What are the most effective referral marketing strategies?
Referral marketing can be a powerful tool for generating high-converting leads for businesses of all sizes. It can deepen your customer base, revive your marketing, and skyrocket revenue for your business.
Besides, it can reduce your customer acquisition cost, increase brand awareness, and build trust between your brand and customers.
40% of consumers trust referral marketing more than any other form of advertising.
Image via Mention Me
And that’s not all:
Statistics suggest that 65% of Gen Z adults trust product recommendations from friends and family members.
Image via eMarketer
Besides, 88% of online consumers trust recommendations from people they know.
However, there is a challenge.
Running a killer referral marketing campaign can be a tough task for many.
The truth is, it doesn’t have to be complicated.
In this blog post, you will discover 6 effective referral marketing strategies to help you launch a powerful referral marketing campaign that generates great results for your business.
But before that, let’s learn a few things.
Table of Contents
What Is Referral Marketing?
Referral marketing is a promotional strategy that involves encouraging your loyal customers to recommend your products and services to their networks.
Here is an example of a referral marketing program.
Image via Gousto
In most cases, when your current customers refer new customers, you give them a referral incentive.
It’s a win-win situation for both you and the customer. You get free marketing for your brand and the referring customer gets a reward such as gift cards, free tools or products, etc.
Types of Referral Marketing
Generally, referral marketing works in six different ways. Let’s explore each type of referral marketing in more detail:
1. Direct Referrals
60% of customers trust product recommendations from friends and family members when making purchase decisions, as shown in the image below.
Image via Power Reviews
What does this mean?
Direct referrals are no doubt a great tool for launching a cost-effective referral marketing strategy.
Direct referrals otherwise, word-of-mouth marketing has been in existence for many years now and is still powerful for advertising your business to grow your customer base.
This type of referral marketing strategy involves your happy customers or business partners recommending your brand to their friends or family members without you asking them. Or without you giving them an incentive.
2. Email Referrals
Email is the most preferred channel of communication by 55% of consumers.
Image via Mention Me
Besides, according to a 2021 State of Email Report by Litmus, 79% of marketers ranked email in their top three channels for effectiveness.
What does this mean?
Email marketing is still a great way for brands to reach customers with promotions, news updates, and other types of information.
Here is an email template you can use to ask your customers for referrals.
Image via HubSpot
3. Social Media Referrals
In 2022, 55% of customers are using social media to shop from recommendations from friends and family.
Image via Bazaarvoice
If you are not using social media referrals, then you’re missing out on a huge business opportunity. The good thing about this type of referral program is that your target customers are already on social media.
You can get your content in front of your potential customers by just asking your social media customers to spread the love by sharing what you post or products you offer.
Take a look at how Ledger uses Twitter to ask their followers to refer a friend via Ledger Live and get $10 in BTC for each successful referral:
Image via Twitter
4. Incentive-Based Referrals
Referral rewards motivate 57% of consumers to buy again:
Image via Mention Me
Incentive-based referrals are a type of referral where brands encourage their satisfied customers to refer other customers in exchange for a referral incentive.
You can give out digital referral rewards such as early access, exclusive newsletter content, discount, and more.
5. Online Reviews
Online consumers read online reviews before they make purchase decisions. In fact, 49% of customers trust consumer reviews as much as personal recommendations from friends and family:
Image via BrightLocal
Online reviews can expand your brand’s reach, influence purchasing decisions, and improve your brand’s online visibility.
However, for people to leave a review about your brand, you need to ask them.
To encourage customers to leave reviews, you can offer them discounts, free services, or loyalty points.
6. Influencer Advertising
The global influencer marketing market size is estimated to be worth $16.4 billion.
Image via Influencer Marketing Hub
Influencer marketing has been on the rise over the last several years thanks to the rise of social media stars.
Many referral programs focus on encouraging existing customers to promote their products or services to their friends and family.
However, you can partner with influencers too who can share unique referral links or codes with their audience. This can help increase brand awareness and influence the purchasing decisions of your target audience.
Why Referral Marketing Works
It takes some time to build relationships and trust with your existing customers before you can start asking them to refer their networks to your products.
However, the benefits of launching a referral marketing strategy are incredible.
Here are reasons why this marketing strategy is the most cost-effective:
Reduces Cost of Acquisition and Leads to Higher Customer Lifetime Value
Customer acquisition is not only a challenge for most brands but is also expensive. Brands are spending $29 for each new customer acquired.
Besides, the average customer acquisition cost for business and industrial sectors is $533.
Image via Shopify
Fortunately, with a successful referral program, you can use your existing customers to acquire new ones which lowers the acquisition cost.
Attracts High-Intent Customers
When someone recommends your brand to a friend or family member, it means they have found it a great fit for them.
This means that there are higher chances that the referred person will likely purchase your products or services.
