Regardless of the type of business, referral marketing is one of the most powerful and reliable tools to generate leads and expand your customer base. But only if it’s done systemically and smartly.
Referrals can be unpredictable and relying on hit-or-miss methods to get referrals can destroy a good product’s potential. Word-of-mouth marketing sounds easy and fun, but it actually takes lots of planning and careful execution to create an engine where customers bring valuable leads.
According to a report by Nielsen, around 88% of global respondents in an ad survey trust recommendations from people they know over any other channel. That’s an impressive percentage, imagine using it to your advantage.
To help you devise a solid referral marketing strategy for your next product launch, we have gathered all the knowledge and tips in one place.
What is Referral Marketing and How Does it Work
Referral marketing is a marketing strategy that uses current customers to generate new customers. Referral marketing works by word-of-mouth recommendations i.e., encouraging the existing customers to refer and share their experience of the product within their circles. For doing that, the company gives them a reward as a token of thanks for bringing in new business for you.
You basically turn your loyal customers into advocates for your brand. The fuel for mobilizing these referrals is referral incentives. Rewards for successful referrals could be in the form of discounts, free products or subscriptions, special promotions, or other perks to make referring worth a customer’s while.
The best part of an effective referral marketing campaign is that its benefits aren’t only limited to the company, customers also reap the rewards for what they do. It’s a win-win and the best way to build loyalty with an increased customer base, with little to no upfront cost. All you have to do is create a strategic plan and creative referral marketing ideas to utilize your customers in this manner.
Benefits of Referral Marketing
The time to enjoy the benefits of a referral campaign may come a little late, but the perks are incredible. Building trust and a nice relationship with your customers and prospects is worth the wait. A few of these advantages of successful referral marketing include:
- Constitutes Social Proof: Generally, people like to rely on recommendations for their everyday activities from others around them. Where to shop, what products to get, what to watch on TV, etc. – answer to these questions could be your product. Positive reviews and testimonials from existing customers will gravitate more people since there will be social proof that their money will see value in your product.
- Builds a Targeted Audience: Referral marketing has a natural filter. In that, your existing customers only refer your offering to friends and family that they think will benefit from it. So your product or service only reaches your potential customers and builds a loyal, trusted customer base.
- Facilitates Cost-Effective Marketing: Unlike traditional marketing, you will be utilizing your relationship with your customers to bring in more business. Referral programs function as a performance marketing channel where you only have to expend when you see results. So only spending on the initial setup is highly cost-effective.
- High Customer Lifetime Value: Referred customers have a 16% higher lifetime value compared to average customers, according to a study.
6 Best Referral Marketing Strategies
Some valuable word of mouth strategies in 2023 include:
Time It Right
In addition to choosing the right platform, establishing appropriate tracking and analytics tools, and crafting a marketing plan, you need to plan the right time to ask for referrals. Because if the timing is terrible, even the best execution of brilliant marketing techniques could go south.
Figure out the right moments in your user journey to pitch the referral program. An industry practice is to ask when a customer makes a purchase. It’s also easy to do it this way – thank the customer for buying your product and invite them to recommend or gift the product further.
Some other instances to pitch referrals to happy customers:
- Customer is “loyal” (has made enough purchases)
- Current customers give a great net promoter score
- They engage positively with the brand on social media, subscribe to the newsletter, or more
The key is to understand customers, their triggers, and the vital stages of their user journey.
Design Strategic Referral Incentives
A good reward in return for referring a product gives customers that nudge to take the extra step. Solidify your referral marketing efforts by devising a powerful referral reward system. It’s not as easy as it sounds because you need to incentivize what appeals to your audience. The reward should align with your goals, brand, and customer’s goals.
Some simple questions that can help:
- What kind of reward will push hesitant customers to recommend our brand?
- Can this reward program be used to upsell our other offerings?
- Is there anything to attract referred customers to participate in future referrals?
- Who are the most valuable customers and what do they like?
Promote to Build a Community
Creating a community of satisfied customers is a great way to add value to your offering. It also gives customers a reason to share. You can foster a strong community around your brand or product in multiple ways, including:
- Promote your referral program with compelling social media, email, and blog content to encourage customer engagement in the form of conversations
- Incorporating contests and giveaways
- Set up online groups or forums where users share customer experiences and tips for using your product or service.
