Launching and managing a referral contest is one of the most cost-effective ways of generating new customers and growing the customer base.
This strategy is perfect for turning ordinary customers into super-advocates. They will use their social connections and persuasive powers to invite friends, business contacts, acquaintances, colleagues, relatives, and family members to your business. A contest’s urgent nature and lucrative rewards will make customers throttle their referral efforts.
But how do you conduct such an activity, and why? Are there types you should know? Relax. We will answer these riddles in this post.
What is a Referral Contest?
Running a referral contest is one of the most productive referral program ideas any business can implement. It’s a friendly competition among existing customers to see who can bring the most potential customers. Whoever lands on the top spot brings home a coveted prize or reward.
Referral contests are integral strategies for a referral program to achieve its objectives. It’s a tactic for inspiring customers to refer social contacts (i.e., family members, relatives, colleagues, friends, acquaintances, and business contacts) to your business. They become brand advocates or ambassadors.
Common Types of Referral Contest
Customer referral programs utilize different strategies to realize their objectives. Referral competitions are just one of them. However, business owners and merchants must appreciate that this strategy comes in various forms. Here are some of the most common types of referral contests you should know.
Referral Sweepstakes
Referral sweepstakes aren’t different from the lottery or raffle draw people love to play. It’s one of the easiest contests to operate and manage.
Each customer earns a raffle ticket for each qualified or successful referral. Hence, the more customer referrals a client brings to the business within the sweepstakes’ time period, the higher the chances of getting the top prize.
It’s a game of chance, although most consider it luck. However, nothing can be more exciting for customers than waiting in eager anticipation of the draw date. They know the more invites they produce, the greater their chances of winning.
Leaderboard Contest
As the name implies, this type of contest tracks a customer’s number of qualified referrals. You display the running results on your website. Customers will know how many potential clients they must secure to reach the top spot.
Leaderboard contests promote engagement and healthy competition. Casual website visitors and potential clients can see the contest’s progress. They can support their “candidates” by becoming their referees.
Unlike sweepstakes, earning the top prize is not a product of chance. Customers must work for it.
Point-based Contest
A points-based contest is like the leaderboard type, except everyone gets a prize. Each qualified referral is a contest entry, earning the customer a point (or points). More points means a larger prize.
The good news is everyone gets referral rewards, regardless of points scored. This strategy is perfect for encouraging clients to be more persuasive in their referral tactics. They could use social media channels and other platforms to invite friends and business contacts.
Tiered Contest
This customer acquisition contest is like points-based competition, except clients progress through levels or tiers. It’s like your favorite computer game where you move to the next level after completing tasks or beating the Evil Boss at the level’s end.
Each level has corresponding rewards. The higher the level, the more handsome the rewards. This referral campaign strategy encourages existing customers to boost word-of-mouth endeavors and ensure they get the best prizes.
Event-specific Contest
Acquiring new clients and turning them into loyal customers is never more fun than leveraging a festive event. After all, everyone is upbeat and in the mood about your company and offerings. Creating results-oriented referral messaging should be easy.
As the name implies, event-specific contests are limited time competitions. You run them rarely or seasonally.
For example, many businesses have contests for the Summer, Thanksgiving, Black Friday, Christmas, New Year, Valentine’s, Memorial Day, Independence Day, and other holidays. Others have special events when launching a product or celebrating the company’s founding anniversary.
The beauty of this contest is you can employ other referral marketing ideas. For example, you could run a sweepstakes, raffle, leaderboard, or points-based competition leading up to the special day. You will cap off the event by announcing the winners and awarding prizes.
Why Should Launch a Referral Contest?
The referral process isn’t different from traditional word-of-mouth marketing. It’s a fact that people trust friends’ recommendations more than what brands and strangers say. At least nine in ten people have this thinking.
Contests encourage existing customers to increase their engagement with their social networks. They can invite family members, friends, relatives, acquaintances, and colleagues on various social media channels and other platforms.
Customers can also email business contacts, persuading them to click the referral link to bring new customers to your company.
These engagements can boost brand awareness. Customers’ friends will know your brand. They trust their friends’ words. And if you deliver exceptional products and customer service, there’s a good chance these new customers will refer to their social contacts. That will grow your current customer base.
A referral contest motivates customers to bring more new clients to the fold. Although you can offer standard rewards for every qualified referral, running a contest stimulates people’s natural competitiveness.
For example, a $20 store credit for each qualified referral might seem generous. Turning the activity into a contest where the top prize is $1,000 should fuel customers to seek more invites. They could be more creative in their referral messaging and more persuasive in their interactions.
