A Referral Marketing Program Works — Yes! You may have heard it but may or may not have tried it yet. If so, what’s stopping you? Does it sound too complicated to implement? Are you wondering how it works? Fortunately, in this article, you’ll learn how a referral marketing program can work for your business and how easy it is to implement it immediately.
Of course, it’s true that you have reached this page because you want to know more about this topic. Don’t worry — we’ve got you covered. In most cases, a great Referral Marketing Program is often focused on rewarding current customers to invite their friends to try your product/service. It’s not like Affiliate Marketing which focuses on third-party brand advocates.
More so, geared towards allowing marketplace users (affiliates) to send customers to your business for a flat fee. As of today, Online Digital Marketing moves at the speed of light. To keep up, you need a strong foundation. More specifically, with the right judgment skills, the capacity to think critically, act independently, and be relentlessly creative with content creation.
Most businesses leverage digital channels such as Google search, social media, email, and websites to connect with current and prospective customers. To maximize user participation, segment campaigns to specific user groups and create graphic ads. As well as custom marketing materials optimized for their preferred communication channels to drive traffic and leads.
What A Referral Marketing Program Entails
By definition, Referral Marketing is a process where your customers promote your business to their family and friends. Often, it involves a fillable online form where customers can key in the details of the people they know (family and friends) and refer them to a business. It’s the shared relationship between your customers, their friends or associates, and your brand.
Referrals are one of the fastest ways to drive leads and customers to your website, even if it’s completely new. It works well for ecommerce websites and other online businesses. Brand ambassadors work mainly through social media platforms, text, email, and app interfaces. Current customers personally promote your brand to new users to earn rewards.
Ideally, this works for both themselves and their friends. Successful campaigns motivate customers to share your brand with their family, friends, and associates in a straightforward, natural fashion. Encouraging happy customers to become active brand ambassadors is simple, so it sets your company up for conversions while rewarding users for their participation.
While affiliate marketing is like enlisting a reputable yet unknown salesperson to spread the word about you online, referral programs are based on personal interactions. It’s like bumping into a friend on the street and having them share a great tip, a resource guide, or advice. Often, this’s called word-of-mouth marketing, referral campaigns center around some basic facts.
Why Word Of Mouth Is A Valuable Referral Marketing Program Tool
Of course, word-of-mouth is very effective for a referral marketing program. Yes! This is because most customers often trust the person referring them to a product or service; they are very likely to act upon their recommendation. For example, those in line with a value proposition and buying position act upon social proof. In the end, they follow the lead of their associates.
Whereby each following customer acts similarly — spreading the value and honest appraisal of your brand to those in their inner circle. One of the reasons why it works so well is because it leverages your existing customers. Instead of promoting your website yourself, you enlist your customer’s help to promote the business website (services and products) for you.
With this, you get more chances to expose your brand to other people. Another reason referral marketing works is because it utilizes the power of trust. Referral marketing works with your customers promoting your business to the people they already know. This can be family members or friends who are close to them. The result? Their promotions are more effective.
One thing is for sure, their family and friends are more open to hearing promotions from them. After all, they are close to them. With this, your business simply cannot afford not to implement a referral marketing program. The best part is that it is straightforward — word-of-mouth is one of the most crucial elements here. It helps spread the word and drive traffic or sales.
What research facts showcase about word of mouth:
- According to a Consumer report by Nielsen, the most trusted form of advertising is a friend’s recommendation. With 83% trusting the source for buying decisions. The report also found that people are 4X more likely to buy when referred by a friend.
- Another Banking Case Study by a Wall Street Journal showed that referred customers are 18% more likely to stay. And also, they are 16% more profitable than customers acquired through other channels.
- Also, in addition, a Study by Huzzah Media showed that not only do referrals improve marketing performance, but they also drive revenue. In the same study, 36% of small business owners noted that word of mouth is their best source of revenue. In that case, right behind returning customers at 44%.
- Equally important, an Ogilvy Study says that 74% of consumers identify word of mouth as a key influencer in their purchasing decision.
