Video: How to 7x your marketing ROI like Casper
Customer referral programs are one of the most effective ways to acquire new customers at low cost.
Casper has seen massive success with their referral program — generating 7x higher returns than their average marketing investment. Tempo, selling at-home gym equipment, lowered customer acquisition costs while generating impressive new customers with their program.
How are they doing it?
In our webinar, “How to incentivize your best customers to drive sales,“ we equip you with the three-step playbook used by Casper, Tempo and many other premiere e-commerce businesses:
- Identify your happiest customers (presented by Delighted by Qualtrics)
- Select incentives that drive new customer acquisitions and maximize ROI (presented by Nick Baum, CEO of Tremendous)
- Build and optimize a referral program (presented by FriendBuy)
Learn how to build and refine a referral program in the webinar video. Or, read the lightly edited transcript below.
"How to incentivize your best customers to drive sales" — webinar transcript
Speaker: Seán Mancillas, associate manager of product management, Delighted by Qualtrics
Topic: How to ID and engage your top customers
Sean: I’m super excited to be here. I manage the product team as well as support and success operations at Delighted.
Delighted is a customer experience solution focused on providing the easiest way for companies to collect customer and employee feedback, analyze that feedback once it's received, and drive meaningful change throughout their organizations.
We work with a lot of really incredible customers — from scrappy startups all the way up to fortune 500 companies — as they run their CX programs.
What is CX?
I want to hit the pause button for a second and chat about what CX, or customer experience, means.
Most of you are probably familiar with this. But if you're not, customer experience is most simply considered the totality of experiences that a customer has with your brand or service.
Say you're on an ecommerce site. All of these experiences make up the totality of what we consider a customer experience:
- you visit the site
- you add an item to your cart
- you make a purchase
- you receive delivery of the product
- you contact a support team because there was an issue with the delivery.
Why is CX important?
We found that companies that focus on strong customer experience programs see things like increases in customer retention, more profit growth, greater lifetime value for their customers, and — most important to us — customers wildly prefer brands when they feel they’re being heard and that action is being taken on their feedback.
Surfacing top customers
Today we’ll primarily focus on using a CX program to surface your top customers. And really, it's super simple. It's just three steps:
- Step One - Setting up what we call “listening posts.” These are the different moments where you're sending out a survey. Maybe that's after it a purchase experience to how to segment your feedback.
- Step Two - Once you receive all that response data, how do you filter it down to become a bit more actionable?
- Step Three - How do you close the loop? Once you've identified your top customers, how do you follow up with them and enable them even further?
When we're thinking about how to identify our top customers, the first step is obvious, but a lot of companies put it off. It’s simply setting up your surveys. It's as simple as identifying the touch points that you want to use to reach out.
There's a bunch of different ways that you can communicate. Find the one that's most appropriate for your customers. Maybe that's SMS and maybe that's still email. It might be WhatsApp.
Finally, start serving.
Understand key inflection points that occur throughout the customer journey — maybe it’s after they received the delivery or after they interact with your support team or a success manager — and insert surveys in those experiences.
We recommend that you build a customer journey where you understand the average experience that a customer has from you from start to finish. You can start learning about your customers, and — important to our chat today — you can start finding the things that are really moving the needle for your top customers.
Once you receive feedback, what are the next steps?
Filtering and segmenting feedback
At Delighted, we always recommend the three steps for filtering the data you collect.
The first is a bit obvious, but it's a starting point: Separate out your positive feedback. Filter through to find the folks who are giving you a thumbs-up about their experience.
The second step is looking backwards. Take a retroactive look over historical response data. Are these folks that are constantly providing positive feedback, or is this the first time that they provided a five star survey? Your top performers are typically going to be folks who are consistently providing you with glowing reviews.
Looking at that historical data is really meaningful for filtering out some of the folks in this process.
Finally, and most importantly, is going to be segmenting your feedback.
Defining a healthy customer
Once you know who’s giving that positive feedback and who's done so consistently, the next step is identifying other key metrics that are important for segmenting those folks. This is going to be different for each business.