Builds Trust Between Brands and Customers
When your trusted customers refer your brand to their friends and family the referred person sees your brand as being trustworthy. It’s the same way as you would do.
You would most likely have a higher level of trust in a brand recommended by your close friend or cousin.
Attracts Loyal Customers
Referrals who purchase your products often end up becoming loyal customers.
Besides, if you offer dual-sided rewards, that is, if you reward the referrals and referrers, you increase the odds of them becoming more loyal to your brand.
When you enhance customer loyalty, you also increase your brand’s overall customer retention rate and customer lifetime value.
Increases Brand Awareness
Facebook or Google Ads can help to create brand awareness but they can only reach so far.
Referral marketing, on the other hand, can get your brand in front of people you might not have reached with the two.
Word-of-mouth can spread faster than any other form of marketing, thus increasing your brand recognition.
Enables You to Gather Valuable Customer Data
Studies suggest that 61% of customers will pay at least 5% more to a brand that offers a good customer experience.
Image via Emplifi
Besides, 73% of consumers expect brands to understand their unique needs and expectations.
Image via Salesforce, Inc
Fortunately, referral marketing enables you to monitor consumer behavior so that you can deliver a personalized and seamless customer experience.
The digital marketing strategy enables you to track engagement and referrals from existing customers to help you better understand what your customers love and how to meet their expectations adequately.
Referral Programs Are Extremely Simple to Launch
Automated referral programs have made it easier to launch successful referral strategies.
All you need to do is to choose your preferred rewards for your customers and referrals. Product discounts are usually the most popular choice.
Launch your referral program and encourage customers to refer others to earn their rewards.
Don’t forget to promote your referral program on your social media platforms or website.
That said, here is how to get your existing customers to bring in new customers via a referral system.
6 Referral Marketing Strategies to Gain More Customers and Double Your Sales
Here are some practical referral marketing strategies that work.
1. Choose a Suitable Referral Marketing Solution
Choosing a suitable referral software is a great idea when launching an effective referral marketing strategy.
It will help you track every potential customer that comes in as a referral and offer a reward to the referrer.
You can choose a referral marketing software like ReferralCandy or similar ones available in the market.
Image via ReferralCandy
The referral marketing software will also inform the person referring others to your brand about every successful referral that converts.
Here are some of the popular referral marketing solutions you can use in your referral marketing strategies:
- Referral Rock
- Genius Referrals
- Referral Factory
- Open Loyalty
Here are tips to help you choose a good referral marketing platform for a robust referral marketing strategy:
- Consider the pricing
- Check whether the software allows scalability
- Consider customer support
- Check integration capabilities
- Consider your target audience and the nature of your brand
Pro Tip: Many referral marketing software available in the market offer a free trial. Try out a few solutions for free to figure out which one works the best for your business. Investing in a good referral marketing solution is key for an effective referral marketing strategy.
2. Promote Your Referral Program
Creating a referral program is not enough. You also have to promote it to let more and more people know about it.
Promoting your referral program across multiple platforms is one of the powerful referral marketing strategies to make it known to many people.
That’s how you increase your referral rate. After all, people will only participate in your referral program if they know about it and the rewards you’re offering.
There are many ways to spread the word about your referral program.
For instance, you can advertise it on your landing pages, checkout pages, and homepage.
Take a look at how Greats, a sneakers company includes a “Refer a Friend” call to action on their homepage:
Image via Greats
Alternatively, you can promote your referral program in the following ways:
Through Email Marketing
Email is by far the most cost-efficient and effective channel for keeping in touch with your customers. 64.1% of small businesses use email marketing to promote their products and reach out to customers:
Image via Campaign Monitor
Because email is direct, personal, and can easily deliver tailored messages. You can, therefore, use it to promote your referral programs.
Take a look at how Casper, an e-commerce company that sells sleep products promotes their referral program a few days after purchase:
Image via Casper Really Good Emails
Create a Unique Landing Page for Your Referral Program
You can also promote your referral program by creating a unique landing page on your website.
Here is a good example of a landing page for promoting a referral program by T-Mobile. Very brief and to the point.
Image via T-Mobile
When a customer refers the cellular carrier to their friends, the customer earns up to $50 if the friend purchases a plan up to $500 per year.
An effective landing page can boost awareness of your referral program and inform your customers how it works, how they can join, and the rewards they can get.
Promote the Program on Social Media
In 2022, there were over 4.5 billion people on social media.
Chances are, your target audience is on social media, preferably on Facebook, Instagram, LinkedIn, and YouTube, the commonly used social media networks according to statistics:
Image via Social Media Examiner
Take advantage of social media marketing to promote your program and ask your target audience to spread the word about it as well.
You can also promote your program in the following ways:
- Add social sharing buttons to help your customers share the program with others.
- Post about your program regularly highlighting the referral reward with images.
- Partner with influencers to spread the word about your program.
