Introduction to Referral Marketing Strategy
Word-of-mouth marketing comes for free, and there is no way to quantify it. However, when companies are confident of their product quality and service, they can also think of incentivizing those willing to spread the good word about your brand or product. When the company gives a word-of-mouth marketing strategy a monetary or some other incentive, it is Referral Marketing.
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Referral Marketing Strategy
It is not easy to convince consumers to buy a product. They are regularly exposed to hundreds of advertisements in newspapers, television, radio, and hoardings. Even as they are partly influenced by the images, sounds, and videos they are bombarded with, many people are still skeptical about it. And they tend to seek the help of friends, colleagues, acquaintances, or even product reviews before deciding to part with their money.
Customers, mostly, do not buy products because of the impact of ads alone but through word-of-mouth. If someone has bought a mobile phone and is happy with it, he or she is likely to tell at least 10-12 people about the product’s merits. This kind of marketing comes free for the company, and in a way, it reflects the branding effort taken by the company. A cash-rich company may spend millions of dollars to get endorsement for their product by a celebrity from the film industry, business, fashion, sports, or any other field of activity.
Most major companies and brands have used the Referral Marketing example with good results, and there is no reason why you canāt benefit.Ā For many US companies, 65% of the new sales happen through referral marketing. A survey by Nielsen revealed that customers are highly influenced by referrals giving good weight to recommendations made by friends.
Moreover, by implementing a well-designed B2B referral program, you can harness the benefits of word-of-mouth marketing, boosting both customer acquisition and retention rates. Launching a referral program could turn your satisfied customers into brand advocates and boost your businessās growth.
Channels for Referral Marketing
The following are the channels for referral marketing:
The company employee: (Referral Marketing Strategy)
Your employees are your greatest ambassadors. If they endorse your product, it shows that the company is taking good care of them and they have good faith in the product too. Many companies provide incentives to employees to promote their products. In banks, clerical staff is given monetary incentives to promote some savings schemes or mutual funds. The best performers among them may be periodically recognized by giving a gold coin on a monthly or quarterly basis.
Employees promoting the companyās own products have twin benefits- it reflects the companyās top-line growth, and employees stand to gain not only by way of incentives but salary hikes at the end of the year if the efforts reflect on the bottom line too.
The other referral marketing advantage is that, unlike a marketing executive or associate, there are no retainer costs in utilizing employees for marketing.
Your own customers: (Referral Marketing Strategy)
A satisfied customer is your best marketing executive; therefore, a company could tap into its rich customer database to utilize them by giving referral incentives. Citibank gives its existing customers Rs 2000 per referral for credit cards, while Google has announced $7.50 per referral to its account holders for promoting Adwords campaigns. Many top-selling magazines such as Readersā Digest, The Week, India Today have all used referral marketing over the years to boost business. Sometimes, the incentive may be a collection of the best articles that have already appeared in the magazine since its inception, or it could be a useful booklet that the reader can keep as a reference.
Dropbox, a leading online file storage company, implemented a referral marketing program for its subscribers in 2009. In a referral marketing program, those who signed up and those who were referred got free space. Within a year, referrals accounted for more than 35% of the new business for Dropbox. Several examples from the industry all over the world have employed referral marketing, e.g., AT&T allows customers to earn up to $575 per year through referrals.
The tie-up with complementary businesses: (referral marketing strategy)
When many global mutual funds and life insurance companies came to India, they tied up with banks to promote business. When banks with a tradition of providing good service endorse an investment product, it is more likely to be accepted by the customers. Aviva launched its life insurance products through Canara Bank before going out on its own and thus got a good customer base to work on.
One can see other ways of referral marketing in automobiles, oil retailing companies promoting credit cards, and air conditioner firms promoting stabilizers.
Steps to ensure better results with referralĀ marketing
The following are the steps:
1. Good product/service and customer service: (referral marketing strategy)
The essential prerequisite for a referral campaign to succeed is to have a good product or service and impeccable after-sales service. Without a good product or brand, you will not make much headway, and not many will be willing to refer you in the first place.
2. Targets should be achievable, rewards appealing: (Referral Marketing Strategy)
The targets for referrals should not look impossible or difficult to achieve. Referring up to 15 may be easy, but most companies offer benefits even if five customers get referrals, which results in conversions. Whether cash, products, or other benefits, the rewards should be good enough for customers and employees to take that extra effort. Also, one should mention whether the rewards are for lead generation or sales conversion.
3. In B2B businesses donāt begin with a referral request: (Referral Marketing Strategy)
Many customers may not be willing to take part in the referral marketing program simply because they donāt know how the company will use the personal details collected. It is better to build rapport with the company by asking them to rate your product or subscribe to newsletters. Before announcing the referral marketing program, privacy and confidentiality clauses should be communicated to them so they feel confident about referring people to you.
Contacting the referred customers should be informed beforehand, mentioning the benefits and rewards for the referral marketing business.
