The Strategy of Referral Marketing
In the US, there are over two billion brand-related conversations each day. People talk frequently about their favorite products and services with friends, family, and acquaintances. The New York Times reported that 65 percent of new business leads come from referrals. That translates to every two out of three customers making purchase decisions based on someone they know recommending a particular product or service. Even better, these programs are very inexpensive, and referred customers spend over 13 percent more. Strategically using this marketing strategy allows businesses to use the exceptional power of consumer recommendations to significantly increase sales and profit.
What Is It?
In general, it is word-of-mouth marketing for a product or service through existing customers. Word-of-mouth is the largest reason why things such as online videos go viral. This marketing strategy is designed to produce the same effect of something going viral, however, it is initiated by the business rather than by the general public. It is usually accompanied by some form of reward or incentive to get existing customers to refer other people.
What Businesses Benefit From This Strategy?
This form of marketing is used by a wide range of businesses and industries. This strategy can be effective for both small and large companies that offer a product or service including:
- Retail stores
- Specialty stores
- Gyms and health clubs
- Health professionals
- Travel agencies and hotels
- Automotive services
- Online businesses
What Kinds of Customers Should be Targeted?
Referral marketing has many great benefits, so it's a strategy that can be customized to target a variety of demographics. Which customers are motivated to refer business? Customers are motivated to refer their friends and family when they are going to be rewarded for doing so. The better the reward, the more quality referrals. Remember, these are already your customers, you just want them to talk about your products or services with other people.
How is a Good Program Created?
Research is the first step to any successful marketing strategy. For this particular strategy to be successful, you'll have to first discover what your customers want. You don't want to offer undesirable or worthless incentives. This initial research could be conducted in a few different ways. You could study the buying habits of your customers to discover what products or services are enjoyed the most. From there, you could offer discounts, add-on services, free products, or bill credits, depending on your type of business.
Another way to gather this information is through customer surveys. With a survey, you could be straightforward with your customers and ask them what they want. Marketers could include a list of possible rewards with the survey and also ask customers to offer their own alternatives. A plan for crediting referrals must also be crafted to ensure smooth and transparent transactions. After that, all that's left is to market the program. This can be done using physical signs, brochures, the company's website, email campaigns, banner ads, or any other way to gain attention