Referral marketing is the method of promoting products or services to new customers through referrals, usually word of mouth. It’s a comprehensive strategy to encourage passionate customers and brand advocates to directly refer their inner network to your business. Such referrals often happen spontaneously but businesses can influence this through appropriate strategies.
Referral marketing and word-of-mouth marketing seems similar, but they’re actually quite different. The main difference between referral marketing and word-of-mouth marketing is that referral marketing is more "deliberate." A business intentionally begins a referral marketing campaign. Businesses engaging in referral marketing deliberately encourage their customers to tell their friends about the company. Word-of-mouth marketing can be more spontaneous, often being started by happy customers, rather than from any deliberate attempt by the brand.
Why is referral marketing so powerful?
Humans are, by nature, social creatures. We naturally share our experiences with our friends. Referral marketing works because consumers trust the opinions of real people far more than they do those of the brands themselves.
If we had a good experience, we are wired intuitively to tell all our friends about it. Why wouldn’t we? We want our family and friends to enjoy the great things that we’ve experienced.
Similarly, if we had an awful experience, you’ll be sure we’re sharing it with them as well. After all, this is the best way to avoid pain and frustration.
By learning from other people’s mistakes, we learn how to avoid those mistakes.
How do you implement referral marketing in your marketing strategy?
- Make the product experience shareable. Your job is to find ways in which you can sprinkle that personality. You could add bits of that personality into your website design, your copy, your images, your product descriptions, and more.
- Leverage the power of influencers and joint ventures. We know that people trust recommendations from friends, and that they’re relatively skeptical of celebrity endorsements. It turns out that people also trust ‘ordinary’ influencers who do reviews, as long as they’ve built up credibility. Some companies even partner with complementary businesses to cross-promote to each other's customer bases. This strategy involves each business offering discounts or other incentives to customers from the referring company, typically in exchange for a percentage of sales from the referred business.
- Provide exceptional customer service. This is how you get happy customers. Happy customers share more. Take care of them, and they will take care of you.
- Ask for referrals. This simple and effective strategy involves mentioning a referral program to as many customers as possible.
- Train employees. In conjunction with asking for referrals, many companies have a training process that equips employees with the knowledge to effectively market the referral program to each and every customer.
- Create viral content. There are three important rules to follow when creating content in hopes of making it go viral:
- Find content that has performed well in your industry
- Improve said content by making it yours
- Promote your beautiful content to your followers
Who can use referral marketing?
Any kind of business can take advantage of referral marketing. This kind of marketing strategy can be very effective for businesses like small single-owner and entrepreneur companies all the way to large corporations. Many businesses that offer products or services can implement referral marketing campaigns.
Some types of businesses that typically employ referral marketing include:
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- Retail stores
- Specialty stores
- Restaurants
- Automotive service companies
- Airports, hotels, and travel agencies
- Banks
- Health clubs and gyms
- Doctors, dentists, and health professionals