4. B2B marketing is time-consuming; keep the customer informed: (Referral Marketing Strategy)
Once you get a referral and start contacting them, the referred customer should be informed of the progress of the marketing process until the deal’s closure.Ā However, one must ensure that to bombard the new potential customer with emails and phone calls which will be embarrassing for the customer who referred it to you.
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5. Rewards should be timely: (Referral Marketing Strategy)
When a referral reward is promised, it should be given in a time-bound manner, the same week or the next month. When there is a delay or cancellation of rewards, the company is shutting the doors to any possible success in future referral marketing programs.
6. Make your website and social media suitable for referrals: (Referral Marketing Strategy)
Make your website and social media suitable for sharing and rewarding, just as undergarments company MeUndies did. They created a special ” Invite ” section to boost referral marketing business. They offered $20 for the customer and 20% off for the person who bought on that referral. Or it could be several tiers of rewards based on business volumes and not a single reward. Now for even small businesses, it is easy to implement referral marketing programs on the website with several apps available for customization: some of them are Ambassador,Ā Friendbuy, Referrify, Extole, Referralcandy.
With the rapid explosion of social media, businesses can now utilize solutions developed for Facebook, Twitter, Linkedin, and Google+ to make your customers share promotions and discount offers. Many use big data analytics to send the right offers to the target audience.
7. Join a referral marketing network: (Referral Marketing Strategy)
Many small and medium businesses can join a business network such as BNI (Business Network International), which has chapters worldwide to help its members promote business through referrals. Each referral is much more valuable than a lead as the conversion rate could be near 90-100%. While a qualified lead from any other form of marketing have a one-fourth chance of converting to business.
Referral marketing networks also help build relationships as they have weekly meetings where they discuss strategies and how to make presentations and proposals. They also hold workshops giving new ideas on business promotion and strategies. BNI reported at the end of 2015 that it has 7,300 chapters and generated 7.7 million referrals valued at $9.3 bn. The total membership of the organization is 190,000 in 64 nations.
8. Use a mix of cash, non-cash, and multi-pronged strategy: (Referral Marketing Strategy)
You may use cash and non-cash incentives for referral marketing. However, as per a Chicago University study, non-monetary incentives were more effective than cash benefits by 24%. It is also better not to confine referrals to customers or employees alone. Referral marketing websites can also help lure new customers into referral marketing programs.
9. Communicate the buyer persona to your customers: (Referral Marketing Strategy)
When asking for referrals, companies often forget the target group they are looking at. Every friend or colleague of your customer may not be a prospect and get a long list of prospects; spending time on them may not bring the desired result. In such cases, the company can outline a client profile- desired age group, income, interests, industry, gender, and hobbies to improve results.
Who can employ referral marketing?
Retail stores, magazines, banks, doctors, credit card companies, the automotive industry, airports, hotels, travel agencies, stockbroking firms, mutual funds, and online trading companies. It is suitable for both B2B and B2C business and service companies. Worldwide, small and medium companies have gained more from referral marketing examples.
Advantages of referral marketing example?
Why should anyone try out the laborious route to referral marketing?Ā It is much cheaper than conventional marketing and gives a better return on investment (ROI).Ā As per research, companies that deploy referral marketing definitions properly have considerably cut down on traditional advertising on mass media. Customers feel important upon getting rewards and share them with their friends, who also benefit from a good product.
With the growth in information technology (IT), several applications are available for web, social media, mobile, and email to automate your referral campaigns targeting offers to the right audience. They also employ big data to deliver better results in referral marketing definition.
Apart from monetary or non-monetary benefits, it generates goodwill among customers and forges a better business-customer relationship. This, in turn, makes the company focus on quality, innovation, and speed to drive the business higher.
Conclusion
Despite the many referral marketing example advantages over conventional marketing, hardly 25% of businesses make use of referral marketing strategy. Analysts note that it requires careful planning, identifying the right target for referrals, and building upon them.
It is important to evaluate to results of a referral campaign before embarking on another. Many small businesses do not make much headway because they donāt ask for it. Unless you ask, you donāt get, and this applies very much to referral marketing statistics too.
Studies have shown that success with a referral campaign is 2% but is much better than direct mail campaigns, which have a success rate of only 1%. Some marketers feel asking for a referral could damage the relationship with the customer. Companies that are not willing to seek referrals can take the indirect route by establishing their expertise through better visibility on websites, blogs, podcasts, YouTube, and appearing on TV, among other options. This, in turn, may help the company get references from people who arenāt its customers.
It is only possible to learn from success stories across the globe. For example, some companies purely generate referral marketing, meaning businesses without any advertisements.
William Daveyās firm Fredās Best Windows, Doors, Siding and Roofing is one such firm that spends zero money on advertising and grows on referrals from customers, real estate agents, referral groups, and partners.Ā Daveyās success is due to the training he gives to referral sources regarding how and the kind of people to be referred to and ensuring his firm has the qualities that make it preferable.
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