“Tell your friends about us and you’ll both get 30% off” “Invite your friends, get a discount of up to €50″ “Give 20% and get €20″ – these offers sound tempting and encouraging to many customers. They are all examples of referral marketing. Below you will read about the benefits of referral marketing, mistakes to avoid, top referral marketing tools and types of rewards.
What is referral marketing?
Referral marketing is a strategy used by enterprises to encourage their current customers to recommend their services or products to their network in return for some incentives. This strategy has many benefits that we are going to discuss below.
8 Benefits Of Referral Marketing.
1. Referral marketing reduces your customer acquisition cost drastically.
All marketers seek to reduce the cost of acquisition for their customers, or CAC, and increase the company’s revenue. This is the permanent objective of any business that wants to survive and continue to make a profit. A well-thought- through referral marketing program allows companies to increase their conversion rates, grow revenue and prolong customer’s lifetime value.
2. Referral marketing makes your ROI skyrocket.
While gifts and discounts are not very costly for your company, they can become a good investment in advertising compared to other ways, such as traditional paid advertising. Moreover, you can experiment with different types of rewards and incorporate your referral campaign into your loyalty promotion program, which will further optimize your costs.
3. Referral marketing wins the trust of your customers.
Recent consumer surveys show that people tend to trust their other people’s recommendations more than regular advertising. According to Nielsen Global Online Consumer Survey, 9 out of 10 people trust the recommendations of their friends. Apparently, people are more likely to buy goods or services advised by someone they trust. Not only are they more likely to make a purchase , but they also spend more and stay loyal to your brand for longer. Look at some convincing statistics below:
4. Referral marketing boosts customer retention enormously.
97% of marketers prioritize customer retention over acquiring new customers. Although the likelihood that a customer will return varies from sector to sector, your current customers are more likely to purchase from you again and again. That is why it is essential to give them an additional reason to do so.
Customers participating in referral programs are more likely to remain loyal to your company. As attracting new consumers appears to be more costly than retaining current customers, this is often one of the main benefits of referral marketing.
5. Referral marketing expands your reach to thousands of potential customers.
Referral marketing allows you to expand your reach, using your clients as ambassadors for your brand. What is more, there are almost no restrictions on your customer recommending a friend or a colleague a good product or service. Since many people have a wide range of friends, the referrals of clients will also allow you to expand your client base with minimum expenses.
6. Referral marketing wins top quality customers with higher lifetime value.
Referred customers have already received a positive impression of your company because you have been recommended to them by a peer. Customers referred by a friend, family member or colleague have a 25% higher lifetime value, compared to other clients.
7. Referral marketing gathers a huge amount of valuable data.
Modern consumers value individual experience. By tracking consumer behavior, you can give your clients the benefit of personalization. It also gives you a good idea of the general market trends that can help your brand become better at meeting or even exceeding your customers’ needs. It also helps you to target a more relevant audience which will increase your conversion rates. Gathering data is made possible by using such referral tools which automatically aggregate and structure information. Referral marketing platforms allow you to track and orient your most loyal clients to receive awards and provide more personalized interaction.
8. Referral marketing raises brand reputation and awareness dramatically.
Referral marketing can help clients learn about your brand and improve your overall reputation. 85% of modern consumers consider joining authentic, honest brands that have a strong voice and positive influence. By empowering your customers to tell your story, you get a powerful resonance in the consumer market. By identifying, empowering and rewarding your most loyal clients you make them feel appreciated and valued.
Having trouble carrying out your referral marketing strategy?
Here is why your referral campaigns might not be working:
1.Your clients might not be aware of your shiny new referral program.
To ensure that you communicate about your referral campaign effectively, use every touch point with clients. In addition to offering the program to active brand advocates, add references to your referral scheme to any or all of the following locations:
- Your website ( several pages)
- Your Social Profiles
- Your Email Signatures
- Automatic Emails
- Landing page
- Thank you pages
- Pop-ups on customer pages
Do not forget to ask clients how they found out about the program. This will not only show you the channels you need to focus on, but will also open up new opportunities and reveal critical areas of the program.
2. Your referral program is a real pain in the neck for your customer.
If you ask your customers to do something for you, make it as simple and clear as possible. They won’t bother to refer you to anyone if they see they have to fill in multiple forms, use complicated referral links and make any other effort.
The look and feel of each referral programme should be transparent, coherent with its brand, and work in synergy with the brand’s other advertising and marketing programmes. Landing pages or platforms that look different may confuse or even repel your customers.
Don’t hesitate to check the usability of the referral program and ask your friends or family to test it. Ask those people to give honest feedback to the program and point out the areas which need improvement.
It is important to show your clients how to share your referral program links. Don’t assume that your customers know how to share their referral link when they sign up for a referral program. It is always best to guide them through the process. You can create a picture guide or an explainer video showing how to share the link:
- as a post on social media and on your profile
- under your YouTube or Facebook videos and in the comments
- in an email to friends, family and colleagues
- on the website or blog and so on.
3. Staff don’t know or understand how exactly your amazing referral program works.
Your staff should be aware of your referral marketing program to explain it to customers. Everyone should understand the referral program, and first and foremost your customer service team members should be able to guide customers through the process and its benefits.
