Deconstructing Demographics: Referral By Sector

by Caity Dalby, Content Manager, Figaro Digital

Referral marketing platform, Mention Me, launched in 2013 as a software-as-a-service solution that allows businesses to switch on and optimise the referral marketing channel, significantly boosting customer acquisition without requiring tech resource. They now power refer-a-friend programmes for hundreds of brands including some of the most well-known and fastest growing retailers in the UK, Europe, and the US.

In October 2017, they undertook research in collaboration with OnePoll to survey over 2000 UK consumers to gain insight into the demographics most likely to refer brands and products, and to further understand how to cook up a referral storm. Figaro Digital spoke to Tim Boughton, CTO & Co-Founder of Mention Me, to discuss the company’s research and resulting infographics exploring the demographics most likely to refer products and how to cook up a referral storm.

In the first instalment of this two part interview find out why demographics are so significant to referral marketing and how to close the referral gender gap. The referral conversation continues here, with Back To Basics: How To Cook Up A Referral Storm.

FD: How important is it for businesses to be able to switch on and optimise a referral marketing channel?

TB: One of the things my co-founder, Andy, and I learnt at our previous company, HomeAway, was that tech teams are consistently stretched and there’s always a massive backlog of projects. So brands who manage to get referral schemes to the top of their tech team’s backlog usually only get a thin version of their first hypothesis of what a full programme could look. Once it has been successfully delivered they rarely have the resources to go back and amend it.

Referral isn’t like other channels, it is something you have to coax into working. It’s not a slam dunk as there are different factors to configure and no one refer-a-friend programme will work across multiple brands. You have to fine tune it.

We designed Mention Me in a way that puts control back into the hands of the brand marketing teams to unshackle them from having to rely on their own tech support. Other than the very simple set up process, they generally don’t need any further tech changes after the scheme has gone live, meaning they can easily and quickly amend the programme to move it forward from that first hypothesis. In our experience it takes around six months to ramp up to performance level and develop a truly successful refer-a-friend programme. Which is why outsourcing refer-a-friend makes a lot of sense.

FD: What makes referral marketing so profitable and easily measurable?

TB: We can measure referral so accurately because we tieback referral purchases to individual customers rather than using cookies for example, which a lot of other channels use to track their performance. We use the email address of a customer as a unique reference, and so we check each new customer that goes through the referral program against the entire lists of customers that belong to one of our clients. So we can guarantee that we’re only giving them incremental new customers that they don’t already have in their customer list. That’s really important because of the incremental nature of the channel and its measurability through transactions.

FD: Why are demographics so important?

TB: Fundamentally it’s a channel about humans. What we’re trying to do is persuade two people to have a conversation, which is often a real life conversation. We are getting one of those people to put their neck on the line and recommend something to their friend, which is a really interesting social transaction to be involved in. In referral there are certain things that that make it easy to get someone to recommend a brand to someone else. If they’re going to be able to give their friends a discount then it’s going to make them look great in front of their friends, removing any barrier to making that referral.

On the other hand there are going to be negative aspects to referral programs, such as: how much hassle is it going to be to make this referral? Will I actually get a discount that I can give them? The last time I ordered something from that brand it didn’t turn up on time, so I’m a bit frustrated. Those are the key things that stop someone from referring. What you’re trying to do is make sure pros outweigh the cons.

The interesting thing about the demographics is that each brand has a different set of constraints because of how much discounting they are doing in the marketplace and various other factors that are in the mix. But demographics matter because you need to think of ways that you can make a referral program positive enough and make sense to your customers, so they’re going to have a great interaction with your brand that leads to a recommendation. So you have to accurately identify the demographic of a brand and use the knowledge we have about how those demographics behave.

It’s important to remember that it’s not an exact science, there’s no rule of thumb that says if your site is primarily shopped on by women and they are in this age demographic, that your referral scheme is guaranteed to work. It’s not that simple. But what we can do is use the demographics to make educated guesses about what we think will resonate, and A/B test the fine details. So we’ll provide a brand with two options and will track their performance all the way from a consumer seeing the offer to the point of them sharing it with their friend, and ultimately whether they make a purchase. That’s the referral cycle and can take up to three months.

FD: With women more likely to recommend in almost every sector, can you explain the referral gender gap?

TB: Although this referral gender gap looks like it would put off brands who are selling in male dominated sectors, the opposite is happening. Men do tend to share and talk about products less than women, but this means that when they do make a recommendation their friends tend to pick up on it faster because there’s less saturation. The men who receive those recommendations tend to follow up on them more, so there’s an offsetting that takes place.

We know referral can work in any sector; it’s not always intuitive as to what will work in that category, so you need to test and learn. You need to find and capitalise on the organic conversations where recommendations are already are taking place, and then the gender gap doesn’t necessarily affect it. It’s important to be aware of it and realise that it doesn’t mean that targeting men isn’t going to work.

FD: Why do you think consumer are so much more likely to recommend brands offering experiences – food and drink, travel, leisure, and entertainment – compared to other sectors?

TB: What we’re seeing here is the process of natural human connection taking place. These are the things that people talk about and make up social collateral. You are simply more likely to tell someone about a great experience like a meal at a good restaurant than something material or monetary. It’s common currency to talk about experiences that naturally occur in conversation, which would in theory make them easy to attach referral programmes to. This is also the case amongst women in relation to women’s fashion and beauty. There is a culture of complimenting each other, so again those conversations about products naturally happen. Partially explaining the Gender Gap as men don’t have the same culture of complements.

The referral sweet spot is in fashion and retail. This is the case as it’s a sector where marketing teams are hugely enthusiastic about referral, but have struggled to get it to work. In comparison food and drink can be difficult as there are less margins to play with, so incentives can be less attractive and recommendations tend to happen offline. We’re actively trying to capture that moment of natural recommendation online and are working on adding features that will make referral really grow in those sectors.

Download the Referral By Sector infographic here.