Could you look back at the product that you most recently purchased? Did you first hear about it through a YouTube advertisement or a TV commercial?
If not, did a friend recommend the product to you?
There are various ways for customers to discover a particular product or business. It can be through online and TV ads, a keyword search on Google, highway billboards, or a friend or relative recommendation. Once they purchased a product — and they loved it — chances are these people will pass the message and encourage their network to try it.
So you see, the value of word-of-mouth is still at a high level, especially in terms of marketing a product. According to HubSpot, most people don’t trust advertisements. They’re most likely to trust legitimate consumer reviews and recommendations from their network. Their study found that 71% of people will potentially buy a product based on social media referrals.
Generating referrals is an actionable, organic way for a brand to grow its customer base. It’s also less costly, especially when compared to other marketing strategies. So if you’re a business owner or a marketer, pouring more than enough energy into referral marketing could point you in the right direction.
With the advent of data analysis and third-party cookies, there are ways for you to do referral marketing more efficiently. Here are some tips to get you started.
1. Define your target customers
By its nature, a referral program offers rewards or incentives to existing customers who refer another person to buy a product from a particular brand. You can always create a customer referral program around the whole base, but it may be more efficient if you key in on a customer profile.
How can you determine which of your customers is more likely to participate in a referral program? Fortunately, there are tons of sources that will provide you with valuable data. You can look at your customers’ feedback, surveys you’ve done in the past, and data from third-party cookies.
All these data could help you develop an ideal customer profile to build your referral program. This way, you’re not just hoping against hope; you’re targeting specific customers and partners who, as data suggested, have a higher tendency to refer another person to buy your product or service.
2. Select (really) valuable incentives and rewards
A referral program wouldn’t exist without rewards. From discount coupons and gift cards to free monthly subscriptions, there’s a wide array of incentives that you choose from.
Oh, and don’t forget that it takes two to tango here. Your referral program should include rewards for the referrer and the new customer. For example, your existing customer would get a one-time 10% discount coupon upon a successful referral. The new customer would receive a 10% discount on their first order.
Again, customer data has something in play here. By analyzing customer behavior and preferences, you can identify the specific rewards that will strongly attract their attention.
3. Engage with your existing customers
Along with the rewards, a referral program would not be possible if you don’t have existing customers. These people have experienced your product first-hand, and they wield the word-of-mouth power that could diversify or reduce your customer count.
So as much as you want to bring in new customers, keeping your existing customers happy is equally important. You can engage with them by requesting feedback or asking what additional features they want to see next. A dedicated team for customer support also goes a long way in establishing brand trust and loyalty.
4. Don’t be afraid of pulling the plug and starting anew
Of course, a new referral program is still an experiment that could see a lot of trial-and-error phases. You may be offering rewards that don’t resonate that much with your customers, or you may be targeting the wrong group of customers.
In cases when you’re not getting much out of your referral program, it could be a sign that you have to pull the plug and start anew. But before you make such a decision, ensure that you have thoroughly analyzed the performance of the said referral campaign. This way, you could determine what doesn’t work and what could potentially work in your new campaign.
Frequently Asked Questions
What is referral marketing?
Referral marketing is a strategy to encourage satisfied customers to recommend your products or services to their network, increasing potential customers and sales.
What are the benefits of referral marketing?
Referral marketing can be a cost-effective way to grow your customer base. It capitalizes on trust between the referrer and their network, leading to more potential customers who are likely to have a high degree of trust in your brand.
How do I start a referral marketing program?
Begin by defining your target customers using data from customer feedback, surveys, and third-party sources. Then, design a reward system that incentivizes both the referrer and the new customer. Regularly engage with your existing customers, and be ready to make changes based on the program’s performance.
What are some examples of rewards for a referral program?
Rewards can range from discount coupons and gift cards to free monthly subscriptions. The key is to choose rewards that your customers will genuinely appreciate.
Should I give rewards to both the referrer and the new customer?
Yes, to maximize the effectiveness of your referral program, it’s recommended to reward both parties. This incentivizes existing customers to make referrals and encourages new customers to make their first purchase.
Why is understanding my target customer important in a referral program?
By understanding who is more likely to participate in your referral program, you can tailor your program to be more attractive to these customers, leading to a higher participation rate and more effective results.
How can I keep my existing customers engaged?
You can keep your existing customers engaged by requesting feedback, asking about their preferences, and providing excellent customer support.
What if my referral program isn’t working?
Don’t be afraid to reassess and adjust your program if it’s not getting the desired results. It may require several iterations before you find the right combination of target audience and rewards.
What role does data analysis play in referral marketing?
Data analysis helps you understand your customers better, identify who is more likely to make referrals, and determine what rewards will be most attractive. It can also help you evaluate the performance of your referral program and make necessary adjustments.
Why is referral marketing considered less costly than other marketing strategies?
Referral marketing leverages existing customers to bring in new ones, which can be less expensive than other marketing strategies like advertising or direct sales efforts. It also typically results in customers who are more loyal and have a higher lifetime value.