- Finally, another Case Study by Radius Global Marketing showed that millennials ranked word of mouth as the #1 influencer in their purchasing decisions. Particularly, on apparel, travel, electronics, financial products, and consumer packaged goods.
You may ask: “Why should I allocate time and resources to referral marketing when I have many channels to reach potential customers directly?”To answer that, we say successful referral marketing yields results that no other marketing initiative can replicate. In general, a great referral marketing program has several other benefits — for both businesses and referrers;
1. More product sales and revenue
Firstly, referral programs can help businesses acquire new customers or clients, which leads to increased sales and revenue. Secondly, it’s also worth noting that since referrals come from trusted sources, they are more likely to convert into paying customers. Marketing requires effort and time. Social media marketing means you need to create posts and schedule them.
Blog marketing means that you write articles and post on other blogs. Similarly, Influencer Marketing requires you to approach influencers by emailing them and taking time to get to know them. As you can see, all of these take effort and time. But referral marketing is different. Once you set it up, it is already semi-automatic — if you have put it in key places on your website.
As such, all you need to do is focus more on driving customers to your website, and your customers will do all the promotions for you.
2. A cost-effective marketing strategy
In the same fashion, referral programs are a cost-effective way to acquire new customers or clients. Not to mention, since referrers are inspired and motivated to refer new customers or clients, businesses do not have to spend significant money on traditional marketing methods. Some people think that launching a referral program is hard.
This is especially true for people who have not encountered the term before. They think that they need to know web development or coding in order to implement it. But with today’s softwares, it is now easy to launch your own referral program without any coding knowledge. One of the most popular softwares in this field is OSI Affiliate. It is a referral and affiliate program in one.
It allows you to set up and launch your own referral program in a matter of minutes. As long as you have already sorted out your referral incentive and the mechanics of your program, you can encode it in a software like this and launch it right away.
3. Potential customer loyalty increase
Equally important, referral programs can also increase customer loyalty. For one thing, referrers are likelier to remain loyal to a business since they are incentivized to refer new customers or clients. Additionally, referred customers are likelier to become loyal since they come from a trusted source. Today, some of the fastest-growing brands are using referrals.
This means that if you choose only one form of marketing, it should be referral marketing. Paypal, Uber, and Airbnb have grown so much that they can beat the biggest brands in their industries. And this is not only because they offered revolutionary technologies or services. Any technology will be useless if there’s no marketing involved. It is referral marketing that drove them.
4. A way to earn passive income
By the same token, it is also an excellent opportunity for passive income. Referrers can earn a commission or reward for each successful referral without investing much time or effort. After all, research shows users aren’t as inclined to send invites to gain an upgrade or an account credit. But, offering double-side incentives for both the sender and receiver is incredibly encouraging.
Still, if you are still stuck on doing traditional marketing for your business, you may be spending tons of money on advertising fees with nothing to show for it. By not leveraging your customers, you are putting the burden of promotion entirely on your shoulders. This means new leads and customers are entirely your responsibility, and your business can’t grow without you.
5. It may help to promote altruism
Generally speaking, Altruism is when we act to promote someone else’s welfare, even at a risk or cost to ourselves. Though some believe that humans are fundamentally self-interested, recent research suggests otherwise. Studies have found that people’s first impulse is to cooperate rather than compete. Toddlers spontaneously help people in need out of genuine concern.
More so for their welfare, and even non-human primates display altruism. With this in mind, you can use consumers’ innate desire to share good ideas within social networks against rewards. All in all, this motivates you more strongly because giving brings more joy than receiving.
How A Referral Marketing Program Technically Works
Most of the Online Marketplace and other application-based referral programs work by incentivizing existing customers or affiliates to refer new customers or clients to a business. The referral process usually involves a unique referral link or code that the referrer shares with their friends, family, or followers. Someone clicks on the link and makes a purchase or signs up.
Whether they make a click for a service or sign up for a solution rendered by the target business, the referrer receives a commission or reward. In the first place, customers or visitors who like your product or service refer people to your website, app, or landing page, and in return, there’s an ultimate reward that comes in two forms. Such as; Altruistic Emotions and Reward Forms.
