92% of consumers trust word of mouth over any other form of advertising, making referral marketing one of the most powerful word of mouth marketing tools. Brands can incentivize their current customers to make referrals to their family, friends, and followers by harnessing the power of word of mouth and steering the conversation from the inside.
What Is Referral Marketing?
To put it simply, referral marketing (also known as peer to peer marketing) is when a brand gets its customers to recommend the brand to their inner circle. It’s one of the best word of mouth marketing methods to drive real conversions — from app downloads, new customer sign ups, sales, email collection, and more. Referral marketing works on a personal level and is made possible by pre-established trust and relationships between your current customers and their friends and family.
Why Does Referral Marketing Work?
Referral Marketing Is Trusted
People trust their friends and family, and they’re more likely to be receptive to a recommendation from their inner circle than from an ad they see on a billboard or on Instagram. Consumers want to know more about real people’s experiences with a product. That’s why 74% of consumers identify word of mouth as a key influencer in their purchasing decisions.
Referral Marketing Leads To Customers That Spend More
When your brand is introduced to a potential new customer from a referral from someone they know, there is already a sense of trust established. That’s why customers acquired through word of mouth spend 2x more and make 2x as many referrals themselves. Referred customers convert 30% better than nonreferred customers, and have a 16% higher life time value (LTV).
Referral Marketing Is Cost Effective
If a customer loves your product, they’re likely to refer you to their friends and family with little to no incentive — they’re intrinsically motivated by their love for your brand. Word of mouth recommendations occur naturally, and require little to no additional marketing investment from your brand, making it an extremely cost effective customer acquisition strategy.
How To Build A Referral Program
Building out a successful referral program means understanding your marketing objective, creating engaging incentives, and making the process extremely user-friendly. Make sure to have a clear, ideal customer journey process mapped out before beginning any work on the program itself. Here are some helpful steps to take when building a referral marketing program for your brand:
Create Concise Messaging
Be sure to explain all the benefits of joining the program. Create a clear call to action with steps on how to get there while making it personalized and easy to understand. Oftentimes, when customers share a referral to others, the person receiving the referral does not know about your brand, so messaging needs to be in clear alignment with your brand guidelines.
Establish Easy Sharing Capabilities
Give customers a variety of ways to share for maximum likelihood of effective sharing. Encourage sharing across multiple social media accounts, through email or text, or even physical flyers if your business is more locally focused. Make a point to outline proper messaging when referring, or have something that customers can simply copy, paste, and send to make the process even more seamless.
Choose The Right Rewards
Rewards can choose one-sided or two-sided incentives. One-sided meaning the benefit goes to either the referrer or the referee, two-sided meaning it goes to both. Think about whether your budget can stretch for either option, then consider narrowing down the numerical aspect. Examples of incentives/rewards include:
- Store credit or points
- Company merchandise
- Gift Cards
- Charitable donations
- Discounts on product and/or orders
Whether you have an established referral program or are just starting to harness the power of word of mouth, referral marketing is an trusted and low cost strategy to help your brand acquire new customers. Interested in learning how your brand can tap into your community to drive more referrals? SocialLadder can help.