“Word-of-mouth can prompt a consumer to consider a brand or product in a way that incremental advertising spending simply cannot.” – Mckinsey Institute
Before taking any major decisions, we normally seek advice and approval from others – especially those who may have experienced similar situations or had similar experiences. In business too, nothing outdoes the approval of customers, business associates and others in the business circle. Referral marketing (the fancy term for such ‘approvals’) is everywhere and anyone running a business is aware of the benefits of it both for the business and for their customers. According to a study conducted, a person that becomes a customer through referral marketing has a 16% higher lifetime value than those that are not ‘referred’. This is very welcome news for businesses and who in turn do offer some kind of monetary gift to the referrer. The person making the referral not only stands to gain monetarily, but also feel good about creating benefit for a close associate / friend.
Referral marketing, both online and offline benefits a business in a number of ways. By keeping track and recording the details of the referrer and referred, they get valuable data about prospective customers and also data relating to buying patterns and behaviours, which factors help influence a buying decision and other such data that can be used for future business. With this sea of data, the marketing team is able to make a much stronger case for putting together and implement a referral marketing program to the top leaders of their company. With sound data in place, a business is able to keep track of and reward the most trustworthy and eligible customers via the referral marketing program – the program must be designed to enable flexibility such that it can be tweaked as and when required.
The business world has been taken over by social media and digitization, making referral marketing even more effective. According to a survey, 27% of those companies that have the referral marketing program in place said that they got more than 50% of new customers via the efforts exerted through this program. Those businesses that are ‘referred’ by their current customers and associates have seen their business get a major boost and also seen their brands gaining more exposure and higher engagement. A referral marketing program is a business’ way of nudging their customers to let others know about their brand. It offers incentives and ‘rewards’ in return for providing referrals.
It would be correct to state that referral marketing programs raise the awareness about a company and its brand but is equally effective in generating new business. Through a digital referral program, companies can also make full use of and take advantage of their social media networks, which are highly visible and far-reaching for any business. Many studies have proved that referral marketing is amongst the top methods to change leads to business. It is a great morale booster for any company when people are ready to do business with them simply by someone’s positive word-of-mouth. It is a well-known fact in business and customer service, that customers trust the opinions of other customers and also those whom they value and consider important and so gaining business via this route is a sure-shot winner.
The fact is also that people who are able to buy great products and get great service, want to ‘show-off this achievement’ to others. What better way to do that than referring these products and services to others – gain mileage for oneself and more business for the brand being referred. In this sense and in a lot of other ways, referral marketing is a very powerful tool when used well. Does your company have a referral marketing program or are you contemplating putting together such a program for your business?
Referral marketing helps companies focus their attention to their best customers and giving them incentives to spread a good word about the offerings. As the customers speak to their friends, associates and social media contacts they are able to send out a personalized message about the company and its offerings, thereby increasing the intensity of the message. Since the people being ‘spoken to’ trust your customers, the message spreads more effectively and has a better impact. These ‘contacts’ then would be more willing to do business with your company and on receiving the ‘great offerings’ as promised, would in turn spread a good word to their other friends and associates. So with laser like precision, your company’s good reputation is enhanced leading to more business.
When companies go about trying to influence prospective customers on their own, they first need to do a lot of ‘groundwork’ to gain the trust and confidence of this section of people. Building trust, as we all know, is a long and tedious process and requires unrelenting commitment and sometimes still does not happen. However, with referral marketing, this first barrier of trust building is not there – people already trust their friends and associates and therefore there is no time wasted in gaining their confidence. With the trust factor already on your business’ side, you would have half the battle. This factor beats the best of promotions, advertising and event marketing done by any company – referral marketing is like a highly personalized sales pitch that is able to positively influence immediately. A highly recognized study shows that referrals are the most trusted and valued form of marketing for any business. The major channels for referral marketing seem to be – friends, family, business associates, customer testimonials, opinions of influential people and celebrities and other such groups that people can trust.
We come back to the subject of social media and its reach once again when speaking about referral marketing. Before the onset of this channel and other online channels of communication, what a person said and thought could only reach a few people at any given point. However, now with just a single comment, post or even photo any one can reach out to thousands of people at one time. It is because of this reach that referral marketing via social media has gained widespread influence and importance.
Referral marketing may sound like it is extremely easy to do – however, just like any other business imperative and strategy, it requires planning and commitment. To start with, your company must make every effort to have great products, exceptional customer service and customer experiences and then put them to good use. Post this ask for your customer’s feedback and see whether they would be inclined to share their experiences and put in a good word for you to those they know. As a customer, you would know that unless you are delighted by the services and products of a company you would not recommend them to others. In the same way, your customers too, have a reputation to protect and hence would only be willing to provide referrals if they were exceptionally pleased with you. So the first step to successful referral marketing would be that your company puts on its ‘A’ grade act.
Use technology to your advantage – this will help to know which customers are referring your company to others, sometimes even without you being aware of it. Also you will know which companies and websites are being referred the most and why and you can use this information to better your referral strategy and get more referrals for your brand. Your company must also ensure that it is allowing the visitors and customers to share and ‘refer’ your brand with ease. Allow for a call to action button in a highly visible area of your website and social media sites – this will enable those visiting these ‘pages’ to instantly share something that catches their eye, thereby reaching out to more people than you thought possible.
Referral marketing is a powerful and highly critical aspect for any business. By using this tool tactically, any business can facilitate their sales and encourage their delighted customers to spread the good word about their company and its brand.