These contests can help you acquire more new customers faster. It boosts brand awareness and allows your company to ensure brand loyalty. More importantly, the more customers you have, the more robust your bottom line.
And that’s what having a business is all about.
Referral Contest: 9 Basic Steps to Conduct a Successful One
All businesses with a comprehensive program for acquiring new customers desire a successful referral contest. Don’t worry if this is your first time implementing one. We have your back. Here are the steps to a successful contest strategy.
Decide the contest goal
Any endeavor starts with a clear goal – an idea of what the activity hopes to achieve. We mentioned that referral programs seek to expand the customer base by adding more new clients to serve.
However, you might want to be more specific or detailed in your objectives. Doing so allows you to focus on measurable characteristics. It enables you to evaluate whether the contest strategy is successful or not.
Your contest objectives also help define other contest elements, including rewards, marketing channels to use, and referral tracking. Future competitions will depend on how the current competition meets its predetermined objectives.
So, what should you aim for?
Most businesses want to improve brand awareness, while others focus on promoting their referral programs. Others might want to grow social media followers, drive more traffic, engage current customers, and increase email or newsletter subscribers.
Start by analyzing business metrics and pick a parameter you want to improve. For example, if you notice only a hundred new customers added to the business monthly, you could aim for a 25% increase within three months.
Here’s the trick.
The clearer the objective, the easier it is to measure and validate. Keep your goals realistic to avoid potential hangups when things turn south.
Find the target participants
Acquiring new customers through well-designed contests requires defining your target audience or contest participants. You must know your customers by now. Otherwise, you can analyze them to understand their unique characteristics.
For example, do you know what motivates them to buy your products? Is it the high-quality offerings or the impeccable customer service? How about the perks you attach with each purchase? For instance, some folks love receiving gift cards rather than enjoying the products they purchase.
The information you generate from knowing your audience will help determine the rewards to give or channels to use.
For example, suppose you have high-quality pet products catering to pet owners globally. You noticed more than three-quarters of your customers are on Facebook and Instagram. Focusing on these social media platforms should help you achieve your contest objectives.
Let’s consider another example. Suppose you offer a language learning application, and customers value self-directed learning. You could devise a contest where winners will receive advanced language courses. It would be more enticing than conventional rewards (i.e., discounts and store credits).
Select the right contest type
As mentioned, defining the contest objectives and participants will help you decide the contest type. Everything depends on how you “read” your customers.
For example, do your customers love the excitement of not knowing whether they won? Some folks love to gamble and play with chance. In such scenarios, a sweepstakes or raffle-type contest should be perfect.
But how about customers who want a more definitive competition? Some individuals don’t like to put their success to chance. You have several contest options for such customers.
Leaderboard contests are perfect for customers who want the world to know about their referral capabilities. You will post a running total beside each contest participant’s name, encouraging customers to bring out their A-game.
You could introduce a points-based or tiered competition if your customers are shy or prefer their identities to remain confidential. You don’t need to display referral counts and position rankings because every participant gets a reward. Everything depends on who wants a more lucrative reward.
Set the contest’s rules and requirements
Like any competition, contests determining who can bring the most new customers to your business require rules, conditions, and requirements. Failure to comply with these rules can lead to disqualification.
You will want the contest to be fair and transparent. Everyone deserves a chance at the top prize.
So, what rules should you set?
No hard and fast rules exist about what guidelines you can set for your contest. However, you might want to define the age requirements for participants.
For example, some businesses open their contests only to customers aged between 21 and 40. This age group underscores the business’s target market – young adults. If you’re targeting middle-aged customers, you can set the age requirements between 41 and 60.
Another parameter worth including in your contest rules is customer location. For instance, the contest might only be available to US mainland residents. Hence, customers living in Hawaii are not eligible.
You can also define the contest period. Will it run for a month, three months, or the whole year? Be specific about the start and end dates. For example, you could say the contest starts on Feb 1, 2024 and ends on April 30, 2024.
A vital rule to consider relates to how customers can join. Of course, they need qualified referrals to join. However, will a referral translate to one raffle or sweepstakes ticket? Does it carry a point? How many points must customers earn to get a prize?
Please don’t forget the rewards, including secondary prizes.
Pick an attractive incentive
People join contests to win rewards they don’t normally get from their usual transactions. So, you can expect your competition to fail if you cannot offer a more lucrative reward than what your customers receive for referring new customers.
