Referral Marketing 101
What is referral Marketing?
Referral marketing is a marketing strategy which uses word-of-mouth and an existing customer base to promote a service or a product and generate leads. The basic idea is that a current customer refers someone, usually friends or family, to your product or service. Referral marketing can take many forms and often happens without the marketers intention. People like to share things that they care about or feel can bring social value to themselves or their friends. This innate human behavior can be amplified by a business that correctly implements referral marketing tactics.
Why is referral marketing so important?
People trust people they know.
This means that once someone receives a referral about your service or product from a friend or family member, they are much more likely to become a loyal customer themselves.
Targeted audience.
When people refer others to your brand, they won’t invite everyone they know but rather recommend it to specific people they think would be interested. this makes referral marketing a more targeted and so cost effective type of marketing.
Cost effective.
Referral marketing is so cost effective because it often will just happen by itself (assuming you take some basic steps that we will discuss later). Even if you are creating an incentive based referral program, you can condition it so that you only pay for converting referrals thus ensuring that your marketing investment pays off.
How to do referral marketing?
There are two basic ways to do referral marketing (not mutually exclusive) -
Just be awesome and sharable.
If your product is great then people will want to tell their friends about it even without receiving anything in return. All you have to do for this to happen is make it easy for them to share ( and maybe remind and ask once in a while). Business cards, shareable links and shareable products and content.
Create a referral program with incentives.
If you want to be more aggressive about your referral marketing strategy you can also create a referral program. A referral program is an agreement with customers that they will receive something in return for a successful referral (such as a discount, freebie, access etc.). The program needs to be trackable by the business and the customer so that both sides can know how many successful referrals have been made and the appropriate compensation can be made.
Note: this works only as a booster! If you do not have happy customers or brand loyalists, the incentives you provide will be meaningless and people are unlikely to risk their social equity by recommending something that they don’t use themselves.
Referral Rock outlines several keys to successful referral marketing:
Have a great product or service.
This is the foundation of referral marketing. People will not tell their friends about something that is no good!
Base of loyal customers.
Having customers that love the brand is essential to referral marketing. If you don’t have customers that are coming back for more themselves, they are unlikely to recommend your business to others.
Established social proof.
For example get reviews and display them in a visible place.
Be active on social media.
If your business has no presence it makes it harder for people to share and discover your business. Social media is designed for sharing, so as long as you have sharable content, you can go far on social media with little recourses.
Provide a good reason for people to refer you.
This can be as simple as “help a friend” or a more complex referral system with a valuable compensation. Show people why its worth it for them to refer you.
To sum things up, it doesn’t take much to employ basic referral marketing, so long as you have a product people love and have a stable customer base. Start by designing a shareable experience or product, giving the right tools and asking customers politely to do so. Next go a step further by developing a full blown referral program with tiered rewards based on the product or service. Now it is up to your customers to decide! Don’t be too pushy and focus on providing a great experience.