An example would be companies looking at lifetime value. Are these folks part of certain loyalty rewards programs? Have they left positive feedback on different social channels?
The idea is generally you find your top customers — using the CX metrics or customer experience metrics that you're tracking — and then you merge that with all of these operational data points that identify who your top customers are.
Closing the loop
All this surfacing and information is great, but it's not really going to move the needle unless you're enabling those customers.
The term in the industry is “closing the loop.” There's a ton of definitions for what this actually means, but at the end of the day, what it really comes down to is:
- Are you enabling your customers?
- Are you following up with them?
Customers want to know that they are being heard and that you're taking action on your feedback.
We always recommend automating your closing-the-loop process using integrations. You see a few of them at the bottom that we support. If you're connected with Zendesk, for example, you might be automatically creating a ticket to promoters to close the loop with them. Maybe you're automatically distributing a gift card to people who provided you with the thumbs up about their experience.
The reasons that you would run this type of closed loop program are two-fold.
- it's an awesome way to enable your top customers to take subsequent steps. A great use case would be if you have an integration with Friendbuy, if you're sending out NPS surveys, you might automatically provide promoters with a way to recommend other folks for your product or service.
- The other piece is that people are taking the time to provide feedback to you, so you want to show your appreciation. Make sure that you're closing the loop with them and following up with them.
It also gives you an added opportunity to identify folks that you might have missed beforehand and didn’t segment out before.
Fundamentally, it's a way to build lasting relationships with a lot of these top customers.
I'm excited to introduce James from Casper to chat about how they use Delighted. I think their use case, in particular, is an excellent example of all the topics we just mentioned, in terms of finding your top customers, creating automated workflows with those folks, and ultimately closing the loop with them.
Speaker: James DeStafano, Casper
Topic: How Casper turns customer feedback into action
James: Thank you for that introduction. We’ve been working with Delighted for over three years now. Every customer that converts on our ecommerce property as well as every one of our 70-plus retail stores gets some basic NPS survey that's managed by Delighted.
We're using that feedback in three ways.
Identifying our best customers
First, anyone who leaves a positive net promoter score (NPS) or a positive product review gets promoted to our referral program in real time. Like the theme of this webinar, it's a tool we use to identify our best customers.
There's two other use cases.
One is that we pipe all of that data into Looker, and the great thing about Delighted is that they have the ability to isolate NPS scores to particular trends. An example of that would be we can look at all of our NPS scores for people who specifically leave comments about shipping and delivery.
After the user fills out a 1-to-10 rating, they get put to a landing page with a freeform text box. All of that information is extremely valuable. We pump it into Looker, and we use the native Delighted platform to mine those responses.
Real-time NPS tracking
The third thing on here is something that's actually a relatively new area and something that was very easy to set up: All of our responses pipe into Slack in real time.
Every day we get an NPS score for the day prior as well as the 30-day rolling trend. And then every time someone leaves an NPS score or a comment, it pipes into here.
Having that data in real time allows us to respond quicker to issues. For example, if we got lots of feedback that maybe our boxes are more damaged than someone would expect in the past, we've been able to use that data to go back and correct some customer pain points.
Moderator: Next, I'm going to hand it over to Nick, CEO of Tremendous, who's going to discuss how to choose the right incentives to drive customer acquisition. Nick, the floor is yours.
Speaker: Nick Baum, CEO, Tremendous
Topic: Driving customer acquisition with incentives
Nick: Hello, everyone. I'm Nick Baum. I’m the cofounder and CEO of Tremendous, a payouts platform used by Google, IBM, MIT, and thousands of other brands to send money, prepaid cards, and gift cards to individuals.
I’m excited to participate on this panel and share a little bit about what Tremendous has learned about how to run an effective referral program. It's an important topic for ecommerce companies, because referral programs are a highly cost effective way to drive consumer growth.
