CHALLENGE
Some of the best marketing you can benefit from is referrals from your customers, but tracking that ROI can be tough.

Ari Parnes, Senior Manager, Marketing, Student Advantage, knew the college students who subscribe to the discount buying service could be great evangelists. They spend lots of time emailing their friends and participating in social networking sites and are the demographic Parnes and his team tries to reach.

The firm’s primary marketing channels were a direct mail push at the beginning of the college year and an affiliate program with merchants in the Student Advantage network. But Parnes wondered if current customers might provide a personalized recommendation to their peers. “We were looking for ways to get involved with more viral efforts and take advantage of social networking and the fact that college communities tend to be tight-knit.”

Parnes needed a system that would do two things: urge customers to recruit their peers and measure the results.

CAMPAIGN
Parnes and his team implemented a student-referral program that turned existing customers into affiliates -- paying them for each new subscriber. The effort urges customers to promote the service to their friends through email messages and widgets on their social networking profile pages. Built-in tracking records what otherwise is untraceable word-of-mouth marketing.

Here are the six steps they took to launch the program:

-> Step #1. Establish compensation for referrals

The team first analyzed what form of compensation they should offer participants for each subscription generated. Cash? Gift cards? Discounts? Other rewards?

They decided that money was most appealing. But how much for each conversion? The compensation had to be meaningful enough to get college students to participate, and the payments had to be affordable for their business model.

They finally settled on paying a slightly higher commission on each new customer -- $10 for each new subscription -- because it was a unique channel and they were working with existing customers.

-> Step #2. Promote the program

With the compensation established, they began promoting the program to existing customers in two channels:

- Online promotion
Existing customers access their Student Advantage accounts through a members-only homepage. Parnes’ team added a box to the page that announced the program and provided a link to the signup page. They also added a link to the referral program on the welcome page for new subscribers.

They used the headline: “Get $10 for Referrals.” Body copy also touted the ability to earn “a little extra cash.”

- Email promotions
The team incorporated referral-program promotions into the weekly emails to customers. Those email messages kept subscribers updated on new features and services.

The first message announcing the program was sent early in the school year. “Get $10 cash for every referral” was the headline. The email also provided a button linking students directly to a program page.

A few months later, they sent a reminder email that detailed new ways in which referral-program participants could receive their payouts, such as gift cards with online merchants in addition to cash.

-> Step #3. Use custom landing page for enrollment

Customers who clicked from online buttons or links in an email message were taken to a landing page to sign up. This page offered more details on how the referral program worked and provided an easy way to enroll.

Users only had to submit their names and email addresses to create their referral program account. This kept registration fields at a minimum. The site also allowed program members to specify how they wanted to receive their commissions.

Radial buttons allowed them to choose:
o Cash payments delivered to a PayPal account
o Gift cards from online merchants, such as iTunes, Amazon.com and Target

-> Step #4. Provide account management portal

The team provided a referral-program portal for students to easily launch their own marketing efforts and monitor their success.

The team focused on generating referrals through two channels:
o Email
o Social networking sites

For email promotion, students could log in to the program portal and use an automated message creation and distribution tool.

- A blank field allowed them to type their own recommendation for Student Advantage or choose from four prewritten blurbs.

- Another field allowed them to type in friends’ email addresses or automatically upload contacts from popular email services, such as Yahoo!, Gmail and MSN.

- Clicking a button automatically sent the message to their contacts. The message included an embedded custom URL linking to a landing page where visitors could sign up for a 30-day free trial.

For social networking promotion, the portal allowed students to create widgets that were automatically added to their pages on popular networks and their own blogs.

Students could select from four popular sites:
o Facebook
o MySpace
o Blogger
o hi5

- The system provided Flash code that users could add to their pages. It provided a link to the free trial landing page and contained tracking information to record referrals.

- Widgets were branded with a Student Advantage logo and a personalized headline that read, “STUDENT NAME recommends Student Advantage.” As with email messages, students could write their own recommendation or choose from four prewritten blurbs that appeared under the logo.

-> Step #5. Create tracking devices for referrals

The team created tracking devices and began monitoring traffic as soon as students in the referral program began sending emails to their friends and adding widgets to their blogs and social networking profiles.

- Prospects who clicked through a widget had a special cookie placed on their browsers. It recorded the page that had referred the lead.

- Pixel tags embedded in the subscription transaction pages recorded when a transaction was completed.

- Links embedded in email messages contained tracking codes in the URL that recorded who had generated clicks and conversions.

- As a backup measurement tactic, the team tracked the specific links that prospects clicked to take them to the subscription signup landing page. This fail-safe technique ensured that program members were compensated for their referrals if there were problems with the pixel tags.

-> Step #6. Pay customers monthly

The system’s tracking features automatically recorded new trial signups generated by individual program members. And they recorded which of those trial members converted to paying customers at the end of the 30-day period.

Every time a trial member converted to a paying customer, students received an email telling them they had earned their $10. Cash payments were deposited automatically into members’ PayPal accounts. Gift cards were sent each month.


RESULTS
The tight-knit college community has become a reliable source of referral traffic for Parnes and his team. “I am definitely pleased with it. It’s not a torrent of traffic, but it consistently brings in a steady stream of new enrollments without requiring a big burden in terms of program management.”

Since early last fall, the referral program has generated:
o 485 new subscribers
o More than 4,500 customers joining the referral program -- making it a key part of its affiliate marketing effort
o 12% conversion rate -- compared to the 4.8% conversion rate for search traffic and the 8.43% rate for affiliate traffic
o 5,200 personalized recommendations for Student Advantage (either by emails or the widgets)
o 58% of enrollees placing a widget on their social networking profiles
o 42% conversion rate on the program landing page

Personalized emails are getting more referrals then the widgets so far, generating a 28% clickthrough rate to the subscription signup page. Parnes suspects this is because of more people being likely to open and read an email from a friend and acting on the personal recommendation.

Useful links related to this article

Creative samples from Student Advantage's referral program:
http://www.marketingsherpa.com/cs/studentadv/study.html

TellAPal - vendor that provides the social marketing referral engine:
http://www.tellapal.com

Student Advantage:
http://www.studentadvantage.com