Have you ever raved about a product or service to your friends and insisted they give it a try? You realize that you have been actively marketing that particular product, right? Now imagine, getting rewarded to do so! This is exactly what referral marketing is.
Referral marketing campaigns basically reward customers for recommending their products and services to others.
Table of Contents
How Do Referrals Work?
The basic premise of referral marketing campaigns is word-of-mouth marketing. Word-of-mouth marketing drives $6 trillion of annual consumer spending. It is perhaps THE most effective form of marketing. Why? The reason is simple, people trust recommendations from people they know. In the age where everyone is bombarded with paid advertising campaigns, a recommendation from a friend or family member seems genuine and reliable and outshines paid ads. Also referred customers come to the brand with a positive mindset. They have a pre-established trust in the brand thanks to their ‘trusted’ referrer. Hence it is easier to convert a referred customer into a loyal customer than to convert an average skeptical consumer.
Why are Referral Marketing Ideas Important?
Today, word-of-mouth marketing is not limited to verbal communication, it encompasses the wide reach a customer has through his social media accounts as well. Social media plays an important role in influencing the purchase decisions of 83% of US online shoppers. A referral reward motivates customers to actively promote the brand or its products and services. Referrals help to tap this potential market and leverage the reach of customers through organic brand promotions. Referral leads have a 30% higher conversion rate than any other marketing tactic. The retention rate of a referred customer is also 37% higher and so is the customer lifetime value. A referred customer brings more profit to the company in the long run than an average customer.
What are the Key Ingredients of a Good Referral Marketing Campaign?
The key ingredients required for a referral campaign to work are- Reward, Timing, Marketing.
- The Reward/ Incentive – Perhaps the most important aspect of a customer referral campaign is the reward or incentive. The reward is the key motivator that encourages existing customers to participate in the referral campaign in the first place. If the reward isn’t exciting enough, the campaign may fail even before the liftoff. Understand your customers and their psyche, learn about things that excite them and shortlist rewards accordingly.
- Timing – For any marketing campaign to work effectively, you need to time it right. The timing of your campaign will impact the reach as well as conversion rate. Usually, brands start a referral campaign immediately after their launch to expand the reach and brand awareness but you could also initiate a referral program whenever you observe a dip in retention or acquisition rate since a referral campaign will help with both.
- Marketing – It may seem hard to believe but many brands already have a referral campaign in place but even their regular customers are unaware of it. A referral campaign needs to be promoted well. Your customers need to be aware of your campaign and the perks they can leverage by participating in it.
What are the Types of Referrals?
For an effective approach, you need to select a specific type of referral, depending on your business goal and marketing objective. Once you are clear about ‘Why you need it?’ it becomes easier to design and execute the strategy. Referrals could be experience-based, aimed at lead generation, designed to reinforce brand credibility or spread brand awareness. For example, if you are seeking to build credibility, you can ask your customers to share their positive experiences with others. If you are seeking to expand your customer base, you could ask your customers to either refer your brand to their network or recommend people they know, that might be interested in your product or service. A successful refer a friend program can considerably help with improving acquisition as well as retention rate.
After you have finalized the kind of referral strategy you need for your business. You need to select the right medium. Depending on your target audience demographic and related customer data, you could either adopt social sharing, email referrals, online reviews or even word-of-mouth referrals.
What are the Best Practices for Customer Referral Campaigns?
- Knowing the Audience – Knowing and truly understanding your audience can help you devise the best business and marketing strategies and customer referral campaigns are no exception. In-depth customer data analysis can help you read the pulse of the audience, understand what excites them and what doesn’t. Based on this information you can design a referral campaign that offers high ROI.
- Selecting the Right Vendor or Partner – The vendor you select to design and launch your program with is of utmost importance. An experienced partner will help you design a referral campaign that is best suited to your audience and customize it to embody your brand image. Annex Cloud’s Engagement Manager can help you with the latest innovations and trends in the business and curate the referral campaign for high efficiency.
- Promotions – Many brands undermine the importance of promoting their campaigns. Unless you routinely promote and market your campaign, your referral program won’t be successful in yielding desired results. Making customers aware of your program and routinely reminding them about it, is imperative. Active promotions can increase participation rates and keep excitement levels high among customers.
- Keeping It Simple – Last but not least, it is important to keep the referral campaign as simple and uncomplicated as possible. For high efficiency, do not complicate the program with too many clauses, terms and conditions. Make sure your CTA is clear and there is no confusion about it.
What Works in 2021?
- Create Social Media Buzz – Hyping up a campaign on social media is not only the new normal it is also a necessity. As of July 2021, 57% of the world’s population is on social media. It is not only a great way to expand reach but an ideal platform to communicate with your audience as well. Creating a unique campaign and making it viral will do wonders for your campaign as well as your brand.
- Create an Omnichannel Experience – Customers need convenience. Make your referral program convenient and accessible from all devices be it a mobile phone or a desktop. Create an omnichannel experience that integrates a customer’s data and provides a seamless experience.
- Reward and Incentivize High-Performing Customers – It is extremely important to acknowledge and reward your high-performing customers. This will also encourage others to perform better and remain loyal to the brand.
How Can You Create the Best Referral Marketing Campaign for Your Business?
A referral campaign works best when it’s customized to suit the brand’s requirements and aesthetics. Be it referral ideas for small businesses or for multi-chain brands and companies, Annex Cloud has the technological capabilities and expertise to provide bespoke solutions and deliver the best possible returns on your investments. For a free demo or consultation, click here.