What is Referral Marketing, What Benefits Does It Bring?

Advertising campaigns, both conventional and digital, help brands get more customers in different environments. But well-applied Referral Marketing can yield many more benefits.

This digital marketing technique is applied by thousands of companies around the world, from different markets and levels of growth. And you can also take advantage of it. So stay and read this post in which we will explain everything about referral marketing.

What is Referral Marketing or Recommendation Marketing?

Referral Marketing is the set of actions and strategies focused on encouraging the customer to refer to the products and services of a brand, but without paying for said recommendation. It is an organic advertising that seeks to make the consumer an ambassador of the company.

One example of a successful referral program is Honeygain. Their referral program harnesses the trust and influence of its users, creating a strong word-of-mouth effect based on genuine recommendations.

That is why it is known as Referral Marketing, Word of Mouth, Referral or Referral Marketing. Although it is not a new tactic in marketing and advertising, it has become more relevant with social networks and the rise of the internet.

The effectiveness of referral marketing lies in the fact that it is based on the recommendations that consumers themselves give to their friends and acquaintances in a natural and spontaneous way. It is a matter of trust, since we tend to believe more in someone close than in a seller, because their intentions are not usually altruistic.

Cialdini principles in referral marketing

In reality, referral marketing is based on three Cialdini principles:

Principle of authority

Here authority is understood as the ability we have to influence others.

If a friend recommends a product, you will see that brand with different eyes, or it may awaken in you a need that you did not have. In the same way, if you do it with another acquaintance.

On the other hand, in social networks we belong to communities. If users leave positive reviews within these communities, we will consider them good because, after all, they are our equals.

Which brings us to the next principle: consensus or social approval.

Principle of social approval

We have a deep-rooted feeling of belonging and we need to form part of groups, of communities… This is also why we accept what the majority says as good. And if the person who tells you is trustworthy, the level of persuasion is already maximum.

Principle of sympathy

When you have an affinity with a person, you tend to share their interests and show yourself receptive to their propositions.

If you notice, these three “powers” are also applicable to influencer marketing.

Why is referral marketing important? Benefits of referral marketing

With so many options to work on marketing, why do it with Recommendation or Referral Marketing? For the following benefits:

1. Increase in loyalty

If you manage to get a customer satisfied enough to recommend your products or services, then you have advanced in the loyalty of that person. They are much more likely to buy again without you having to put in as much effort. Recurrence increases the Lifetime Value (LTV) of your clients, which is the value that a client brings you during the relationship with you.

2. Reduction of advertising expenses

Since you have a group of clients recommending you to their acquaintances and friends, you don’t have to invest as much to reach your target audience. So your CAC (customer acquisition cost) will be lower, and you will be able to dedicate those resources to other strategies.

This does not mean that you have to do without paid advertising, since this can turn out to be a complement to Referral Marketing.

3. Reception of qualified leads

It will not be necessary to capture and nurture the potential client who has received referrals from scratch, since they will have already been nurtured by their friend. Thanks to this, you will be receiving qualified traffic, with real interest in your offer and that responds to your value proposition.

4. Shorten the sales cycle

Since the prospect who received the referral already has an idea of ​​what your company does and how it does it, they skip some steps in the awareness and consideration phase of the funnel. It is possible that you will go straight to the conversion and sale phase.

5. Increases the effectiveness of other strategies

Ads campaigns on social networks and Google will be more effective when they come across a user who has received a reference about your brand, product or service.

Even if you do an organic search and you have managed to rank well, you have a better chance of being chosen even if you are not in first place in the SERP.

6. You boost social proof

The positive evaluations of other people enhance your social proof or social proof, building a halo of trust around your brand.

Referral Marketing Strategies and Examples

Let’s move on to the most interesting part: Referral marketing strategies. We are going to tell you which ones integrate this technique and how some apply them.

1. Offer incentives

It is not about payments, but about corporate incentives for recommending your brand, products and/or services.

What is done is invite the client to share some content with their friends and acquaintances, perhaps on social networks or via email, in exchange for a special discount for them.

There are also those who create special codes for each client, so when he refers to the brand, the receivers and he can receive benefits.

Within this type, as in the example, you can create a recommendation program that incorporates gamification elements, such as a loyalty program gamification. In this program, users will have the opportunity to earn new rewards and unlock additional benefits as they level up and become ambassadors for your brand.

2. Referral program

A referral program is one in which you organize and arrange for customers or other people who sign up to advertise the brand.

Again, while it looks a lot like affiliate marketing, referral marketing programs are almost always based on non-paid incentives.

For example, years ago Tesla launched a referral program, which, depending on the number of qualified leads sent by its customers, received different rewards: from a tour of the factory, to attending one of its exclusive events, or access to to the purchase of a model that was not for sale to the public, among others. The referrer, for his part, had ten discounts of $1,000 to offer his friends.

3. Take advantage of featured events

Important events and dates make it easy to create special content and promotions to encourage word of mouth. For efficient event management without the hassle, consider exploring alternatives to Eventbrite for seamless planning and execution.

That’s what Naturebox did, offering a 50% discount prior to a Super Bowl, a major sporting event in the United States.

The key here is not to have a great product or service, but something that is practical so that the public will want it.

4. Generate relevant content

In the digital realm, the content you offer as a brand has a great influence on referral marketing.

If the information you offer is good for the public, they will share it on their personal digital channels, either on social networks or web pages.

Study which contents have obtained the greatest interaction with the public, try to find the elements or factors that caused this reaction and strive to replicate it in the other contents.

5. Host referral contests

Referral contests are about making your audience compete for a prize, the more referrals you make, the more chances you have to win.

You can even go further and offer several prizes for a podium, that is, first, second and third place, each with a different prize.

6. Offer a unique shopping experience

Improving the purchase process is one of the aspects that can help you get users to refer to you.

For example, some brands opt for attractive and efficient packaging, this has led many buyers to share their purchase on social networks, giving publicity to the brand.

This is the case of the popular unboxings and hauls:

• In the unboxing: the person opens the package they have received live.
• In haul: Users display all the products in their order. It is common in the fashion and beauty sector.

This is all User Generated Content (UGC). Therefore, it is very valuable, since he shares his first-hand experience with his peers, activating the three levers of persuasion.

Conclusion

Referral Marketing can be a powerful help for your brand, products and services, you just have to know how to integrate it with other types of marketing to achieve the best results. In addition, you must create a unique strategy for your audience, this is how you can motivate them to talk about you.

Of course, none of the strategies and examples that we have shown you are magic formulas, so you may have to try more than one. But that is precisely the point: push yourself until you find what works for you.

Remember that social networks now make referral marketing much easier. You just have to give enough reasons for your customers to want to talk about you.

The first step is that they are satisfied with you. From there, make them your allies.