Why Referral Marketing Works

Customers love recommending the brands that they enjoy to people they know. Referral marketing is your opportunity to use that to your advantage, increase new leads and drive sales.

Here are just five reasons why referral marketing is perfect for your business.


It Drives More Traffic And Sales Than Other Forms Of Marketing

I’m sure you must have tried several marketing strategies including social media marketing, SEO, and offline marketing. It is quite possible that despite investing all your time and money, you aren’t getting the expected sales in return. Marketing can take some time and it isn’t something whose benefits you can see right from the onset.


But referral marketing is different from other forms of marketing. If you have a solid customer base, referral marketing shows its results right away.


Referral marketing works on the principle of leveraging the connections of your existing customers. This strategy is effective mainly because of something known as “the compounding effect.”


What’s that? Let’s say your company currently has 500 customers. If at least 250 of them refer you to at least 2 prospective customers, then that gives you a chance to double your existing customer base. Now imagine if you had more than 500 customers or if all of them referred to their friends!


Clearly, this compounding effect can multiply your traffic and sales in a short time.


It’s A Time And Cost-effective Marketing Strategy

For many businesses, especially in the case of eCommerce, marketing is often the most expensive and time-consuming aspect. It can be a demanding practice when you have to pay for PPC or social ads and create blogs for your content strategy as well.


When it comes to referral marketing, it saves both, your time as well as money. It doesn’t require any external support but works on the concept of exploiting something that is already there.


Your customers are going to share their experiences with their friends and family anyway. Referral marketing just taps into that and encourages them to bring in new visitors to your business.


Since most of your work of finding qualified leads is done by your happy and satisfied customers, you can now focus your time and money on customer retention and other forms of marketing.


In fact, once these new customers enter your referral programs, they in turn bring in leads and the cycle continues. It is an easy and self-propagating technique that saves you any kind of hassle.


It’s Easy To Implement

Unlike referral marketing in the past, where you needed to have coding knowledge in order to implement it, building a customer referral program today has been much easier.


There are several referral marketing software available online such as Talkable, OSI Affiliate, etc. They allow you to set up and launch your own referral program in a matter of minutes. As long as you have a clear idea of what your referral incentive is and what the mechanics of your program is going to be, you can encode it in one of this software and launch it right away.


Once you set it up on your website, most of your job is done. All you need to do now is focus on driving customers to your site and they will do all the promotions for you.


I’m sure you must have heard of Paypal. When they launched their referral program, they gave away cash for every sign-up. As a result, they got tons of sign-ups and referrals but most of these came from their existing sign-ups. Paypal is now the top payment processor online with over a billion users.


It Boosts Your Email Marketing ROI

Your email marketing strategy has a lot of formats namely promotional, transactional, informational, and so on. But which one of these should you mention your referral schemes in? Where does it give the highest return?


While it works fine for most formats of customer emails, referral marketing is most likely to be effective in a post-purchase email. This is because your customers are more likely to be happy and excited about their purchase and an incentive such as a discount or a free product will drive them to refer to friends.


This boosts the ROI of your emails by adding an extra lead generation source. When you create an order confirmation email for your customers to remind them of their purchase, you can capitalize on that post-purchase glow to elicit referrals.


It’s Something Everyone Is Using

If you are still stuck doing traditional marketing for your business, you may be spending tons of money on advertising fees with nothing to show for it.


In order to stay ahead of your competition, you need to incorporate referral marketing into your strategies. Even if you provide better products and services at a better rate, a customer is more likely to make a deal with a company recommended by someone they trust.


In fact, if you were to choose only one form of marketing, it should be referral marketing. Have you ever wondered what companies like Paypal, Airbnb, and Uber have in common besides their radical technologies and excellent services? You guessed it right. It’s referral marketing that drove them to where they are now.


In conclusion, referral marketing is the easiest and cheapest form of marketing that you can implement. All you need to do is provide good service and ensure the best customer experience, and tell them to spread the word. That’s it. But that would be leaving a lot of referral marketing’s potential on the table.


So how do implement a referral marketing for the best results? Read along.