You must have heard that word of mouth is the best form of advertising. Referral marketing is based on this principle but amplified to get measurable results. In fact, many successful businesses have managed to use referral marketing programs as their secret weapon to drive growth without straining their marketing budgets.
This guide takes an in-depth look at referral marketing programs and explains the logic behind what works, how to build them, and what it takes for a referral program to succeed. By the end of it all, you will have all the insights you need to jumpstart your referral program and see your business grow.
What is a Referral Marketing Program?
A referral program is a structured strategy designed to inspire your customers to share information about your business. These programs create incentives for your satisfied and most loyal customers to bring in new clients to your brand by making them brand advocates.
Sometimes it might be in terms of a discount, store credit, or a goodie on their success for every successful referral. Think about the likes of Dropbox, Airbnb, Uber, and many more companies you know or use. These companies did not achieve their popularity through advertisements. Such companies have used referral programs as their silent marketing strategies.
Why Referral Programs are Effective
A referral program has the following benefits, which assures you of a successful campaign:
Builds Trust
People will be safer with friends and family recommendations than advertisements. Nielsen’s new report shows that about 96% of twentysomethings trusts people’s recommendations. While specific percentages might differ across different platforms, the overall percentages show that at least 92% of consumers’ trust people they know’s recommendations.
Cost-Effective Marketing
The acquisition cost of most referrals is less compared to paid advertisements or direct marketing.
Targets the Right Audience Naturally
Indeed, your existing customers have a strong chance of referring your business to their friends and family who exhibit similar interests. Therefore, you can have your market avenues automatically bringing in clients that have shown an interest in your services.
Enhances Customer Loyalty
A referral program allows your clients to see that you care about their satisfaction by rewarding them for helping your business grow. It treats them like partners in helping grow your brand, establishing customer loyalty and the basis for long-term relationships.
Consider the Following Program Components to Ensure You Set Your Program Off on the Right Foot
Clear Incentives
What are your customers going to get for referring people to your services? Find ways to make your offering enticing to ensure people take part. Most businesses use discounts, gift cards, or credit, but you can also take the tiered approach and award different incentives based on the number of referred visitors.
Easy Participation
Ensure your program is as simple and seamless as possible. This means you can integrate referral links, automate email invites, and make use of easy-to-fill forms for mobile use.
Strong Messaging
Sell your referral program by having the communication details clearly shared with the target audience. Clearly, give the approaches people can use to get into the business and educate them on rewards and how easy it is to share with friends. Make sure your language is direct and positive to help potential referrers do the right thing.
Tracking and Attribution
Let your program easily and functionally track every recommendation. You can use referral tools such as Referral Candy or an integrated CRM system, such as Post Affiliate Pro, to help track your successful referral rates.
How To Promote Your Program
Given that people always have to know about it to work, here is how to get them learning about your new business long-chain marketing program.
Email Marketing
Your email subscribers and your loyal followers are a strong target for the referral program, especially because of the level of sophistication they already exhibit. Make a clear and loudmouth announcement about your program’s launch and how easy it is to participate. Highlight your program benefits to entice your customer base.
Social Media
Make the most of platforms like Instagram, Facebook, and Twitter: get loyal fans to share your posts or tag people in your comments for a bonus spot on their feed. Social proof is a significant player here.
Website Placement
Showcase your referral program with a priority slot on your website: add a banner, create a landing page, or pop it into your FAQ.
During Checkout
Prompt people to use it at checkout: mention it for the first time and stress the acquisition benefits. For example, “Love that? Refer a friend and get 20% off the next.”
Partner with Influencers
Work with industry-relevant influencers to raise even more hype around your referral program—some of their followers will want to be in on it, too.
Measuring the Success of Referral Program
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Referral Conversion Rate: How many referrals translate into paying customers?
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Customer Retention: Do those who participate frequently return for more purchases?
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Average Purchase Value of Referred Customers: Do leads spend more or less than your average customer?
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Cost-Per-Acquisition: Is the money you spend running the referral on par with the revenue it generates?
Use these KPIs to figure out which elements are working and how to adjust them.
Examples of Successful Programs
Dropbox
Dropbox is an excellent example of a successful referral program. The file-sharing company offered a free space to both the referrer and the referee, creating the win-win situation that kept user shares rolling in.
Airbnb
Airbnb also has an excellent referral program example. The travel company sent travel credits to referrers and their friends, boosting both bookings and the customer experience.
Uber
Uber’s referral program succeeds by taking a cue from that old networking maxim — usually attributed to the wonderful marketing wizard Seth Godin — that it is not about who you know, but about who knows you. Riders share an easily memorable code with others, which earns both the participant and the individual he/she referred to in a ride. Keeping it easy and important to the customer helped the brand’s clients promote the corporation without knowing it.
Final Thoughts
Referral marketing programs do so more than simply recruit new consumers — they also create a devoted group of marketers. By using customer satisfaction and word-of-mouth recommendations, your company can solidify its reputation and revenue.
Take your newly activated creative excitement and convert your faithful brand followers into natural growth engines. Design your referral campaign or, if you’re strapped for time, utilize referral marketing automation tools to create, track, and execute it.
