Referral Marketing: The Benefits and How to Effectively Apply It

Referral marketing is a marketing strategy that transforms customers and “brand ambassadors” into a sales channel, through the indication of the product or service to their network of contacts.

Referral marketing goes beyond organic referrals, with tactics and metrics to encourage new referrals.

Marketing can happen even if you make no conscious investment in this area. If you create a valuable product or service and market it, people are likely to start talking about it.

The job of the marketer is to influence this process, ensuring that everyone knows how much your product or service is worth.

Thus, referral marketing (or referral marketing) are strategies to encourage your client to tell friends and family about your business, becoming another sales channel.

We have all told our friends about our shopping experiences.

In this process, the role of the marketer is to intensify this “word of mouth”, ensuring that more people talk about the incredible products and services they have purchased.

This involves implementing some incentives. The challenge is to ensure that these interactions are always timely, useful, and relevant.

People like to boast about their excellent experiences. And this is an easy way to advertise your business.

Companies that use referral marketing definitely enjoy the benefits. Not only is it more profitable than traditional marketing, but its reach is quite remarkable.

Typically, customers tell friends that they think they’ll be interested in your company. This means that you do not have to struggle to find these people.

If each referral becomes a customer and they each share things about your business with all their friends, you will essentially create a new customer community.

Consumers trust their friends more than salespeople.

How can referral marketing be used?

The process for applying referral marketing has become much more efficient and more accessible due to the various software and platforms for this purpose.

Besides, this software and platform can be implemented in your marketing strategy without generating friction with the programs already used.

Startups like Dropbox, Uber, Airbnb, PayPal, Netflix, Amazon Prime, and Evernote, or even other app development companies, have long used referral marketing as their main acquisition channel.

But don’t be alarmed! Referral marketing is for any company (e.g. B2C or B2B), for any product and at any stage of maturity.

As said by the Greek philosopher Aristotle: “Man is, by nature, a social animal”.

Therefore, speaking well of something that pleases you or dislikes it is something organic for us, you need to notice the people around you.

Dave Mcclure, one of the most active startup investors, created a basic growth framework called AARRR, which stands for:

• Acquisition (acquisition)

• Activation

• Retention

• Revenue

• Referral (indication)

The benefits of a referral marketing strategy

Investing in referral marketing can be very smart. But, contrary to what the sentence that starts this article suggests, it should not be left to chance.

Some benefits you can derive from a reliable referral program are:

Super segmentation

The job of defining and finding your ICP (Ideal Customer Profile) is almost ready. This is usually the main point that takes companies to the death valley in the first years of activity;

Lower CAC

Cost of Customer Acquisition can be a stumbling block for those who grow fast. With referral marketing, this can be reduced.

Indicators lend their credibility to the company. This makes the nominee more advanced in the purchase stage when it arrives;

Smaller sales cycle

It is a consequence of the item above. By lending your credibility and serving as a product use case, the friend who recommends your company is already part of the marketing and sales job for you.

Thus, when the new customer arrives, closing usually happens much faster.

Applying referral marketing in a simple way

Referral marketing is more than one person referring your company to another.

Creative professionals have already noticed the need to expand this interaction, increasing the influence of referral marketing and reaching many more people. 

So, there are countless things you can apply in your business to stimulate word of mouth about what you market.

And it doesn’t have to be expensive or complicated!

These are five ways to apply referral marketing to your company in a simple and very effective way:

1. Contests aimed at referring friends

You can encourage referrals from your customers by competing for one or more prizes based on the number of referrals.

One nomination, ten, one hundred, one thousand! You choose.

Thus, you can offer discounts, products, or services that are of interest to your target audience. This is an excellent way to reach many more people with referral marketing.

2. Seasonal campaigns

Using seasonal events or holidays is also an excellent way to earn many referrals through Referral Marketing.

Naturebox understood this and asked its distributors to offer “50% off” before the Super Bowl. Using one of the biggest American events for your marketing strategy has significantly increased your profits.

Take advantage of events to generate a “word of mouth” about your company. It doesn’t have to be something big, just something timely!

3. Social gifts

You can also generate leads by allowing your customers to gift their friends.

You can send codes or links for your customers to share with others. Thus, these people can win free products, discounts, or tests on some of their services.

Social gifts, despite not offering anything directly to their consumers, present themselves as a very cool way to be generous to someone.

4. Use an influencer or client as an ambassador

As the main point of referral marketing, the best people to promote your company are those who already love what you do and sell.

These people are not just satisfied customers. They are ambassadors for your brand! So, it would help if you found out how to use these reference symbols for the current generation.

An excellent way to do this is to invest in influencers. They will spread your brand across you, introducing your company to thousands of others.

Also, you can look at your customer base and even employees and find micro-influencers capable of boosting your sales.

5. Using employees as brand ambassadors

Developing an ‘ambassador program’ may be the most organized way of dealing with employees who are willing to become spokespeople for the company.

In addition to being a great way to expand your online reach, these people will be prepared to take any questions from customers and spread news.

But, for that, the messages transmitted must be true.

It is not necessary to compel employees to share content on their private channels – spontaneity is the most precious factor in influencing people on the internet.

Speaking of rewards or rewarding the brand’s best ambassadors may seem forced. But in reality, offering status to employees is a simple way to demonstrate their satisfaction with their engagement.

Inviting him to write about his day to day work at the company blog is a good example.

Conclusion

Using referral marketing can bring great business chances for your company, be it big or small.

You must ensure that your customers know they can benefit from telling their friends and family about your brand.

Try the suggestions and comment on your experiences with customer referrals!