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Is Rewarding Customers for Referrals Worthwhile?

How Sweet Spot, a hair removal salon, used Blue Calypso's word-of-mouth solution to generate sales and repeat clients, something LivingSocial had failed to do.

Bill Mayer

The Company: The Sweet Spot, a Dallas hair removal salon that specializes in sugaring, an alternative to waxing

The Goal: Attract customers to the newly opened salon

The Execution: The Sweet Spot's founder, Erin Cox, noticed links to products and services on her friends' Facebook Walls that looked a lot like promotions. She followed the links and realized they all originated from Blue Calypso, a mobile marketing platform through which businesses reward people for sharing ads via Twitter, Facebook, or text message. In January, she signed up with the service, paying $2,500 a month for a promotion that allowed her up to 230,000 impressions. A Blue Calypso representative helped her design an ad offering 50 percent off any treatment at the salon and import it to the Blue Calypso app, where it appeared alongside other offerings being promoted to the service's thousands of members. Each time members posted the Sweet Spot ad on Facebook or Twitter, or shared it via text, Blue Calypso paid them 4 cents to 30 cents, adding the money to a Visa debit card (payments are based on each member's reach and activity levels). To sweeten the deal, Cox also rewarded endorsers with complimentary services. People who clicked on the promotion were redirected to a Blue Calypso landing page featuring the coupon, along with an option to "Like" the Sweet Spot on Facebook, call the salon, or visit its website to make an appointment. Cox could then view reports and analytics on the Blue Calypso site.

The Result: The promotion exceeded Cox's expectations, resulting in more than 108 coupon redemptions in the first month. Though she was selling her services for half price, she says the salon still made a profit, even after paying Blue Calypso. She ran the promotion for three months, then kicked off an ongoing giveaway campaign that offers free lip or eyebrow sugaring to first-time customers who purchase any other full-price service. All told, about 200 Blue Calypso members have promoted the salon's ads each month. Tens of thousands of people have clicked on them, hundreds have redeemed the coupons, and about 60 are now regulars at the salon. Cox says the campaigns have been much more successful than a LivingSocial deal she ran this year that was not profitable and did not lead to any repeat customers. "The demographic base you reach using Blue Calypso isn't just people looking for a hell of a deal," Cox says. "Once they get in the door, they tend to stick around."

The Price Tag: $2,500 a month

Expert Tips

Build a base
Paying endorsers works best for companies with an existing fan base, because people are more comfortable promoting companies they trust, says Fareena Sultan, a marketing professor at Northeastern University. "People don't want to spam their friends," she says. "They tend to send promotions to friends who will benefit from them."

Don't cheap out
Make sure rewards are substantial enough to motivate endorsers, Sultan adds. "They're performing a service for your business, and they should be compensated for it," she says.

Follow through
Finally, be sure to deliver on whatever promotion you are asking people to endorse, Sultan says. "The implementation has to be good enough that people who hear about your service through an endorsement want to become endorsers themselves," she says.

For more social-media strategies, go to www.inc.com/business-owner-social-media-tool-kit

Issie Lapowsky is a reporter at Inc. magazine. She has covered lifestyle and entertainment for the New York Daily News, and her work has been published in BlackBook magazine and The Brooklyn Rail. She lives in Brooklyn, New York.