The business world is pacing through a dynamic change - one that’s largely influenced by technology. It has redefined the way companies operate not just in terms of product development, but primarily in how they market their offerings to get the best response.
From website landing pages to social media feeds, every consumer-oriented outlet is now exposed to sponsored brand ads but the response hasn’t been so encouraging. Some 30% of consumers have lost trust in brand ads they see on social media.
For most individuals, friends and family are still the most trusted sources of information. People are naturally inclined to ask for and act on recommendations from friends and family before trying out a new brand. This inbred trust paves the way for referral marketing, allowing companies to expand their user base and increase revenue at the behest of current customers.
But without the right referral marketing strategy, your customers wouldn’t bother to refer you within their networks. To keep the referral engine running and gather valuable leads, you must implement the correct referral marketing techniques.
How Referral Marketing Works?
Referral marketing is a strategy employed by businesses to acquire new customers through recommendations from existing ones.
The concept relies on the power of word-of-mouth marketing, where satisfied customers are naturally drawn to share their positive experiences with friends and family, who they believe will also benefit from the brand’s offerings.
Referral marketing campaign capitalizes on that dependency either by exclusive referral rewards or special incentives, turning customers into reliable brand advocates. Likewise, a recommendation coming from a trusted source is likelier to convert any prospect into a paying customer.
Unlike traditional marketing outlets that employ engagement algorithms to attract new users, customer referral programs leverage personal connections between individuals to popularize a product or service.
As more people talk about and refer to your brand within their social circles, you can tap viral growth and boost your revenue. A referral program usually operates on the following mechanics:
- Identification of Advocates: Businesses first need to identify their top customers who spend more, engage longer, and are willing to refer your products to others.
- Incentivizing Advocates: Once identified, businesses devise referral incentives that might compel these customers to refer your brand. In exchange for referring their friends, customers are rewarded for keeping them engaged long-term.
- Referral Process: Advocates then share information about the business, often a discount offer or cashback reward bound by a unique referral link or referral code, with potential customers in their network.
- Acquisition of New Customers: When a referral recipient, influenced by the advocate's recommendation, makes a purchase or signs up for the service, they are counted as new customers.
- Reward Fulfillment: Advocates receive their incentives as a thank-you gesture for successfully referring a new customer or signing up on the platform.
Benefits of Referral Marketing Strategies
A satisfied customer base is the bedrock of any successful referral marketing program. If you manage to satisfy your users, keep them engaged over time, and present a lucrative incentive for bringing leads, there’s a high chance you can convert them into brand ambassadors.
Since a referral program relies on organic word-of-mouth rather than monetary tactics, it saves the marketing budget, incentivizes clients with an intent to purchase, and fosters long-term relationships with customers. Here are some key benefits of referral marketing:
Low Customer Acquisition Costs
Where traditional digital marketing campaigns require high budgets and develop trust from scratch, a referral program has it ingrained. It capitalizes on the existing relationship and trust between customers and their networks thus, ensuring better conversion rates.
Even though referral programs do involve incentives, they are often less expensive than the cost of acquiring a customer through traditional means e.g., PPC ads or media campaigns. In the past five years, the marketing expenditure of businesses has risen by 60%.
Since they are only awarded after a successful referral, business can spend their marketing resources more effectively, especially when they see clear results.
Gather High-Paying Customers
Instead of shooting in the dark, referral programs help you target an audience that is the best fit for your brand. If you’re steering the program through your loyal customers, let them be the guide.
After knowing and experiencing your products firsthand, they are likely to refer those who are in need of or value your offerings. High-paying customers are often more cautious about where they invest their money, and referrals provide the trust and credibility they seek in a business.
Besides adopting a reinforced trust in the company, referred customers tend to have a higher lifetime value with a brand and spend more money over time.
Foster Consumer Trust
New leads that are brought in through referral links inherit the trust existing customers have in your brand. For newcomers, referrals act as third-party validation for the business. It signals that others have tried the brand and found it valuable. The credibility eliminates any skepticism that prospects might have leading to a trustful relationship moving forward.
5 Best Referral Marketing Program Techniques
While your competitors are busy acquiring a high click rate, relying on referral programs will effectively announce your presence and distinguish yourself from the crowd.
Sometimes consumers actively go looking for companies that don’t flaunt exaggerated media ads but rather broadcast testimonials of their satisfied user base.
But if you want to capture the attention of your target audience amongst the noise, you need to set your referral strategy a bit more cleverly. While it may not convince every customer to speak your gospel to others, you can definitely engage them to interact with your program at least once.
Define the Ideal Referral Lead
Not all referrals are equal. For your business to scale, you must identify prospects that have a high likelihood of converting into customers and hopefully advocate for your brand in the future.
Start by thoroughly understanding your existing customer base.
- Who are your most valuable customers?
- How often or frequently do they purchase from you?
- Are they willing to leave reviews or testimonials on-site?
According to most marketing experts, your buyer persona should be an exact image of your existing customers. Prospects with similar interests, buying preferences, and demographics are set to be your ideal referral candidates.
Make sure the customers you’re targeting carry social influence. Prefer customers that have an active social media presence, a wide network of followers, or associations within your industry. A word from their handle is likelier to influence others into buying your products or participating in your referral program.
