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Let’s say you’re in search of a dentist for a dental health issue, how will you choose the right dentist for your dental health issue? By going through billboard ads, reading through several dentist websites, or opting for the dentist that was referred to you by a trusted friend?
If you’re like most people, you’ll go with the recommendation of a trusted friend. Personal recommendations and referrals tend to generate the most sales conversions. But that creates a challenge for marketers. After all, it’s almost impossible to influence personal recommendations. Finding a way around it will make all the difference — and that’s where referral marketing comes into play.
Getting a good grasp of referral marketing involves reading through multiple referral marketing examples. This way, you’ll easily identify the strategies brands are using to make things work, and also replicate the same strategies in your business.
Definition: Referral marketing is a marketing strategy where brands prompt their existing customers to recommend their products (or services) to their circle of influence. Referral marketing examples usually replicates the same results of regular customer-to-customer recommendations.
Referral marketing can be done face-to-face, or with digital channels. Digital channels could be blogs, reviews (or testimonials) from previous customers, articles, or social media platforms.
A typical referral marketing program uses incentives to encourage customers to recommend their products to their families and loved ones. These incentives could be a bonus, or store credit for each successful referral.
Referral marketing is a marketing strategy that helps businesses boost their brand engagement and reputation and increases their chances of acquiring more customers. Here’s the breakdown of the major value referral marketing offers.
The public will always trust recommendations from their loved ones and friends. The conversion rate from referral leads is usually 30% higher than the conversion rates from other marketing channels. Aside from the high conversion rate, referral marketing always generates high-quality leads. Referred customers gotten from referral marketing examples are pre-qualified by the referring customers — and they most likely have interest in what you’re offering.
Customers who recommend your brand to their circle of influence become strong brand advocates — and they tend to develop a great sense of belonging and loyalty to the brand. Furthermore, referred customers have proven to stay longer with the brand — and that shows they have a higher retention rate than regular customers.
Referral marketing typically involves word-of-mouth advertising, and that could serve as social proof. This strategy helps to build your brand’s credibility. Customers usually perceive referral marketing as a more authentic and genuine advertising model. And when you have thousands (or tens of thousands) of people speaking positively about your brand, you’re sure to generate enough brand awareness in the long run.
Referral marketing generates results by tapping into complex human dynamics and behaviors — and that’s where its power lies. Here are some major things that make referral marketing powerful:
Customers who promote your brand will likely develop an emotional attachment to the brand. With referral marketing examples, these customers will feel appreciated and valued — and will likely develop a sense of brand ownership. This will, in turn, boost brand loyalty, and make them leave positive online reviews.
Satisfied customers will likely refer others. These newly referred customers will likely be satisfied with the brand offering, and help spread your brand message. All these translate to more organic growth for the brand.
Word-of-mouth recommendations from close friends are powerful. After close friends are trusted sources, you’re likely to go with their recommendation. When you have lots of people spreading your brand message, that can serve as good social proof for the brand.
Word-of-mouth recommendation is a powerful social proof — and that can increase your brand reputation and image. When you’ve got lots of organic validation, you will likely be seen as credible and trustworthy by your target audience.
Referral marketing is relatively more cost-effective than traditional (or paid) marketing models. With referral marketing examples, your existing customers help you acquire new customers at no extra cost. But you’ll have to give them some incentives for a job well done.
Here are the different types of referral marketing:
Yelp and Google Reviews can be a great source of social proof. If you can encourage customers to leave a positive review on these platforms, it could serve as positive reinforcement for potential customers who are considering buying your products.
With the email referral model, existing customers are encouraged to share unique referral codes (or links) with their email lists. When the referred customers complete your desired action, both the referring customer and the referred customer get an incentive.
Social media referrals involve customers recommending your products to their social media followers. This strategy helps boost your brand’s organic reach. A simple product recommendation by one of your existing customers with a large following can change the trajectory of your product sales for the month.
This is the regular referral program where satisfied existing customers share their experience with your brand with their close circle. It’s effective since people will likely take recommendations from trusted colleagues and loved ones.
Referral marketing has been one of the most effective marketing strategies out there. Here are some of the top successful referral marketing examples.
Dropbox launched a referral program where both the referee and the referrer get free storage space. This strategy led to massive organic growth and more brand reach.
Airbnb launched a referral program where a unique code is used in inviting customers. A customer who uses the referral code gets travel credit — and that increases customer acquisition and host bookings over time.
One of the reliable ways Tesla used to grow their business was by offering a significant discount to customers who bought Tesla vehicles via the referral program. The strategy generated lots of buzz and sales for the Tesla brand.
PayPal grew its user base by using the send and get $10 program. With this strategy, both the referring user and the referred user get $10 for each complete referral made.
Uber launched an effective referral campaign where participants get the chance to win free rides. This strategy generated lots of engagement and signups for the brand.
Tracking and measuring your referral marketing strategy is a sure way to figure out what’s working and what’s not. Here are simple steps to help you effectively track and measure your results.
What are your primary objectives? Are you looking to improve your brand awareness, grow your revenue, or acquire more customers? Set a defined objective for your referral marketing.
There are lots of ways to track your referral marketing program. You could use unique codes (or referral links), referral management software, UTM parameters, or CRM integration.
With a unique code (or referral link), customers get a unique code or link that tracks their campaign performance. Referral management software offers a comprehensive platform for all analytics that pertains to referral marketing. With UTM parameters, referral traffic is tracked and reported on the website analytics. You can also integrate the referral campaign into the CRM to get a more robust view of the referral marketing activities.
Some KPIs to monitor are:
Analyze your referral marketing, and figure out areas of improvement. You could also try running some A/B testing to identify the campaign elements that work best for your audience.
Referral marketing is a strategy that involves offering rewards to customers who recommend their brand to their circle of influence.
Referral marketing on social media involves taking advantage of social media platforms to broadcast a brand’s message.
Yes, referral marketing is legal! And you need to have some legal structures around your business.
A referral source is a brand advocate. Anyone who uses word-of-mouth to spread your brand message.
Referral marketing is arguably the best way to generate leads and sales for your business. With referral marketing, you get to easily grow a loyal community of brand advocates who will broadcast your brand message.
Referral marketing generates a higher conversion rate than regular traditional marketing. By merely incentivizing your existing customers, they’ll go out of their way to advertise your brand offering within their circle of influence.
Getting started with referral marketing involves taking a close look at some referral marketing examples. Uber’s “Win a Year of Free Rides”, PayPal’s “Send and Get $10”, and Tesla’s discount program are great referral marketing examples to take cues from.
What pieces will you put in place when designing the next referral marketing program for your business?
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