Surprisingly, what to offer as referral marketing rewards is variable but must remain relevant. For one thing, users are evolving from customers to brand ambassadors and markedly creating valuable introductions, and generating goodwill in an almost exponential fashion. Compensating referrers (those making the introduction) with something worthwhile is key to success.
But how should your referral program look? One idea is to look at some of the best referral programs other businesses operate. Well, there are some of the better-known high-performing referral programs already in the marketplace.
Some of them are as follows:
- PayPal – gives cash for referrals
- Dropbox – offers free storage for referring friends
- Airbnb – gives reward in cash for referring people (and more when they rent out their places)
Keep in mind that: It’s critical to focus on customer engagement foremost. Building a stronger relationship with customers is the priority. Remember that everyone who networks your offering is involved in creating a trustworthy relationship with your brand. Some will write reviews on your website and otherwise will post on social, but each referrer is quite important.
Precisely, this is because they are becoming more loyal with each action. Not to mention, a bold Call To Action (CTA) social sharing makes referrals a one-click process for users. Therefore, increasing rates of mobile use is a distinct advantage to referral programs. Especially those taking advantage of in-app messaging, push notifications, and other mobile referral strategies.
How Affiliate Marketing & Referral Marketing Are Different
Both strategies rely upon incentives to drive revenue, but the underlying strategic plans and techniques vary significantly. Affiliate marketing is similar to referral marketing as they both use incentives to drive new customer revenue. On the one hand, Referral Marketing revolves around the shared relationship between your customers, their friends or associates, and your brand.
Current customers personally promote your brand to new users to earn rewards, ideally for themselves and their friends. On the other hand, Affiliate Marketing falls under a large umbrella of affiliate programs. The affiliate programs are also associate programs. In addition, professional affiliates handle the affiliation process during the marketing period.
If you have ever asked yourself what affiliates are and, more importantly, what they do, keep reading. Affiliate Marketing centers around a business relationship between a brand and an affiliate. In this type of performance-based marketing, the affiliate is paid to promote the brand. These publishers are compensated for each visitor or customer earned through marketing efforts.
Related Resource: Influencer Marketing Campaign Steps For More Traffic & Sales
Basically, if you’re having a hard time reaching clients, you could hire an affiliate. In the end, who might be part of a larger affiliate network to approach consumers through their own tactics. These businesses act as agents, sending qualified traffic to your website. When one of these visitors converts, you pay the affiliate a commission.
But, important to realize, affiliate program success relies on locating advocates capable of reaching and promoting your product to your target audience. Customers will not know the advocate personally, and this is the crucial difference between affiliate and referral programs. Businesses can employ a range of affiliate partners to bring in a robust supply of new customers.
How Effective Are The Referral Marketing Program Initial Investments?
While some referral software will require a minimum monthly fee, that is nothing compared to the number of sales you can get from semi-automatic marketing. With a referral program, you get more brand exposure, and more and more people will think of you once they want to buy something. The key to a successful online business is recall since your business is online.
Thus, people can easily access your website. So if your business has good recall, you have a higher chance of closing that sale. However, recall can only happen once a lead sees a brand at least 9 times. This is for advertisements. But there’s a faster way. A targeted lead consumer gets to remember a brand name more if it is referred by someone they know.
This is the power you’ll harness once you have a referral program. Generally, the Return On Investment (ROI) for referral programs increases as user engagement and new customers expand the network of satisfied customers. As your customers are driving conversions, you can save on short- and long-term sales expenses. But what if your customer service is lacking?
Well, this will be an incurred cost of a referral marketing program. Creating satisfied customers is essential, never more apparent when running a referral campaign. So, be sure to shore up inadequacies and address areas where customers might not enjoy their interaction with the brand. Above all, customer satisfaction is mostly about feeling listened to.
