The New York Times states that 65% of new business comes from referrals. This means that on an average two thirds of consumers make purchases because someone recommended the particular product or service. Referral marketing has remarkable potential; it is observed that people are four times more likely to make a purchase when referred by a friend. Preparing a strategy for referral marketing and using it properly enables professionals to tap into the power of consumer recommendations to achieve exceptional results.
So, what is referral marketing?
Ever heard of word of mouth strategy?
Word of mouth is a marketing strategy that occurs when one person tells another person about a business and so on. It is basically a free advertising triggered by customer experiences. It is perhaps the oldest and most trusted marketing strategy. Referral marketing produces the same effect as word of mouth but unlike word of mouth it is initiated and directed by a business.
Referral marketing is a process where customers are encouraged and significantly increase referrals through word of mouth. It is a marketing tactic that makes use of recommendations and word of mouth to grow customer base through the networks of existing customers of a business. This can be accomplished by encouraging and rewarding existing customers and other contacts to recommend products and services to potential customers and B2B brands both online and offline.
Due to technologies now a days businesses can track customer behavior online and make marketing strategies based on it. Online Referral marketing can increase brand awareness, referrals and also revenue. It focuses on interactions between customers. The internet provides a various outlets such as company’s website or social media platforms like LinkedIn, Facebook, Google and Instagram to customers to share their experience, opinions and favourite products. It is beneficial if the marketing plan of a company integrates referral strategy in it. Companies can track user traffic to offer referrals to online customers. Referral marketing helps your unique business ideas in becoming successful.
Study shows that Customers who are referred by others are more profitable and remain loyal to the company than normal customers. Referred customers have greater contribution margin, greater retention rate and are more valuable both in short-run and long-run.
Referral programs generally provide two types of rewards:-
- Current customers are given incentives such as cash, prizes, discounts, shopping vouchers or redeemable points.
- Referrers can benefit from existing customers through increased visibility or recognition, or by special treatment.
Good referral marketing and business strategy can make a difference and lead your business towards success. You need to have a referral marketing strategy because: –
- Sales through word of mouth strategy are five times more than through paid advertisement.
- Customers acquired through referrals spend twice more and make twice as many referrals themselves.
- The conversion rate through referrals are 30 better and have 16 percent higher retention rate than leads acquired through other channels.
- People usually prefer word of mouth if they plan to purchase based on single information.
- Referral marketing is cost-effective, powerful and trusted.
Customers who are happy and have a good experience with a brand, product or service frequently share it with others. Recommendations and referrals are useful if you want to stand out from the crowd. Satisfied customers through referrals can be easily turned into convincing cheerleaders. It is powerful selling point to others if your customers are happy with your product and are getting good return on investment on the money spent on the product.
A properly organized referral program helps businesses get new and loyal customers at a very low cost. Referral programs incentivize happy customers to share their feelings in exchange for a small gift. But the programs are not just about sharing feelings. The referral programs also generate substantial and tangible return on investment. The referral programs not only bring in new customers but they bring good loyal customers. A few advantages of referral marketing for business are: –
- Customers obtained through referrals are better matched. They are more likely to interact with people similar to themselves.
- The referrers are existing customers who understand the purpose of marketing and the need for potential clients. They can measure a good fit between the two. The well matched customers can help to produce more profits at a lower cost.
- The value and contribution acquired through referred customers are more than those from non-referred customers.
- Customer satisfaction can be defined through referral programs. If many customers are willing to act as referrers this means that the company’s customer satisfaction is high.
- Referral programs also enable businesses to establish long term relations with customers. The company can know the expectations of customers and raise the effectiveness of marketing programs. Referral programs can also be used a tool for retaining customers.
Seeing the benefits you all must now be wondering how to create a good referral program for your unique business ideas?
We at Evolvers have listed down some of the best ways to create a successful referral program for your business: –
- Keep it simple: – Your customers must be able to quickly understand what you want them refer and what are the incentives provided for referrals. The explanation should be concise but should contain all the necessary terms and conditions.
- Display a clear and enticing call to action: – Effective call to actions easily catches the customer’s eyes, incites customers to refer and share the incentive. The CTA must be easy to find. It can be put on top of the referral page.
- Offer valuable cost effective incentives that tie right back to your business: – Consider incentives for both referrer and the friend (double- sided incentive) and cumulative incentives like offering store credits, service credits, gift cards and discount. One can also consider offering free products or services but only after many successful referrals.
You can also convert the experience into a game by point system wherein a customer has to obtain certain number of point through referrals in order to receive a benefit or any other exclusive perk. Charitable donation can also work as a referral incentive. For example, with every referral the company will donate certain amount to a NGO.
Remember never to underestimate the intrinsic reward of friends helping friends.
- Make social sharing efficient and easy for customers: – Your customers should able to share your referral program easily on social media. Integrating social sharing to the referral program increases the impact.
- Seamless integration: – Even the most loyal customers would not want to participate if the sign up for the referral program and then find that there are five more steps that they have to complete before collecting their reward.
- Promote your program: – Creating a referral program is not just enough. You need to spread the word out about the program for customers to know about it and participate in it. One way to do this is by triggered or time based email campaigns.
- Use your business position to your advantage: – Your business also has a unique personality. Inject your personality into your referral program. Consider using feel good messages that focuses on helping friends and your business. The messages can include friendship or community focused images.
You can also emphasize on being a part of a community in your referral program messaging.
Thus Referral Marketing is important. It is a cost effective marketing strategy which has a greater reach and higher conversion rate. Its helps build strong customer relationship and loyal customers.
Referral programs are effective because people trust word of mouth more than any other source of information. A referral program simplifies the recommendation process and makes it more official. Your customers can share your business with friends and family at just the click of a button.
If you want to know more about referral marketing strategies and other marketing strategies then you can contact theEvolvers Experts. The evolvers team focuses on addressing the needs of business and helps them to grow. Click Here to learn more.