We use cookies to give you a better experience. Carry on browsing if you're happy with this, or read our cookies policy for more information.

Skip main navigation

The value of personal referrals to marketers

We discuss how marketers can encourage existing customers to recommend an organisation to their friends by using gamification techniques.
LISA HARRIS: We’re going to be talking today about gamification. So perhaps you could start off by telling us what exactly is gamification.
SEBASTIAN STEIN: OK. So, gamification is a concept that’s now very popular with different companies, and it’s basically the use of game rules, game elements, game mechanisms in a non gaming context– so like a business context, education context, and so on. So it could be the use of points. It could be the use of leaderboards. And these points are awarded for certain problem solving– for solving problems on the website or so on, and to engage users. And there are lots of examples of companies employing gamification. So for example, on Amazon, if you submit lots of reviews that users find helpful, then you get a badge saying you’re a top reviewer, and there’s a leaderboard of the best reviewers on Amazon.
LISA HARRIS: That’s very interesting. And Victor, perhaps, why should we– in digital marketing course– be learning about gamification?
VICTOR NARODITSKIY: It can really make a huge difference, in terms of getting users engaged, and it could be something very simple. For example, LinkedIn at some point had just a progress bar saying that if you add the school that you went to, you’ll get five more percent– five more points– so you get closer to completing your profile. It seems like nothing, but that may have made a big difference for them. And it’s something that really does not cost much to the company, and it can stimulate specific activities. So, for example, if you are short on a particular type of user generated content, then you could try to stimulate that by offering a specific badge for that type of content.
LISA HARRIS: OK. And can you tell us a bit about what projects you’re involved at the moment?
SEBASTIAN STEIN: Yeah. So we are specifically interested in seeing whether we can use gamification to encourage users to spread the word about a particular organisation or a course on social media. So we partnered up with Cancer Research UK, and we set up a website to support one of their causes. So they had six medics from the University of Southampton, actually, who ran the New York marathon to raise money for esophageal cancer. And we wanted to see whether we could use some kind of gamification mechanism to encourage raising awareness of this website. So we put a big progress bar on the website, and we awarded points for signing up to the website to support the cause.
And we said, if enough points are generated– so, 1,000 points are generated– a donation would be made to the cause, 500 pounds. Now then, specifically, to look at encouraging referrals, inviting others to go to the website, we offered a bonus payment of points to certain users. So giving an extra point or an extra three points to users if they successfully referred a friend to the website. So, indeed, the really interesting thing we found was that these extra points actually made a difference. So when we offered more points to users for referring their friends, we got more referral activities. They were more likely to post on Facebook or Twitter and then successfully refer friends to sign up to the website.
LISA HARRIS: OK. And Victor, how could you summarise the value that this offers to marketers?
VICTOR NARODITSKIY: To me, the biggest value is taking marketing to the customers– so it’s the customers who are doing marketing for the company. So, using in the buzzword crowdsourcing, that’s crowd sourcing marketing activities. And now that we are basically overloaded with information and there’s marketing everywhere, personalised referrals are becoming more and more important. So if you can get your existing customers to promote the company, they can do it in a much more effective way because they know what their friends want. They can basically do a more targeted referral, and also they would have more trust. So even if a customer posts on Facebook or Twitter, it’s a totally different message than seeing a Facebook ad.
LISA HARRIS: And how do you evaluate success in this type of project?
SEBASTIAN STEIN: So in our project, we were looking specifically at referrals. How many people– someone who came to the website– they referred, how many of their friends. But you can evaluate all kinds of other metrics. So for example, the kinds of engagement that might– it might increase engagement with the website because people are more interested. They like the challenge, so they come back to the website and maybe check their progress.
Some studies have shown also that people who have been referred by others are themselves more engaged. So I think a German bank run a big trial where they encouraged their existing customers to refer new customers, and actually those new customers were more valuable to the bank. They were more loyal than regular customers.
LISA HARRIS: If you were perhaps running a small local business, would you still be able to make use of gamification techniques effectively?
SEBASTIAN STEIN: Yes, I think so. I think even small companies can benefit from gamification. So first of all, it’s usually free to implement. You don’t necessarily have to pay users directly. You just award points or have a leaderboard. Then technically, it’s quite easy to implement as well. You might just have to redesign your website slightly, add a mechanism to it. It can be very beneficial. And you can use your existing customer base to– for example, as we looked at in our research, refer new users to your website without spending a lot of money on marketing.
VICTOR NARODITSKIY: And due to the lack of traditional marketing budgets, they are relying more and more on their existing customers, so on referrals and on social media.
LISA HARRIS: OK thank you both very much.
In this video you meet Sebastian Stein and Victor Naroditskiy who discuss how marketers can encourage existing customers to recommend an organisation to their friends by using gamification techniques.