Look no further than Casper's customer referral program, which generated seven times higher lift than the average marketing investment. Using a similar strategy as Casper, one FriendBuy customer increased their referral share rate by 58%. Another saw share rates increase 30% and conversion rates increase 160%. That's huge.
How did they do it?
Finding the right incentive
One key is finding the right incentive.
With any referral program, the goal is to acquire as many new customers as possible. When thinking through a referral program, there's three parties to consider:
- your company,
- your existing customer, and
- the referred customer.
A successful referral program aligns the interests of all three.
What's the best incentive for your business?
There's two main options. One is offering discounts on your product. The other is offering some form of third-party incentive like money, gift cards, or Visa cards.
Choosing the best option depends on the product or service that you sell and what is the most motivating to your existing customer and to the referred customer.
Let's walk through a few examples to understand use cases for each of them.
When discounts make sense
For things like consumer goods or services the customers repeatedly buy at a relatively low cost, offering some form of discount or coupon might make most sense.
Let's consider Uber Eats. They offer existing customers $10 off an order of $25. Referred customers get $20 off an order of $25 or more. This is a great system for Uber Eats because:
- It only costs them $30 to acquire a new customer, and
- It keeps customers within their ecosystem by encouraging both existing and new customers to buy from Uber Eats.
The average Uber Eats customer spent nearly $240 in Q4 of last year. So you can imagine that the value of an Uber Eats customer is way higher than the $30 dollar acquisition cost.
Discounts aren't always the best option, though. And this is where Tremendous comes in.
How Tempo used Tremendous to reward customers referrals
Consider one of our clients, Tempo. They sell home gym equipment with a built-in personal trainer.
Since it's a one-time purchase, offering existing customers a discount off of a future purchase isn't the most appealing incentive. Instead, they offer existing customers a $100 gift card. And since they administer this through Tremendous, the recipient can choose the gift card that's most meaningful to them.
The referred customer still receives a discount. If it’s their first purchase, they get 20% to 25% off, depending on which model they choose. So that's really appealing. It's a worthwhile expense to give a new customer up to a quarter off on the hardware.
According to Tempo, their referral program helped the company generate more sales at a lower customer acquisition cost.
5 clear cases for third-party incentives
Under what circumstances should brands use third-party incentives rather than discounts?
There are five clear-cut cases:
- one-time purchases like the Tempo example or an online education program like Master Class;
- high-consideration purchases like Casper;
- regulated industries like insurance where are you legally can't discount the product;
- limited SKUs like Smile Direct Club, or Candid, which sell one product; and
- to get people who aren't customers — and perhaps never will be — to refer your product to their friends.
These are the five most frequent use cases for third-party incentives for referral programs. But they can also be perfectly effective with repeat purchases and low-consideration items.
The question becomes: Between discounts and third-party incentives, which generates a better ROI, which converts better, and which is cheaper to administer. For high-volume transactions, Tremendous offers discounts on Visa prepaid cards and gift cards, so that can tip the economics in favor of cash and gift cards or Visa cards over offering a discount.
Third-party incentives vs. discounts
For companies that have run A/B tests of third-party incentives versus discounts, the results have been pretty clear.
One customer ran a $75 Visa card versus a $30 off discount on a $2,200 dollar purchase. The gift card had a 58% higher referral success rate over the coupon code.
Another customer ran a $75 Amazon gift card versus $150 off a $1,000 purchase. The gift card one won and improved the share rate by 30% and the conversion rate by 100%. Keep in mind the gift card is half the dollar amount of the discount, and it still won significantly.
Those numbers are compelling to anyone looking to optimize their marketing budget.
How Casper uses Tremendous
Let's talk about how our friends at Casper used Tremendous.
Casper, as we all know, sells mattresses and other sleep products. A twin size original foam mattress goes for about $900. Their most expensive mattress is $4,000. Casper mattresses are super high quality. People love them.
It's a high-consideration purchase. People only buy one every few years, so a discount to their existing customers really doesn't incentivize them effectively to send referrals.
