How Referral Marketing Can Help CPG Brands Overcome Their Biggest Challenges

by Grace Miller |

The market for consumer packaged goods is becoming increasingly diverse. While CPG brands were once limited to creating products and selling them to retailers, many are now selling directly to consumers. Conversely, many retailers are now creating their own brand products. This trend has introduced a variety of new marketing challenges for CPG brands by not only forcing them to expand their marketing strategies but also by putting them into competition with some retailers. With increased consumer variability and changing consumer demographics, referral marketing for CPG is becoming a critical aspect of their survival.

Referral Marketing for CPG Can Increase Reach

Referral marketing is a great way for CPG companies to broaden consumer and retailer outreach alike. With an increase in communication technology and a consumer demand for transparency, the “happy customer” has come to play a key role in today’s market as a potential liaison between a company and other potential customers. By creating happy consumers and encouraging consumer referrals, CPGs can extend their reach beyond traditional marketing areas within both B2B and B2C marketing.

Referral marketing has also allowed companies to penetrate areas that are traditionally closed to advertising. These can include professional groups, private property, and even certain websites. However, these areas are not closed to referral marketing, as no one is going to stop a friend or colleague from recommending a favorite product. Take for instance a medical supply company that practices referral marketing. That company’s customer, Dr. Lee, who has just received his new stethoscope and is pleased, will likely mention the company to his colleagues, either in person, at a meeting, or online. If the medical supply company offers rewards, Dr. Lee is also likely to share his positive experience on an online medical group or his own social media profiles. Here, the company is using referral marketing to reach their consumers where other forms of advertisement would not be permitted.

Consumers Want to Hear from Friends

Studies have shown that consumers would prefer to hear from friends and other customers, as opposed to advertisers, before engaging a company. As many as 90% of consumers check reviews before visiting a store or business website, and 88% trust online reviews as much as personal recommendations. This trend has made reviews, especially positive reviews, a powerful marketing tool that will best resonate with the modern consumer. Dr. Lee’s acquaintances and friends, for instance, are much more receptive to the opinion of a colleague than they would be to an advertisement. After all, Dr. Lee can tell them how that new stethoscope really works instead of reciting a sales pitch.

Create a Positive Brand Voice

Modern consumers of all income levels are now drawn to private brands for several reasons, among the most popular being lack of voice. Nearly half of consumers feel that corporations do not have a clear voice, and they connect more with brands that have a strong story. Referral marketing will allow you to create a positive, reliable story for your brand through your customers.  Whether you are a CPG brand that wants to broaden its ‘retailer’ base or are starting to engage in B2C marketing, having a brand reflected in a positive light by your customers can only be helpful.

Referral marketing program

Referral Marketing Has Great ROI

Traditional advertising can get expensive, especially with online ads. Unfortunately, studies are also showing that many online ads are often ignored or not even seen by consumers thanks to ad blockers. On the other hand, despite all that it can do, referral marketing is fairly cheap. Offering incentives or giveaways to consumers that promote your company is likely not going to have a major impact on your net profits. The type of reward can vary depending on your business model as well as the time and effort that you want your customer to contribute. Popular referral rewards include a free gift, free shipping, or a gift card. The amount of “work” done by the consumer should also justify the reward, but it will still yield a better ROI than continuously running an online ad that most people will ignore.

Referral Marketing Helps Increase Customer Retention

Studies have shown that customers prefer—and even expect—loyalty programs. While a traditional loyalty program is limited to points for purchase, referral marketing has expanded this definition to allow consumers to earn for posting reviews, promoting the company and its products on a personal social feed, or by directly referring new customers. By offering your customers small rewards for sharing the company with friends, you gain potential new customers while also encouraging your current customers to continue buying your products

As the world of marketing continues to evolve, CPGs can continue to remain competitive, and even grow their business by adopting various referral marketing strategies.

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