A delighted customer’s recommendation is hands down, the best way for a business to acquire new customers. A referral happens when a customer recommends your product or service to a friend or peer. Not only does referral bring new business to you, but also it lets the new customer on a definite positive note.
Referral marketing is one of the most cost-effective ways to acquire new customers for your business. According to research by Influitive, of companies with a referral program in place: 69% said they have experienced faster time to close 59% reported higher lifetime value 71% have seen higher conversion rates Even more compelling, over 14% of customers who visit a referral page will take action.
While some of your customers may refer your product on their own, to get most of the referrals, you need a referral marketing approach to facilitate and increase customer referrals. Referral Marketing usually involves a reward of some sort to be earned by the referring customer for successful referrals. However, referral marketing is not just about referral rewards. It should be built like any other marketing campaign including targeting strategy, implementation, analysis, and iteration.
People are 4 times more likely to buy when referred by a friend. 92% of consumers trust recommendations.
Referral Marketing retains much of the character of spontaneous word-of-mouth - most referrals still tend to be made within the referrer’s intimate networks, and the recommendation still carries much of the credibility of unprompted referrals. What’s more, Referral Marketing is about smoothing out any inertia off of the referral process by incentivizing referrals that might have happened anyway. Several studies have found that customers enrolled through referral programs are markedly more profitable than others.
Referral Marketing brings in aspects of relationship marketing which helps to keep the current customers engaged and motivated, thereby improving overall retention.
Referral Marketing vs Loyalty Marketing vs Affiliate Marketing
Referral Marketing helps in acquiring new customers through existing customers and also is the most cost-effective way of driving growth. Referral Marketing should become your key marketing strategy, when you have a sizable customer base, cost of new customer acquisition is high and takes a long time. Often, referral marketing is seen intertwined with loyalty marketing. Referral Programs and Loyalty programs have different purposes and serve different business goals. Referral Programs are for acquiring new customers and Loyalty Programs are for retaining and rewarding existing customers. Loyalty programs help in driving repeat sales, cross-selling, and upsell. They help in increasing the share of the wallets of customers. Referral Programs help in broadening the customer base.
Other related programs like Affiliate Marketing and Influencer Marketing will also drive referrals. But Affiliate and Influencer programs involve usage of third party brand advocates to drive customer acquisition by paying commission, incentives, or a flat fee. Compared to Referral Marketing, the trust factor in Influencer or Affiliate Marketing is low.
B2B Referral Programs
Referral Marketing is not limited to B2C. It is equally important in the B2B world where purchase cycles are no longer and the cost of customer acquisition is higher. Businesses that have the best in class products and services, high customer satisfaction, high NPS scores, and sizeable customer base should definitely invest in Referral Marketing. Unlike B2C, the stakeholders in the B2B world are many and they are part of the decision-making process and the process of selection is more formal, structured, and has long cycle time. B2B buyers want personalized and customized experience dealing with sales. Hence Referral Program has to be combined with the existing sales process. However, businesses can make it easier for their existing customers to participate actively in Referral Program by creating attractive and visible campaigns, promoting it actively, and making it easier for customers to provide referral customer information through simple forms and CTA. It is equally important to make the product and service information easy to share among their business contacts.