The ideal referral lead may evolve as your business grows or changes. Regularly review and update your buyer persona to ensure the ideal lead stays aligned with your business goals.
Create Content Around the Launch
If you’re gearing up for a product launch, referral programs can be a perfect strategy to generate hype and build anticipation around the upcoming offering, and entrap viral growth afterward. In fact, the strategy has been a success factor for many startups and enterprises which usually starts with content marketing.
Develop comprehensive and informative content about your new product to educate your prospects, but first spark their interests. Launch video teasers, blog posts, and social media updates on what’s coming. Make them curious about the upcoming launch with eye-catching visuals and graphics, followed up by content briefs on how to get early access.
Learning from Robinhood’s case, create a referral waitlist strategy - offer an early or exclusive to the product or service once it launches in exchange for referring new leads onboard.
Promote your strategy on all mainstream social marketing channels to capture virality. When people learn they have something special to gain by participating in the program, they will preferably share it within their social circle for the common good.
Don’t Shy Away from Asking for Referrals
Wish it were the case but no, people don’t randomly share positive notes about a brand to others unless they’re asked for it. If you think the credibility of your business or the quality of your offerings is enough to compel your audience to refer you, you’re off by a long shot.
If a referral program is your prime lead generation marketing tool, you better start asking for referrals as soon as someone comes aboard or finishes their purchase.
For some companies, it might be the hardest step. But if you’ve mastered a product that offers value, you have a legitimate reason to follow up your leads with a question - “Are you willing to refer others?” Here are two effective ways to ask for referrals:
Send Targeted Emails
Despite the rise of other dynamic channels like business chat apps, email marketing still remains a potent tool for soliciting referrals from your satisfied customers - as long as you curate it right.
Your email subject line is your first chance to grab the recipient's attention. Make it intriguing, relevant, and personalized to increase open rates. Something that goes like "Love Our Product? Share the Joy and Earn Rewards!"
As for the body, communicate the benefits of your program. Describe what your customers are set to achieve by participating in the program. Use persuasive language to emphasize the value of your offerings.
Always end the email with an even compelling CTA. If you’re offering a reward as a discount, the following tagline would work best, "Refer a friend now and earn a 20% discount!"
Leverage Social Media
With its overwhelming outreach and the audience response it musters, social media is an integral part of any marketing plan. Whether you’re creating awareness about a brand or delivering customer support for a referral program, social media always comes in handy.
To cash in your social media referral strategy, concentrate on identifying key players in your followers’ list. Figure out who interacted with your posts the most lately and learn how they responded to your referral posts. Create a list of candidates who interacted with your account recurrently and target them with personalized referral messages.
Set your Incentives Generously
At times, especially after a purchase or service upgrade, customers will be happy to recommend you to others of their own accord. However, relying on customers’ instincts to grow your platform won’t bring measurable results unless you introduce a reward system.
Set a worth to your program that compels your current customers to refer new leads and allures the prospects to join your platform. It's a standardized way of giving back to your audience for what it’s worth to engage with your referral strategy.
To entice them on board, determine their referral triggers as well. Figure out what prompts your customers to refer others. Is it exceptional customer service, a unique feature of your product, or a special promotion?
Based on the outcome you can devise incentives that match their preference and the effort they put into referring others later on. Tesla, for instance, offered $1,000 credits to referrers and referred in customers as part of its referral scheme for participating in the program.
Encourage User-Generated Content
Let your customers be your ambassadors by allowing them to spread the word of your brand message through whatever channels they deem fit. Give them a fluent customer experience to create content around your offerings and share them to their social networks either as testimonials, blog posts, or social media mentions.
User-generated content is inherently authentic since it’s not supervised by the company but rather comes directly from the customers or advocates. It shows how real people use and benefit from your offerings, making it easier for potential customers to envision themselves doing the same. To further improve social sharing for your B2B business, collaborate with influencers relative to your niche.
For example, the Ovolo Hotel in Australia invited several of its prospects to visit the hotel, take snapshots of the arrangements, and later share that on their social handles.
When potential customers see their peers creating content about your brand, they're more likely to trust the message. Authentic UGC adds to your credibility, which in turn influences customer’s purchase decisions in your favor.
Creating a successful referral program that allures your prospects, spreads awareness around your brand, and boosts revenue growth shouldn’t be a confusing affair.
With the strategy in full swing and utilized by key market players from every niche, it leaves little chance for growth for any humble startup. But if you manage to gain customer’s trust, devise attractive incentives that motivate them, and a strong promotion strategy to reach a widespread audience, you’re en route to success. This blog post outlines everything you need to know to set a perfect first interaction with your audience.
Capitalize on these effective referral marketing techniques to extend your reputation beyond the local audience. Sign up with Prefinery.com to ensure all your marketing ideas are employed effectively and bring out the best results.
What is referral marketing, and how does it work?
Referral marketing is inherently a word-of-mouth strategy where businesses encourage their existing customers or advocates to refer new customers to their products or services. It typically involves rewarding referrers for every referral. The strategy works by leveraging the trust and personal connections between referrers and their networks to attract new customers.
What are the best channels for requesting referrals?
The best channels for requesting referrals can include email, social media, in-person conversations, and dedicated referral landing pages on your website. The choice of channel depends on your target audience and where they are most active and receptive.