've also made these codes transferable. Though the codes do expire, our clients can give them to anyone they want. That encourages people to refer even more of their friends. That's the part clients will like, but there are some changes they won't.
Primarily, the referral reward is less than it was before. We looked at what services people were buying and $15 seemed like a fair discount. We were probably giving too much previously. The codes also have an expiration date. We like this because it's not something that just hangs out there forever. More importantly, it gives us another opportunity to get our clients to use the codes. If a client who referred someone hasn't signed up again within six months of that last referral, we'll reach out and remind him that the code expires soon.
We've had this method in place for a month or so now, and we've yet to hear any complaints. At the same time, we've made our internal system far easier for us to handle, and we're encouraging people to refer more of their friends by making the code transferable.