What is Referral Marketing?

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Referral Marketing also goes by the name of word-of-mouth marketing, as the name suggests that it’s a type of marketing strategy where customers share their experiences about the product, good or bad (mostly good), with their friends and social circles.

Referral marketing has a deliberate influence, it doesn’t matter whether the marketer gets himself involved in the process or not. When it has to happen, then it happens.

The reason it’s so powerful, it’s because of its influence on sharing. We, human beings, are social animals and we tend to share our experiences with our friends and relatives when we like or dislike something.

As social creatures, we just can’t take it and keep it inside our experiences. It makes us feel good when we express our inner feelings (good or bad) with our love and close ones.

Referral Marketing Statistics

The same formula applies in the online world when people like or dislike something, and they leave their reviews and comments. Before buying anything online, we’d like to read comments and reviews of earlier users, and then we make a decision about the product or service.

When there are as many referrals about a certain product, service or brand, then it becomes a network of referring people who do the marketing for you, even without your asking. As the co-founder of Intuit, Scott Cook said;

‘‘A brand is no longer what we tell the consumers it is. It is what customers tell each other it is.’’

Here are some amazing statistics to show you the power and influence of referral marketing. Harris Poll conducted the statistical poll study on behalf of the Ambassador, according to its findings;

82% of the Americans have said that they require consultation and recommendation from their family, friends, and relative before doing any shopping.
Out of which 67% people said that they make their purchase decision after when they read the views of their friends on social media or an email.
88% of the Americans said that they want something in return when they express and share their views, it could be anything like stars, packages, gift and etc.
This figure is much higher among the young people aging from 18 to 34, it is approximately 95%.
86% of the rich Americans, whose annual income is 100,000 US dollars, said that they also require reviews and recommendation before shopping.

Why Referral Marketing Strategy Works?

Now, the question is how and why it works. Its functionality is very simple people read the comments, reviews, and recommendations of other people, and then they make their buying decision. It is because people usually believe other common people like themselves, instead of believing the words and promises of the advertiser.

It works even much faster among friends; according to a study conducted by Nielsen that 92% of the customer said that they’re more likely to believe the people they know, especially when it comes to referring. However, referral marketing strategy is very influential and powerful because of the following reasons;

Targeting. Take an example of a friend or a celebrity whom you admire and you have many things in common. When you see the style of your celebrity or see your friends talking about something nonstop. Then there’s a greater probability that you’d follow the same thing, it’s because if it wasn’t good, they wouldn’t have been using it.
Marketers follow the same principle; first of all, they identify the majority demographic segment of the society, then their choices and ideal. Then, they adopt exactly the same style that people want and follow.
Trust. Recent studies have shown that people tend to trust those people who are like them, instead of generic messages of advertisers and marketers. It is because when it comes to put your trust on a stranger or on someone you know of. Then the choice is very simple, you’d trust the person whom you know of.
Reach. In the past, face to face communication was the only source of connecting with other people, sharing and expressing your view. That was the past, in today’s world of social media; you can easily share your views about anything at any time. Those reviews are open for the public to read, people can view them from anywhere.

Companies Use Referral Marketing Program

There are different types of businesses that use referral marketing and there’s a great variety among those professions. Some of those professions and businesses are as follows;

Retailers
Hotels and restaurants
Doctors, dentist, and pharmacist
Bankers
Travel agents and airports
Gym and bodybuilding clubs
Automotive companies
Grocery stores

Best Practices for Referral Programs

Many companies employ the referral program to increase their sales, and they use different techniques and practices. Some of those practices are as follows;

Easy-to-Find based Referral Program

The referral program of your online business or platform should be simple and easy. You shouldn’t ask people to login first, and then they can leave their feedback because they won’t do it. You should make sure that people can easily invite their friends; it shouldn’t be more than 3 or 4 clicks. The lengthier the process is, the more chances that people would leave it unfinished.

Transparency in the Program

When it comes to sharing your personal information, people are genuinely concerned about their privacy. You should tell people more about your system that why your system is asking for their personal. How you’re going to use their personal information, add something for them that it’ll be used for their betterment consequently.

Once you have got the information about your customers, you should also have an effective plan to make the best use of such information in the right way. You should understand the attitude and behavior of your customer about your product and service, it’s because you want them to spread the word about your product or service. Therefore, you have a system of tracking your customer’s actions, whether they have or haven’t.

Knowing Your Customer’s Needs

The ultimate goal is to make people invite their network on your platform; you’re also offering something in return for them. Now, the question is whether your offer is useful for them or not. If your offer isn’t adding any value to their life, the chances are that they won’t take any action that you require them to take. Therefore, you should know the desires, needs and wants of your customers. If you provide them what they’re looking for, then they’ll invite their friends.

Right Timing

If you ask them at first to invite their friends, then they won’t do. It’s because it would make you look like a desperate person. First of all, you should start talking about their needs and requirements, and how you’re going to fill that gap. Once you have added the value in the form of benefiting service, then ask them to take an action and they would do. Right timing is very important.

Give proper Time and Resources

If you want your referral marketing plan to succeed, then it would require a lot of time and resources. For instance, you’re spending a lot of time on your plan, but you don’t have sufficient resources to back up your plan. Or you’re taking this referral program a second choice, then it won’t work out. The only way, it will become the lifeblood of your organization if you’re completely committed to this project, and keep on satisfying the needs and requirements of your customer.

Referral Marketing Examples

Here are some of the examples of very successful referral marketing plans, which are as follows,

Dropbox

Dropbox is a platform that allows its users to save their data online; initially, they were providing 500 MB to their users for free. Once more and more people started signing up for the free online data storage, they also knew that people want more. They started the referral program that if you invite your friends to sign up, then you’ll get more storage as a reward.

Evernote

Evernote is a mobile note-taking app which allows its user to take notes on their smartphones. Some of its premium features are very useful, catchy, and interesting. Either you can buy those features, or you can use your referral points to have it. However, if you invite your friends to download the app, then the company gives you free points. You can use these free points to buy premium features of the app. If you invite more people, then you’ll get more points, more features consequently. The company has acquired 13 million users through referral marketing campaign.

Evernote Company doesn’t send the reward process after successful referrals, every time your referral friend upgrade, the referring person would also get points. The purpose of this plan is to keep its users motivated about the referring plan.

Conclusion

Now, we have discussed the power and influence of referral marketing and how some of the companies are using referral programs successfully. The key thing is that they are adding some value to their customer’s life, and then they ask for referrals. If you follow the same steps for your business, then people would also refer your product and service to their network.