So what exactly is gamification?

Gamification is a marketing activity whereby elements commonly associated with games are applied in non-game contexts.
It can drastically increase the level of engagement of a user.
This is accomplished by turning potentially unexciting activities into fun. In the end, the users benefit as they are enjoying the ‘game’ and the company benefits as it is getting user engagement.
Examples of gamification include awarding users with badges, points or levels for achieving certain goals, showing leaderboards that allow users to compare their relative contributions to a cause, or even offering prizes for outstanding contributions.
Many online businesses use gamification, including Tripadvisor, Amazon or the Strava fitness app.
Increasingly, organisations are effectively crowdsourcing their marketing – by using gamification techniques to encourage existing customers to recommend the brand to their friends via their own social networks.
This greatly extends both the reach and the impact of the message.

Our Gamification Project

We have been investigating how to use gamification to motivate people to make referrals. In particular, what is the best way to encourage more participants in a project, or contributors in a charitable drive, or customers of a company to recommend their friends to take part?
Our approach is applied – we compare various referral motivators side-by-side. Website visitors are assigned to different motivators at random.
You can read about our last experiment that was done in partnership with Cancer Research UK in this guest blog post for JustGiving.

The value of personal referrals

We are all exposed to a growing amount of information and marketing. A natural reaction is to filter out all of the ads thrown at us.
Many studies have highlighted a growing distrust of traditional advertising by consumers.
A personal referral on the other hand carries a more compelling message. We are much less likely to ignore a recommendation from a trusted friend.
When companies succeed at getting customers to make a referral, they are obtaining a very effective marketing channel. Facebook is recognising this and it displays the names of friends who “like” a particular advertisement to make it more personal.
Companies like the taxi provider Uber are offering significant rewards for customer referrals in terms of free rides or account credits.

Measuring success

We have experienced some challenges in getting access to participants to carry out our research. There are a certain amount of technical changes that need to be made to a company’s system in order to implement an experiment. This takes time and resources. It is often hard to convince companies that they will benefit from this investment in the end.
The main measure of success is the increase in the number of customers/users/subscribers since the experiment began. A cost-benefit analysis can be performed to show how well a given referral motivator is performing compared to other marketing channels.
The approach of rapidly testing various marketing strategies and relying on existing customers to help marketing activities is even more important for small businesses and startup operations than it is for large organisations that have big marketing budgets.
Without the large budgets, you have to be creative. In the start up world these activities are known as growth hacking.
This article is from the free online

Digital Marketing: Challenges and Insights

Created by
FutureLearn - Learning For Life

Our purpose is to transform access to education.

We offer a diverse selection of courses from leading universities and cultural institutions from around the world. These are delivered one step at a time, and are accessible on mobile, tablet and desktop, so you can fit learning around your life.

We believe learning should be an enjoyable, social experience, so our courses offer the opportunity to discuss what you’re learning with others as you go, helping you make fresh discoveries and form new ideas.
You can unlock new opportunities with unlimited access to hundreds of online short courses for a year by subscribing to our Unlimited package. Build your knowledge with top universities and organisations.

Learn more about how FutureLearn is transforming access to education