And also, having support staff available, so investing in customer experience can reap huge benefits. In addition, you must consider referral marketing software in your plans. So, are you looking for ways to make extra money without investing much time or effort? If yes, referral marketing programs might be just the thing for you. Referral programs are an excellent way!
How To Get The Most From Your Referrals Through Marketing Campaigns
Referral programs are marketing strategies incentivizing existing customers or affiliates to refer new customers or clients to a business. In return for each successful referral, the referrer receives a commission or reward. Often, referral programs are designed to leverage the existing customer base to help web-based businesses acquire new customers or clients.
Eventually, which ultimately leads to increased revenue for the business. It goes without saying, there’s no way to force your customers to give referrals. But, the right referral marketing program will motivate your customers and dramatically increase the number of referrals you receive. Always remember, not every satisfied customer will be willing to refer your business.
The customers you reach out to first for referrals should be the ones who have demonstrated the most loyalty to your company. In reality, Altruism is the cornerstone of any referral program. Why? Because it feels good to help out a friend. When happy customers are incentivized to invite people along for the ride, 2-3 new customers are created.
On the other hand, rewards in the form of discounts, credits, and upgrades are much like to increase lead conversion. Consumer rewards can be tailored to suit user channels with the most engagement. Here are some steps to consider.
1. Segmenting Your Users
Segment your audience based on how likely they are to give referrals. Keep in mind: a customer who doesn’t demonstrate strong loyalty might still end up giving a referral. Prioritize your most loyal customers, but continue to incentivize referrals for the rest of your audience, too. Referral programs work best in targeted campaigns that speak to a segmented group of users.
Break your lists down into chunks such as:
- Users with the highest lifetime value (to attract other spenders),
- Influencers with large social followings,
- Users with high levels of engagement,
- And also, users in specific geographic regions.
2. A/B Test Copy & Rewards
For example, when Airbnb ran A/B tests that offered a $25 incentive to users and new friends – instead of just users – they saw referrals increase by 300%. So, spend time to test and optimize copy and offers to suit your users.
3. Mobile Audience Targeting
According to a recent survey, 79% of people 18-44 have their phones with them 22 hours a day. This means that; using mobile-mania to your advantage can reap huge rewards in the right referral market.
4. Feedback and Purchase History
Use surveys to collect direct feedback. The most common method is a Net Promoter Score survey, which directly asks customers how likely they are to refer your brand and products on a scale of 1 to 10. Simply ask customers for their feedback using your business website or customer marketing channels.
The strongest sign of loyalty is a customer who buys from you again and again. These customers trust your brand and the quality of your products, and they’ll be much likelier to spread the word if you give them the opportunity.
Why A Referral Marketing Program Software Is Essential
To enumerate, there are various referral marketing program software tools and solutions that are an economical way to minimize the costs of staying updated on all the customer actions within campaigns. With 2020 rapidly approaching, it seems an excellent time to consider your referral marketing options. As with most types of marketing, you can simplify your workload.
Specifically by automating the process and using specialist referral marketing software tools. For example, through the magic of a tool like ReferralMagic, you can turn your users and customers into referral magnets. How is that possible? It’s not just the easiest way to integrate referral-tracking software into your website. You’ll build the right referral program for your business.
Directly into your SaaS, rebrand and resell to your clients, and customize based on your business needs. With that in mind, there are so many benefits of using various software tools to help drive your referral marketing program.
Some of the notable benefits are as follows:
- Flexible themes to support your brand’s look and feel
- Analytics to measure customer interactions
- Security features to protect against fraud
- Triggered email notifications to keep users engaged
- Seamless mobile platform integrations
In addition, Revetize is among the best referral marketing software tools that let you hit multiple birds with one stone. If you’re looking for a one-stop shop for everything lead generation, customer communication, and reputation management, Revetize is your platform! What makes Revetize different from other referral marketing tools?
It lets you leverage your happy customers and quickly acquire referrals, reviews, and repeat business. It also helps you send personalized, purposeful business texts and generate leads without lifting a finger. All of your marketing efforts are organized into one spot. The software tool allows brands to generate hundreds of online reviews quickly.
