We would like to begin with some stats.
- Word of mouth is the major reason for 20% to 50% of purchasing decisions.
- Consumers rely on word-of-mouth two to ten times more than paid media. (Source)
- Word of mouth improves marketing effectiveness by up to 54%. (Source)
- The LV of a referred customer is 25% more than other customers. (Source)
Surprised? You shouldn’t be! After all, every time you want to buy a certain product or service, you first ask a friend or family member for a recommendation or scroll through online reviews, right?
That’s why you need to capitalize on the power of word-of-mouth marketing, aka start working on referral marketing. It’s the holy grail you’re looking for.
Whether you own a clothing brand or a start-up, referral marketing can get you a steady stream of new customers! So, let’s go and learn everything one needs to know about referral marketing!
What’s Referral Marketing?
Referral marketing is a marketing tactic where you bring in new customers and grow your customer base with the help of your company’s existing customers.
Basically, your existing customers spread the word about your brand via recommendations and word of mouth. The referer and the referred usually get some incentive on each referral!
Unlike other forms of marketing, in referral marketing, you can use your company’s existing customers to generate new leads. And, according to a study, people are 4 times more likely to buy when referred by a friend!
But, that’s not the only good reason why you need to try out referral marketing. There are literally SO many other benefits of this form of marketing, and we’re going to talk about them in the next section!
3 Amazing Benefits of Referral Marketing
1. Builds Social Proof
According to a survey, 92% of consumers trust referrals from people they know. That’s just how humans are wired. We trust our friends, family, or the people we know more than a billboard advertisement on the street.
Let’s elaborate this further with an example. You’re looking for an affordable gaming laptop, and you see an advertisement for one on Youtube. It’s compelling. But then, your friend recommends another laptop to you.
Now, the question is: which laptop you’re going to buy? You’ll obviously trust your friends’ reviews more than a Youtube advertisement, right? That’s exactly why referral marketing works so well.
Using referral marketing, you can turn your biggest fans into brand advocates. Their friends and family will definitely trust their reviews about you, resulting in more customers!
2. A Filtered Target Market
It’s obvious that your existing customer won’t go ahead and tell every single person about you. They would just recommend you to the people who actually want to buy the kind of product you’re offering.
This means your potential leads will be naturally filtered out, and unlike other marketing tactics, you won’t have to spend time picking the best leads from the lot. Your customers have done all the hard work for you!
Not to forget, your connections and your existing customers will always keep you connected with your target market. They’ll always talk about you, keeping you on the top of the mind of your potential customers!
3. Great ROI Value
Let’s accept it – marketing is expensive. It burns a hole in your pocket, and you don’t even know whether you would get a good return from the money you invested.
But, there are certain types of marketing where you can get an awesome return with the minimum investment. One of them is, of course, referral marketing.
Mostly, you don’t even have to spend a single penny to get your customers to refer you to others. Believe it or not, there are approximately 2.4 billion brand-related conversations in the US every day.
That means people talk about the products and services they enjoy all the time. So, if you offer them a good experience, they’ll talk about you too and promote your brand without you having to break a sweat.
But, if you want to make the best out of your referral marketing strategy and get more customers to recommend you, you can start rewarding them for the same!
It would still cost you way less than the traditional methods of advertising and get you lots of customers at the same time. So now, let’s discuss a few more tips that will help you build a solid referral marketing strategy!
3 Tips to Build a Good Referral Marketing Strategy
1. Ask for Referrals Right Away
As soon as a customer buys your product, ask them for a referral. It might seem a little intimidating at first, but it’s inevitable if you want to grow your business.
See, your customer is MOST excited about your product right after he has bought it. After all, they’ve decided to spend their hard-earned money on your product. This is why it’s the perfect time to ask for a referral.
You can send them forms, ask them to share their review, and let them know the benefits they would get if they recommend you to their friends and family.
2. Make it Easy For People to Refer
Don’t make people go through hoops and loops before they can get a reward for referring your business to their friends. Basically, don’t overcomplicate things.
If you want to make your referral marketing strategy a success, keep the process straightforward. For example, “Buy our product > Refer us to two of your friends > Get a 10% discount on your next purchase. “
See how simple that was? This would encourage more customers to refer you to their friends and family because it isn’t a tiresome and stressful task. 🙂
3. Provide Exceptional Service
It goes without saying – if your product is not up to the mark, no one will refer it to others. (Even if you’re offering an 80% discount as a reward.)
So, before going ahead with referral marketing, focus on delivering a great product and an excellent service. That’ll make people recommend you to others, even if you don’t offer ANY incentive.
No, we’re not just saying that for the sake of it. According to stats, excellent customer service will incite 55% of consumers to recommend a company!
Well, now that you know all the amazing things referral marketing brings with it, let’s go ahead and take a look at some companies that are totally winning the referral marketing game.
5 Really Cool Examples of Referral Marketing
Uber is the perfect example of how dual-sided rewards make people more likely to refer. This ride-sharing app assigns each customer a referral code as soon as they sign up on Uber. Every time someone creates a new account using that referral code, both parties get their next Uber trip FREE. Awesome, right?
Incentives don’t need to be limited to cash and gift cards, and Dropbox proved just that. They offered an extra 500 MB of free storage space to the customer who makes the referral and also to the newly-referred lead. As a result, Dropbox’s membership skyrocketed by 60% in 2010 because of this referral marketing program!
Evernote, the note-taking app, gives points to the customers every time they make referrals. These points can later be redeemed to get free access to the premium features of the app. Each time the referred customer upgrades to the premium version of Evernote, the customer who submitted the referral gets extra points too.
PayPal started its referral marketing campaign in the early 2000s when social media wasn’t so common. The company used IMs, emails, and blogs to spread the word about their referral marketing campaign and started paying people for referring their friends. This helped them grow by 7-10% every day.
Earlier, Tesla used to offer its customers a thousand dollars if they referred a friend. However, they revamped their referral marketing strategy, and now they offer their customers items like an exclusive battery, invite to an exclusive party, and special edition products!
Referrals are crazy valuable, and you know that by now. If you want your business to be one step ahead in this competitive era, you need to incorporate referral marketing into your business’s DNA.
With everything we’ve discussed above, you’ll certainly increase the number of referrals you get. Just make sure that your sales team asks for referrals every time they make a sale!
Once you figure out which referral marketing tactic works best for you, you’ll start seeing great results and take your business to the next level! So, don’t wait any longer and get started with referral marketing today.