4. Your customers are not crazy about your product.
If your product is not appealing to customers even magic will not make it work. Referral marketing is for companies who have satisfied customers, good products and are confident about their reputation. Before implementing a referral program, fix all the issues with your customer service and product quality.
Customers will tell you if they are happy, in the form of ratings, public and social media reviews and direct messages. If they don’t tell you, think of ways to get their feedback and how to fix a broken customer recommendation system. Add NPS (Net Promoter Score) to the list of KPIs to track to identify and please your most loyal customers and potential brand advocates.
5. Is your customer service lacking?
Excellent customer service plays a major role in the success of a business. It is also the best way to introduce referrals. Ignoring customers’ concerns, comments and questions in emails and on social media will make them feel unvalued. Your dedication to your customers will make them pleased with your service. Sincere and helpful attitude will always give you a competitive advantage. Take the example of Axa France which managed to reduce negative comments on the AXA France Facebook page by 53%.”
Exceeding your customers expectations in customer service should be your priority. When your customers have a good experience with your company , they have a desire to talk about your brand. That’s when you can capitalise on their positive experience and introduce your referral programme. By exceeding your customers’ expectations every time, you will gain a powerful competitive edge and stand out from your rivals. Going the extra mile in customer service doesn’t have to be expensive. They can be offered a gift, discount or branded merchandise.
Read about: 12 Tips, Tricks, and Strategies to Redefine the Ultimate Customer Experience
6. Are you offering enough incentives to your customers with your referral program?
Your referral programmes will hit the brick wall if customers are not interested in your offer. Remember that most people want to do as little work as possible. A poor referral bonus, non-motivating bonus will not make them recommend you.
If you have a referral scheme in place, but the engagement is low or close to zero, this is one of the first things to check. Conducting AB tests with different incentives might be a solution until you find a winning combination. Get inspired by the best referral programs and more importantly keep an eye on what your competitors offer.
Referral rewards and incentives to skyrocket your revenue
Why do you need an incentive in a referral program?
Of course, your most loyal customers will refer you to anyone without being rewarded. But always going an extra mile and exceeding their expectations by rewarding their efforts is something you will be remembered for.
In general, reward bonuses tend to increase the likelihood of referrals. It gives customers a good reason and pushes them to choose you and to share your brand with others. So instead of passively waiting for your referrals you can scale them and make them more reliable. An important decision to take is who is going to receive the rewards. The rest will be done by one of the referral marketing tools that you will choose to automate the process.
There are a few options for a good referral program incentive:
- existing customer
- potential customer (referee)
- both of them.
If you offer a bonus to an existing customer, chances are high that they will be more inclined to refer you to others since they receive something for their job. It can also strengthen your relationship with customers and increase retention rate as well as overall brand loyalty. On the other hand, potential customers may see a double bottom here and doubt the sincerity of existing customers. In any case this type of bonus is best for new companies with affordable products who are growing their business and brand awareness.
Offering a bonus to a potential customer, increases the chances of someone to get converted. This way you are increasing your odds of them moving forward in your sales funnel. However, if you leave the existing customers without any incentive they will not actively refer to your business. It might just not be at the top of their mind. Yet, this model is good for subscription business models, frequent or luxury purchases businesses. Rewarding new customers is also popular among SaaS or service companies.
Rewards for both, or a double-sided referral program gives both parties the reason to join you. You do not harm the reputation of your advocates by making them seem self-serving and increase the effectiveness of the whole process. However, some companies simply can’t afford to give out too many rewards at the initial stage. Moreover, tracking the incentives from both sides can multiply their work.
Popular types of rewards
After choosing the recipients, it is time to choose the type of rewards. To make the right choice you should take into consideration the type of your business, kind of products you sell, how often purchases take place, who your customers are and what rewards would be the most motivating for them.
This is a list of the most popular rewards for referral programs.
- Free subscription
- Gift cards
- Contests or Giveaways participation
- Exclusive Event
- Product Upgrades, etc.
Top referral marketing tools to use in 2022.
The best way to simplify the workload incurred by putting a referral program into practice is automation. Using special referral marketing tools will simplify your life in many ways.
The top features from referral marketing tools are:
- quickly build your own referral program using templates;
- customize the templates so they go with your brand;
- implement the software without external help;
- track and monitor everyone using the referral program;
- experiment with different reward structures;
- run several referral campaigns at a time;
- Prevent frauds;
- Perform A/B testing;
- See analytics, etc.
These are the top referral marketing tools of 2022:
Referral marketing tools will guarantee smooth implementation and running of the campaign as well as a seamless customer journey.
Depending on your budget, desired features, platforms you are using and integration complexity you can choose the referral marketing tool that is most suitable for your business. The main differences between the tools can be found in the price and packages they offer, fraud prevention option, availability of such features as reports and analytics, possibility of running several campaigns, customer support quality and sales volume requirements.
Read about The Best Customer Journey Growth Hack of all Time
Convinced to start? Or do you want to speak to one of our experts? Get in touch with The Growth Agency to discuss how referral marketing can increase your revenue.