Especially from authentic customers, create and distribute promotions straight from the platform, and even send personalized messages to a mass list of customers. That being said, there are a few more software tools to consider.
- Referral Factory
- Genius Referrals
- Referral SaaSquatch
- Referral Rock
- Mention Me
Additionally, Hello Referrals is also yet another web-based referral-tracking software that helps firms work with their network to send, receive, and track business referrals and sales leads. It provides tracking and reporting tools and gives you a place to organize your trusted partners in business. Their website emphasizes the broad canvass of its potential app users.
Some user-based canvases are:
- Chambers of Commerce
- Rotary Clubs
- Small business associations
- Trade associations
- Business networking groups
- Groups of friends
You can use Hello Referrals to send and receive business referrals and word-of-mouth leads. You can also track your referrals and manage your leads. It provides centralized communication with your referral group that keeps your networking activity in one place and always up-to-date. The platform allows you to send messages to partners, stage meet-ups, and the like.
As well as create events to help each other throughout the sales cycle. You can pick from three pricing tiers (at $49, $99, or customize your referral program) that vary according to the number of members in your group.
Why Online Digital Marketing Leads Conversion Matters
On the one hand, Digital Online Marketing for content has now evolved as the simplest way to get more and more marketing leads, especially without putting pressure on the company’s owner and treasury department. And eventually, guide them down the sales funnel with relevant content and offers towards the purchase.
On the other hand, Online Digital Marketing is the process of marketing brands, products, services or solutions using digital technologies. Particularly over the Internet, but also including mobile phones, display advertising, and any other digital medium. The reality is, people spend twice as much time online as they used to 15 years ago.
And while you say it a lot, the way people shop and buy really has changed. Meaning offline marketing isn’t as effective as it used to be. Marketing Leads Conversion is the process of turning an online lead (visitor) into an opportunity, deal or even customer. Usually, lead conversion is generated from marketing inbound or outbound activities.
As an example, getting someone to open an email is an act of lead conversion. Then again, having them click on the call-to-action link inside that email is another lead conversion. Also, going to the landing page and filling out a registration form to read your blog content is another lead conversion.
And, of course, buying your product is the ultimate goal of some if not all lead conversion. For consumer marketers, conversion can be relatively fast and simple. A possible customer scans a QR code to get a coupon (that’s a conversion right there). Again, they immediately go to the restaurant to get their free french fries.
As you can see, Referral Marketing involves promoting your products or services by using referrals from your existing customer base. This is usually done by word-of-mouth and can be a highly effective form of marketing. As with most types of marketing, you can simplify your workload by automating the process using specialist referral marketing software tools.
As mentioned above, referral marketing works by leveraging your customers’ connections. What makes it more powerful is the compounding effect. So if you have 1,000 customers (this is relatively small, by the way) and each customer refers you to at least 3 people, that’s already 3,000 referrals for you. Think about what will happen if you have more customers.
The compounding effect can quickly multiply your traffic and sales in days. From traditional marketing techniques to Social Media Marketing to SEO to paid ads — if you have tried all these and are spending too much without getting any sales in return, you’ll know how marketing can take some time. It is not something that you can easily see the benefits right from the onset.
But referral marketing is quite different. If you have a solid market base, you can immediately see the benefits of referral marketing. Remember, simply creating your program is not enough. It will not be valid unless you launch it successfully and effectively. This is what promotion is for. You need to promote your program to get referrals.
Other More Related Resource References:
- WordPress Affiliate Plugins | Top 10 Best for Web Marketers
- How WordPress Membership Plugins Work | 5 Top Samples
- A Membership Website Design Plan To Increase Revenue Streams
- Email Marketing | A Step-By-Step Business Marketers Guideline
- 10 Tips To Design A Lead Capture Form That Highly Converts
Finally, we hope you enjoyed reading and understood more about the difference between affiliate marketing & referral marketing (especially how both of them work). However, if you have additional contributions, opinions, suggestions, contribution questions for Free FAQ Answers, or even valuable recommendations, you can leave them in our comments section.