- Invest time on Twitter. A single tweet from a renowned person can rack up tens of thousands of retweets and give your referral program the limelight it needs
For instance, Hawkers used referral marketing for community-driven growth. This sunglasses retailer gave away free glasses to social media users with large following lists. This was backed by a referral marketing program where customers were allowed to be influencers.
They were given personalized promo codes to share and earn a commission for purchases. The person using their referral code also gets a discount. This way, Hawkers increased social sharing and generate 90% of their profits from social media.
Capitalize on Social Media
We live in the fast-paced, crazy world of social media and it wouldn’t be fair to ignore it when launching a referral marketing campaign. Referral campaigns on social media reach far more sets of eyes than any other marketing channel. Leverage that. Make it easy for your customers to share their unique referral links on social media and be seen.
You can also host giveaways and contests on social media to drum up your referral process. For example, Pottery Barn Kids launched a two-way reward referral program where the referred friend was to enjoy $25 off of their first purchase of $100 or more from the brand. For every successful referral, the referrer was to receive the same reward once their friend completed their first purchase.
Targeted Email Marketing
Despite the increase in trendier business chat channels, email remains the most effective mode of marketing when it comes to customer preference and persuasion. According to a DMA Email Marketing Report, email was a preferred marketing and communication channel for over 59% of consumers.
To leverage emails you need to establish trust with your customers by making sure that the email arrives at a moment when they will be inclined to act on the referral. You can set up email autoresponders based on specific actions or events such as cart abandonment, completed purchase, positive review, etc.
For instance, ReadyTalk revamped its referral marketing program by streamlining its email marketing. This cloud communication service provider sent more targeted messages that offered rewards for small things such as giving an online review or sharing a piece of ReadyTalk content on social media.
With just your name, email, and contact information, you could enter the referral program and track the status of your referrals too. All referral-related information was shared via email and resulted in bringing in 183 referrals in the first ten weeks.
Make it Easy and Encourage User-Generated Content
Create a referral marketing program that contains shareable content pieces that are easy to pass on to friends and family. This includes incorporating share links, social media buttons, and more. Then, let your consumers become your brand advocates. Encourage customers to spread the word, and share pictures, and videos using your product.
This is commonly done on social media by running branded hashtag campaigns. Seeing a product through the lens of someone you know increases trust in the product and brand and gives the onlooker confidence to buy.
User-generated content is considered more authentic by a majority of audiences. It has a unique charm of unfiltered imaging that people resonate with.
Valdo Prosecco is a popular brand of wine in Europe. To boost their brand awareness in the U.S. they launched an Instagram photo contest to attract engagement from wine lovers in this region. They encouraged users to create and share content featuring their wine and incentivized it with a chance to win a trip to Italy.
All customers had to do to participate was take a photo of a cocktail made with Valdo Prosecco and use the hashtag #whatsinyourvaldo with the recipe in the caption. Taub Family Selections picked a winner from 25 top-voted photograph entries and successfully created a buzz in the U.S. population with this program.
To build a world-class referral scheme, you need to have a strategy in place, make well-informed decisions, and keep everything simple for the customer. A good strategy is a powerful marketing tool. By simply asking your customers to make referrals for you, you encourage growth, gain customer support, and retain a valuable patron with every referral made.
If you’re just setting up or experimenting to see what works best for your word-of-mouth strategy, experts at prefinery.com can help in creating a successful referral campaign for you.
What is the best referral strategy?
One of the best word of mouth marketing ideas is to offer a good incentive in exchange for a referral. This includes discounts, free products, gift cards, cash, etc.
What are the types of referral marketing?
There are four types of referrals:
- Direct, word of mouth, or customer referrals
- Incentive-based referrals
- Implied referrals
- Community referrals
Can you use referrals in digital marketing?
Yes. A referral in digital marketing means using someone’s influence or opinion to sell a product or service. Targeted marketing efforts on social media referrals are one of the best ways to execute a successful referral program.