Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How a Tea Brand Uses Referral SMS to Boost Repeat Rate by 60 Percent
Transcript
- Lucas: So a tea brand called Leaf & Bloom ran a referral campaign over six weeks, purely through SMS, and the headline number is this: customers acquired through the referral program had a repeat purchase rate that was 60 percent higher than organic first-time buyers over the next ninety days. Luna: Sixty percent — that's huge. What was the offer they used? Lucas: Pretty straightforward ten dollars off for both the referrer and the referred friend. But the interesting part is how they timed the texts and how they designed the landing page. It wasn't just one blast and done. And I think that's partly why the numbers came out the way they did. Luna: I want to hear about the mechanics, but first — and this is totally on brand for us — we don't run ads on these shows. We keep it that way because we think the content should speak for itself. If you find value in episodes like this, the best way to support that choice is at buy me a coffee dot com slash fexingo. No pressure, just an option. Lucas: Yeah, exactly. And that support lets us keep digging into specific campaigns like this one without any sponsor influence. So, Leaf & Bloom: they sent the first referral SMS to existing customers who had made at least two purchases — so they targeted people already showing repeat behavior. The text was short: 'Love our tea? Share ten dollars off with a friend and get ten dollars off your next order. Here's your link.' Luna: Did they include any personalization? Lucas: Just the customer's first name. Nothing fancy. But the key was that they sent a second text three days later to anyone who hadn't clicked the first link. That follow-up was slightly different: 'Your friend is waiting for that ten-dollar discount. Send them the link.' Luna: That second text feels a little playful — 'your friend is waiting.' Did that actually move the needle? Lucas: It did. Of all the referrals generated, about 35 percent came after that second text. So without the reminder, they would have lost more than a third of the referrals. And the reminder didn't feel spammy because it was only one follow-up and the tone was light. Luna: So the timing was first text right after a purchase, then three days later? Lucas: Not exactly. They sent the initial referral text about a week after the customer's second purchase. The idea was that by then the customer had received their order, tasted the tea, and formed a positive opinion. They didn't want to ask right at the point of sale when the customer was still in transaction mode. They wanted the customer to have experienced the product. Luna: That makes sense for a consumable — you need time to actually use the product before you feel confident recommending it. Lucas: Exactly. And the landing page was also smart. When the referred friend clicked the link, they landed on a page that showed the ten-dollar discount automatically applied, plus the most popular tea blends with customer ratings. No long sign-up form — just name, email, and phone. The friction was very low. Luna: Did they track whether referred customers had a different average order value than organic customers? Lucas: They did, and the referred customers actually had a slightly lower average order value on their first purchase — about four dollars less. But because their repeat rate was so much higher, the lifetime value still came out ahead. After three orders, the referred customer's lifetime value was about 45 percent higher than the organic first-timer. Luna: So the trade-off is a smaller first order but stronger retention. That seems worth it, especially for a consumable brand where people need to reorder regularly. Lucas: Right. And the cost of the incentive was ten dollars off each side. So the brand spent twenty dollars per successful referral — ten for the existing customer, ten for the new one. But if that new customer makes three purchases with an average order value of, say, thirty dollars, the gross margin on those three orders easily covers the acquisition cost. Luna: What about the existing customer? Did they actually redeem their ten dollars? Lucas: Yes — about 70 percent of referrers redeemed their credit within sixty days. And that redemption often triggered another order, which meant the brand got an extra purchase from the loyal customer too. So the referral program wasn't just acquiring new customers; it was also re-engaging existing ones. Luna: I like that double effect. And the whole thing ran over SMS — no email, no social media push. Why do you think SMS worked particularly well here? Lucas: Several reasons. First, the open rate on SMS is around 98 percent within three minutes. For a time-sensitive offer — even one with a week-long window — that immediacy matters. Second, SMS feels personal. It's a channel people associate with friends and family, so a referral ask fits naturally. Third, the brand already had a strong SMS relationship with these customers through order confirmations and shipping updates, so the referral text wasn't out of the blue. Luna: Were there any negatives? Any customers who unsubscribed after receiving the referral text? Lucas: The unsubscribe rate was about 0.3 percent for the first text and 0.5 percent for the second. So very low. But the brand did pre-filter: they only sent to customers who had opted into marketing SMS, not just transactional. And they excluded anyone who had received a referral text in the past sixty days to avoid fatigue. Luna: Smart segmentation. So the takeaway for a brand thinking about doing something similar: target existing customers who have already repeated, send the ask after they've had time to enjoy the product, follow up once, and keep the landing page simple. Lucas: Exactly. And one more thing: the brand A/B tested incentive amounts. They tried five dollars versus ten dollars versus fifteen dollars. The five-dollar offer generated very few referrals. The fifteen-dollar offer generated about the same number as the ten-dollar offer but with higher cost per acquisition. So ten dollars was the sweet spot — enough to motivate action but not so much that it attracted purely incentive-driven customers who wouldn't repeat. Luna: That's the kind of data most brands never test. They just pick a number and go. Lucas: Right. And because Leaf & Bloom ran this as a six-week campaign with clear tracking, they now have confidence that a ten-dollar referral incentive, delivered via SMS with a single follow-up, generates a repeat purchase rate sixty percent higher than baseline. That's a number you can build a growth strategy around. Luna: Absolutely. And I think the key insight is that referral programs aren't just for acquisition — they're a retention tool too, because they re-engage existing customers and bring in new ones who are already primed to be loyal. Lucas: Yeah. The referred customer comes in with a built-in trust signal — their friend already vouched for the product. So their likelihood of sticking around is higher from day one.