Instead, Casper offers existing customers a $75 Amazon gift card, and the referred customers get 25% off their mattress.
That's made referral programs one of Casper’s most effective marketing strategies
Three keys to choosing customer incentives
To summarize, when you're seeking an incentive to motivate customers to refer their friends, consider a few things:
- Key 1 - Consider your product and, specifically, at what frequency people are purchasing.
- Key 2 - Consider what will most motivate your customer to refer their friends. If it's cash, gift cards, or Visa cards, Tremendous ties in directly with Friendbuy and you can choose to offer anything from ACH transfers, Paypal, Visa prepaid cards, gift cards to hundreds of retailers including Amazon, and charitable donations.
- Key 3 - Run experiments to find out exactly what dollar amount maximizes conversion rates.
Thank you, everyone. I will hand it back over to Samantha to talk about the mechanics of setting up and running a referral program.
Speaker: Samantha Samuels, head of partnerships, FriendBuy
Topic: Setting up and running a referral program
Samantha: Thank you. I'm Sam, head of partnerships at Friendbuy. Our area of expertise is powering referral programs to help brands accelerate growth through word-of-mouth referrals. We partner with companies across many different categories and stages of growth.
These days everyone is going direct and doing so digitally. If you're in the business of acquiring customers digitally, then a referral program is absolutely a viable and economically sustainable growth channel for you.
Why referral programs are essential
First, let's talk about why referral programs are an essential part of sustainable growth for a business.
Referral programs achieve three things that growth teams are looking for:
- High-margin growth. Every customer you acquire through referral is one less you have to acquire through a paid channel.
- Your best customers. A big part of today's conversation is that a referral program can help you with identifying your best customers. It's usually your best customers doing the referring, and it's usually the case that you acquire your best customers through word-of-mouth referral programs.
- Significantly higher customer lifetime value and fast for conversion rates. Referred friends convert five times faster than other channels, and lifetime value can be four times higher.
To scale your referral program, you'll want to ensure that you have the placements to make referrals an integral part of your customer experience.
How impactful can a referral program be for your business?
A referral program can deliver single-digit cost per acquisition. When it comes to your return on spend, referral programs are one of the most profitable ways to acquire customers.
We developed a set of best practices to maximize getting customers to refer on impulse, which we call “impulse referrals.”
You need three things to get this to work at scale:
- Strong awareness of your program. In order for your customers to share an impulse, they'll need to know that you actually have a referral program.
- Accessibility. It has to be really easy to get to.
- And then finally, it has to be super simple to use when working together.
These ingredients make a referral program very successful.
Let's talk about the recommended best practice placements to get your customers to refer on impulse.
Primary referral call to action
Number one is what we call the “primary referral call to action.” Let's say two friends are talking at a bar and your brand comes up in conversation. One of them says, “Hey, let me send you my referral link.” That's a referral happening on impulse.
You want to make sure customers can get to your referral program from your website within 5 to 10 seconds. For example, a referral CTA that says “Get $20” on the left hand side of your homepage that triggers an overlay so people can easily share it. We typically see that 46% of referral revenue comes from this placement. It has the highest share rate of all placements.
We also recommend including a referral widget on the order confirmation page of your site. This way, every customer that purchases from you will know that you have a referral program.
Including the referral widget post-purchase is also a great way to capitalize on the excitement of the purchase. Many customers will even share with their friends as soon as the purchase because they’re so excited about it.
Referral links and dashboards
Lastly — and this is especially important for subscription businesses or brands where your customers are frequently logging into their account page — you'll want to make it easy for your customers to grab referral links directly from this placement.
You might also consider including a referral dashboard, so your customers can track how many rewards they've earned, track the referral invitation, and even send reminder emails to their friends who haven't yet converted directly from this dashboard.
Spreading the word
Now that you have all the referral program placements in place on your website to drive impulse referrals, let's talk about how you can then let people know that you have a referral program and incorporate referrals as part of your customer communication strategy.
Step one: Send a dedicated email to your customers announcing that you have a referral program. Always send a dedicated referral email to new customers to make sure they know about the program.