- Use paid social media advertising to target loyal customers.
- Add a short blurb about your referral program in your social media bios.
Pro Tip: Provide a direct link to your referral program landing page on social media for easy sharing. Get creative with the messaging and imagery to draw attention to your referral program on social media.
3. Exceed Expectations
If your products are good and your customer service is exceptional, you will undoubtedly get referrals even if you don’t have an active referral marketing strategy.
To exceed your customer’s expectations with your products and customer service, follow these simple principles:
- Understand what your customers consider to be exceptional customer service.
- Creatively solve a problem they are facing.
- Personalize your products and services.
- Be proactively helpful.
- Take your time to figure out what your customers expect from your brand.
- Continuously look for ways to improve your products and customer service.
4. Ask For Referrals
When launching a referral marketing strategy, many marketers think of all other methods but forget that you can ask for referrals directly from your customers.
This is one of the most cost-efficient and effective referral marketing strategies.
The reality is that your satisfied customers are willing to recommend you to their friends. They are probably waiting for a nudge from you so that they can keep the conversation going.
The good thing is that asking for referrals will never hurt your business. On the contrary, your business could be losing opportunities for not asking at all.
Take a look at how Andrew Christian use the Get $30 | Give $30 on Twitter to ask customers to refer their friend and save on the hottest undies:
Image via Twitter
Here is how to ask for referrals:
- Reach out to the right people.
- Don’t hesitate to directly ask for referrals.
- Provide value.
- Make it personal.
- Be specific.
- Offer incentives.
- Recognize and appreciate referral sources.
- Make it easy for referral sources to refer.
- Join referral networking groups.
5. Offer the Right Referral Incentives
No matter how effective your referral marketing strategies are, if you don’t give out attractive incentives, you will not get valuable referrals.
Incentives can nudge your customers to recommend your brand to their friends and family but not just any incentive. They must be enticing enough, otherwise, customers won’t participate in your program.
Offer rewards that motivate your audience to recommend you to their friends and family. For instance, tiered incentives or prizes are likely to perform better than standard rewards.
You can give your customers valuable rewards such as:
- An exclusive invite to your upcoming webinar
- Cash rewards
- Free products
- Free shipping
- Discount coupons
- Early access to your new products.
You can also offer exclusive content and experiences.
In fact, a good rule of thumb is to offer rewards based on demographics or purchase history. As a rule, you should conduct thorough research to uncover the ideal incentive for your shoppers.
6. Encourage User-Generated Content
Last but not least in our list of referral marketing strategies is UGC.
User-generated content is when people share snapshots and videos of your products and how they use, interact, and enjoy your products on social media.
Here is how Starbucks uses the famous #RedCupContest every December on Instagram to get customers to promote their coffees:
Image via Instagram
You can create branded hashtags and encourage users to include them in their posts on social media, especially Instagram and Twitter.
UGC is beneficial in many ways.
- Converts better than professional imagery.
- It inspires brand advocacy.
- Drives traffic to your website or blog.
- Improves your SEO rankings
- Boost customer engagement.
- Generate more leads and sales
- Creates a community around your brand.
This makes it useful for generating referrals for your business.
When people see their friends interacting or enjoying your products, it increases their trust in your brand thus encouraging them to try your products and services.
Q1. What’s the purpose of a referral marketing strategy?
A. A referral marketing strategy is a plan you create to encourage your happy customers to recommend your products and services to their friends and family.
The purpose of the strategy is to acquire more customers cost-effectively and increase sales.
Q2. What is a referral marketing strategy?
A. A referral marketing strategy outlines all the tactics used to encourage current customers to refer new customers to a brand in exchange for an incentive.
Q3. What are the 6 types of referrals?
A. The five types of referrals are:
- Direct referrals
- Email referrals
- Social media referrals
- Incentive-based referrals
- Online reviews
- Influencer advertising
Q4. How do you attract referrals?
A. Use these seven referral marketing strategies to attract high-intent referrals:
- Set up a robust referral marketing program
- Choose a suitable referral marketing service
- Promote your referral program
- Exceed expectations
- Ask for referrals
- Offer the right referral incentives
- Encourage user-generated content
Q5. What are the benefits of a referral marketing strategy?
A. A referral marketing strategy can be beneficial for your business in the following ways:
- It can reduce customer acquisition costs and increase customer lifetime value.
- It can Help you attract high-intent customers.
- Builds trust between brands and customers.
- Can help to attract loyal and new customers
- It can help you increase brand awareness.
- Enables you to gather valuable customer insights.
Even though referral marketing takes advantage of your current customers to expand your reach, acquire leads, and generate more sales, running an effective referral marketing campaign is not child’s play.
Follow these 7 referral marketing strategies to launch a killer referral marketing program that explodes your sales.
You can also use our email marketing services to promote your referral programs effectively.