Quick question: What is common among Paypal, Uber, Airbnb, Gilt, Robinhood, and Dropbox?
Each of those companies grew into huge businesses thanks to referral marketing.
Given that we live in the age of digital media, think of referral marketing as word-of-mouth on steroids.
Sadly, not many businesses pay any attention to it.
A 2016 Neilson Study revealed that over 82% of people consult family, friends, and even acquaintances before making purchases (even online purchases). If you disregard impulse buying, most other transactions are influenced by referrals.
As Apostle Mengoulis of Viral Loops writes,
“More people seek out a referral than drink water daily”
Assuming you did everything you could do to boost your e-commerce conversions, only 58% of your customers will ever let other people know (however they choose to do it).
That’s why you need referral marketing. You’ll do better to incentivize your visitors, existing customers, and potential customers to “refer others” to get discounts, exclusive bundles, VIP access, or to push them into preferred or loyal customers just based on how many referrals they can make.
Since your online customers just have to drop in a few emails or share links on social media, there’s virtually no resistance for them while they get to not only share what they just bought off your store but also get incentivized for doing it.
See how Dropbox does it:
Want to apply referral marketing to your own business?
Here’s what you should know about the power of referral marketing, why it matters, and how you are losing money on the table (if you are not using it for your business):
Everyone can (& must) use referral marketing
Customers trust word of mouth at least 10 times more than they’d ever trust advertising in general.
Referral marketing works for every business, individual, and even freelancers or self-employed professionals. It works for small, medium, and large businesses. And it works for doctors, dentists, and attorneys.
It works for everyone and every business. Period.
A National Harris Poll Survey only confirms this:
- Word-of-mouth isn’t limited to specific industries (i.e., it’s not just for eCommerce brands) or demographics, but certain age groups and income levels do rely more on referrals.
- The vast majority (more than 80%) of Americans seek recommendations when making a purchase of any kind.
- When someone shares or talks about a brand on social media, there’s a significant correlation to purchasing behavior.
- Incentive structure plays a big role in increasing and scaling referral activity.
Setup a system (use referral marketing tools) to enable referrals, incentivize your customers to do so, and let the word spread on its own.
Referral marketing is inexpensive & amplifies your promotional efforts
The lifetime value of a referral customer is 16% higher than non-referrals. At least 84% of B2B customers start their buying process with a referral.
What do you get?
Cheaper and amplified form of marketing.
Your budgets reduce overall while you get more leads given that you put in the same effort. The online word-of-mouth engine (referral marketing) pushes your sales, revenue, and profit upwards.
You do know that it’s easier to do business with your existing customers than it is to get new customers all the time.
Most businesses are aware of it. Few businesses actually do something about it and use this to their advantage.
As soon as your customer makes a purchase, they are happy-as-a-clam. They are primed to let the world know about their new purchase. If you do this right, they can even shout off the top of their rooftops.
All you need to do is to put a system in place to make it easy for them to share their new purchase with friends or to invite others to get an incentive (like getting a product for free).
Referral marketing compounds over time
While everyone knows and understands referral marketing, not everyone puts it into practice.
Companies with formalized referral marketing programs experience a whopping 86% growth in revenue compared to those that don’t use referral marketing. Yet, only 30% of companies surveyed actually have a referral program in place.
For businesses with formal referral marketing programs in place, the best part is that these numbers aren’t absolute.
If the efforts are consistent, there’s a “compounding effect” that kicks in driving growth for each of these businesses over a period of time.
Give your referral marketing program enough time and chances are that you’d never have to spend a dime on paid marketing again.
Referral marketing tools are in, excuses are out
If an effective referral marketing tool helps make it easy for a customer to make a referral (during or after a purchase), more than 14% of customers would take action.
There are several tools you could use right away to put an effective referral marketing program in place. Here are some of them:
Are you using Referral marketing for your business? Are you letting your customers spread the word to amplify your marketing?
Need help with your marketing strategy? Paid marketing campaigns? Sales funnels or landing pages? Get on a scheduled call with us and change the way you do marketing.