You also want to include a referral CTA in new product announcements. This way customers will remember that you have a referral program and will go back to your website to find it when they're ready to offer on impulse.
One client includes a referral call to action in their newsletter emails that links directly back to a dedicated landing page. About 30% of their referral revenue comes from this type of offsite promotion. Walmart sends push notifications inviting customers to refer at strategic times when they know customers are likely to refer and likely to shop with them.
Others send a dedicated SMS message to their SMS subscribers to invite them to refer friends. Texts can include a QR Code taking them to the referral program.
Another thing you'll want to do is track the performance of each of these placements and optimize accordingly. You can do that with Friendbuy.
These are some of the ways innovative and high-growth brands are scaling their referral programs to incentivize their best customers to drive new customer acquisition and drive sales.
Thank you so much.
Speaker: James DeStefano, senior director of CRM and retail and wholesale marketing, Casper
Topic: How Casper optimizes customer referrals
James: Hi, everyone. My name is James DeStefano. I am the senior director of CRM and retail and wholesale marketing at Casper. I’ve been at Casper for a little over three years and in the CRM space for about 15.
The unique thing about Casper is that we truly believe sleep is the super power that charges everything people do. We firmly believe that sleep changes everything.
We saw an opportunity to drive revenue from top customers with referrals. We needed a partner that could help us with four key things:
- operationalizing A/B tests,
- providing visibility into program performance,
- validating referrals, and
- removing fraud.
Because we're such a high price point, that was one of our top concerns — and also the ability to actually fulfill rewards.
We've been working with Friendbuy, Delighted, and Tremendous for about three years. We partnered really closely to scale this program.
ROI on Casper’s referral program
Compared to the average customer marketing investment, our referral program has a seven-times greater return on investment. What’s driving that is really two-fold.
First, it's extremely efficient because we're leveraging our top customers and we've strategically included referral placements throughout the customer life cycle:
- We trigger referral communications after someone leaves a positive NPS score or a positive product review.
- A link to the referral program appears at the top of our order confirmation page.
- We include in the printed material that runs with our product instructions.
- We also send emails at dedicated touch points, and more.
Also contributing to that ROI is the ability to test and optimize on a continuous basis. We always have at least one test running.
I'm going to take the rest of the time to walk through some of the A/B tests that we've run.
This is the one that we're currently running now. We're really testing the offer strategy here:
- Option A: higher friend offer (25% off), lower advocate offer ($75).
- Option B: lower friend offer (20% off) and a higher advocate offer ($100).
Another key element that we test is placement. As Sam mentioned, accessibility and ease of use is critical.
We have it prominently displayed in our navigation with a cash icon. We did a lot of testing of this placement. As you can imagine, this real estate is extremely competitive. We saw referral revenue significantly drop when we didn’t include it, and so it's now on an evergreen basis.
And we have what we call the “hamburger” in our order details and shipping status pages. These two placements are driving about 60% of the total program shares, so they are super important.
After Covid, interestingly enough, we saw a massive growth in our pillow sales. So we really leaned into that trend and developed this pillow referral program.
We're making use of this space on our main refer friend page to let advocates know about this referral program. It was really important to us that we didn't cannibalize our mattress referral program.
We A/B tested this before rolling it out. We also did a lot of placement to understand how we present both of these referral offers and how they live together on the site. This was the treatment that works best for us.
Lastly, we know urgency works for the cost per customer.
We know that there's a very long discovery before the customer reaches Casper. But once they reach Casper, it's a relatively short discovery to purchase latency. And so we know urgency works.
We developed what we call a “referral blowout” that we selectively run. For a few days to a week we temporarily increase the referral incentive — again, really leaning into urgency — from a $75 Amazon gift card to a $200 Amazon gift card.
We've seen a lot of success here. The last time that we tested this, we saw a 29% lift in conversion compared to the prior three months. So again, this is a tactic that we selectively use when we're not on a promotion, to drive the business.