For example, a 10% discount might be okay for standard referrals. But for contest purposes, you might want to be more generous. For instance, bumping the discount to 50% for the winner should get everyone excited.
Cash prizes are always an excellent draw for such strategies. You can also give free services or products. And if you have an event-specific contest, you could reward the winner with a more appropriate prize. For example, how about a summer holiday cruise to the Caribbean?
You might want to consider giving consolation or secondary prizes. Although such incentives have a lower value than the top prize, participants will still appreciate the recognition. They will know you value them.
Of course, even consolation prices should be different from the usual referral incentives. For example, you could give Apple AirPods instead of a 10% store credit.
The idea is to offer an irresistible prize. It should be high-quality and valuable to contest participants. Otherwise, they won’t be motivated to invite more new customers through social media and other channels.
Decide where to run the contest
You have several options where to launch the contest. Everything hinges on which platform or channel most contest participants use.
For example, suppose all participants have social media accounts, like Facebook, TikTok, LinkedIn, and Instagram. You can launch and run the contest on these platforms to leverage each participant’s social network.
You can also run the contest on your official website. Participants can log into their accounts and stay updated of contest progress. It is especially advantageous for leaderboard-type contests.
You might want to determine the platform that most contest participants use. That’s why understanding and defining your audience is a crucial step to ensuring a successful contest.
It’s promotion time
Contests are strategies for gaining more new customers for your business. These activities leverage existing customers’ social proof of your brand. Their positive experiences allow them to create more positive impressions about your company. And that empowers them to share meaningful stories and recommend your brand to their social circle.
Unfortunately, they won’t know about your contest if you don’t promote it. They will only invite friends, colleagues, family members, acquaintances, relatives, and business contacts whenever they feel like it. They don’t have a sense of urgency.
Hence, you must create one. And the only way you can bring this message is if you promote your contest across multiple channels and platforms.
One of the most effective ways of promoting referral competitions is by creating a social media post and publishing it on all social media networks. Your followers will see the contest and share it with friends. You can ask audiences and followers to tag their social contacts in the comments.
You can also leverage your email list by sending recipients a newsletter dedicated to the contest. Ask your email subscribers to join and win fascinating rewards. This strategy is more effective because people in your email are actual customers, unlike social media, with a mix of customers and non-customers.
How about writing blog posts about the contest? Using proven SEO techniques will draw more attention to your blog. Add a popup or floating referral widget to your website and link it to the contest landing page.
Promoting to giveaway directory websites is always an option. You can also collaborate with social media influencers and well-known bloggers to share your contest with their followers.
You will want to promote the contest several weeks before its official start. For example, if the competition starts on June 1, 2024, you can begin marketing the activity as early as March 2024.
Add incentives to these marketing tools. Make the messaging attractive to entice as many contest participants as possible.
Choose the winners
You won’t worry about this step if you run a leaderboard-type contest. After all, the rankings are publicly available. And everyone can see who is winning the race. It’s also not an issue with points-based and tiered systems because everyone has a prize.
However, if your contest is the sweepstakes or raffle type, you must pick a winner when the competition ends. Use a random picker app to determine who gets the top and consolation prizes (if any). Some brands like to livestream the drawing to make the activity as transparent as possible.
Please don’t end the contest by only picking the winners. You must celebrate it with the rest of your customers, too. Showcase your high-performing referrers. This strategy reinforces trust in your business, including contests and other activities. It can also open further engagement with people who wanted to join the competition but couldn’t.
More importantly, people will look forward to future contests because they know how credible and trustworthy you are in executing such activities.
Analyze the results
This task can be challenging if you don’t have clear objectives before setting up the contest. Did the referral competition meet your goals? Did it exceed them?
Use referral-tracking apps and technologies to create in-depth reports about your referrals. Check referral-centered metrics to determine whether the contest is successful.
Analyze the results and use the information to devise more productive contests in the future. For example, you might want to offer more lucrative giveaways or launch the contest promotion earlier.
Let this contest be a learning moment for your business to do better.
Conclusion
Acquiring new customers to expand the customer base is the ultimate dream of every business. More customers equals more opportunities for financial growth. Although referral programs can offer referrers an attractive compensation, contests take the activity to a higher level.
Contests create urgency, and the rewards are more lucrative than ordinary referral incentives. Moreover, the strategy taps into people’s innate desire to compete and outdo one another. After all, there’s nothing more fulfilling than winning a coveted prize.
So, plan your referral competition today, launch it in a few months, and enjoy substantial growth in your customer base.
