Which of the following would make you more likely to buy a product—a TV commercial with an anonymous narrator hawking it, or a friend telling you it’s one of the best products he’s ever bought? Odds are, it’s your friend you’d trust more, and the reason is simple: your friend doesn’t have a dog in the fight. You know him, he’s not being paid to praise the product, and he doesn’t make any money if you buy it. Your friend, in other works, is more likely to give you an objective, non-partisan appraisal, and for that reason, you’ll listen to him.
What Is Referral Marketing?
Referral marketing leverages this simple understanding that people place their trust in people they know—or people they respect—to boost sales. Shopify defines referral marketing and its effectiveness this way:
“Study after study has proven that referral marketing is one of the best forms of marketing when it comes to sales and conversions. Simply put, referral marketing, sometimes also called word-of-mouth marketing, is just people purchasing products based on someone else’s opinion or influence. It’s a powerful marketing channel because people trust the opinions of other people in their lives and people they respect, whether that be family, friends, social media influencers or big stars.”
Why Is Referral Marketing So Effective?
Referral marketing works in part because targeting the right customers is easier when your primary communications strategy is word-of-mouth, and because it integrates seamlessly with social media marketing. The principal reason for the success of referral marketing campaigns, however, is that it achieves a key goal of inbound marketing—establishing trust. According to a recent Neilson Trust Study, for example, referrals are trusted more than any other type of marketing, and by a wide margin. When asked what type of advertising they trusted most, 84% of consumers said, “recommendations from people I know,” more than TV ads, radio ads, billboards, emails, “influencers” or customer reviews.
How Can I Make Referral Marketing Work for My Business?
Naturally, some referral marketing campaigns are more successful than others. The ones that achieve the greatest success rely on best practice strategies, like the following 5:
- Keep your brand promises: if a friend recommends a product, but the product doesn’t do what it’s supposed to, or your company has poor customer service, your referral campaign will suffer. Make sure you keep your brand promises to ensure the success of your referral marketing campaigns.
- Measure your results: you can’t improve your marketing performance if you don’t measure results. One of the best ways to do that is with a strong analytics tool, like Google Analytics, which has a section dedicated to referrals.
- Make the buyer experience “sharable:” Jet.com is an ecommerce site where you can buy groceries and other items online. That means they’re in direct competition with Amazon (not anymore with Walmart, since that giant recently acquired Jet). Jet is successful in part because they offer free shipping for orders of $35 or more, and in part because you can buy perishable foods (which they’ll cold pack for a small fee), something Walmart doesn’t do. But here’s the truly sharable part—if you have a problem with an order, like an item is missing, you can write to Jet and get a personalized response from a real person within minutes. Jet’s strategic balancing of price, selection and stellar customer service means consumers who buy from Jet have great buying experiences, and that they share those with friends and family.
- Make it easy as possible to share: if your goal is to boost referrals, you need to make sharing as easy as possible. You can, for example, have a “share” button right on your navigation bar (that’s what MeUndies did). When people click on that button, you can pre-populate their Facebook or Twitter message, making it even easier for them to tell others about the great experience they had with your business.
- Offer incentives for sharing: people love discounts, redeemable points and vouchers, period. By offering these incentives for subsequent purchases in exchange for sharing, you’ll increase those shares and boost the effectiveness of your referral campaign. For example, Harry’s, which operates in the ultra-competitive grooming products industry, offered free shaving products to customers who were willing to share—and was able to acquire more than 100,000 signups before they even launched.
The days of inexpensive clicks and easy social media reach are gone. Today, paid ads are more expensive than ever, and they typically reach less than 25% of your target market. That doesn’t mean, however, that there aren’t still effective strategies to grow your business with social media marketing, and chief among these is referral marketing. To learn more about the ways referral marketing can help you drive sales, contact us today.