How Referral Marketing can help you grow your business

Referral Marketing for business growth

In today’s hyperconnected world, where consumers are bombarded with endless advertisements and marketing campaigns, businesses are constantly seeking innovative ways to stand out from the crowd and acquire new customers. One proven strategy to achieve this is referral marketing.

You probably all do some form of referral marketing. Most businesses rarely use the term “referral marketing”, even though you may unwittingly be operating that as your main method of getting new customers.

It is basically word-of-mouth marketing. But do you actually have a strategy on how to leverage your efforts? Likely not.

In this article, we will delve deep into the world of referral marketing, exploring the benefits, strategies, and best practices for implementing a successful referral program.

If you’d like 1-2-1 help on building a referral marketing campaign, book a meeting with us. We’re not just accountants!

What is referral marketing?

At its core, referral marketing is about enabling and incentivising your existing customer base or other business contacts to encourage their friends, family and business contacts to try your product or service for the first time.

It is especially valuable right now, when the core focus for many is building value, loyalty and trust with their customer base.

Referral marketing and word of mouth are not the same though. Word of mouth is the result of customers talking about your brand with their friends or business contact, without any marketing effort. Referral marketing, on the other hand, attempts to encourage customers to refer by engaging, rewarding and asking for customer recommendations.

Referral marketing capitalises on the power of word-of-mouth advertising, which has been proven to be one of the most influential factors in purchasing decisions.

According to Nielsen, 92% of consumers trust recommendations from friends and family over any other form of advertising.

When someone they know and trust recommends a product or service, they are more likely to take action and make a purchase. This means that by leveraging referral marketing, you can tap into the trust and influence of your existing customers to attract new customers.

Why is referral marketing so important?

It is relevant: When a friend or contact shares a business with you, they’re doing so because they know you and know you’ll appreciate being introduced to the business.

It uses trust: They will also only share businesses that they trust. People won’t risk their reputation by sharing an unreliable or poor-quality business.

People are wired to understand referrals: If you experienced great customer service, received a product that changed your life or maybe even your accountant saved you a lot in tax, you’d tell your friends about it wouldn’t you? We naturally share our experiences with our friends. It’s part of our conversations.

It doesn’t cost you much: It’s pretty much free to acquire referrals and they tend to be warmer leads, as you’ve already developed rapport by having their contact as a client.

Whilst this is true, the sad truth is: While 83% of your satisfied customers are willing to refer products and services, only 29% actually do. We lead busy lives and often it slips our minds.

Referral marketing statistics 

To further understand the power of referral marketing, let’s take a look at some statistics:

• According to a study by the Wharton School of Business, referred customers have a 16% higher lifetime value compared to non-referred customers

• A study by the American Marketing Association found that referral programs can generate a 70% higher conversion rate compared to other marketing channels

• According to Nielsen, 77% of consumers are more likely to buy a new product when learning about it from friends or family.

• A study by the University of Pennsylvania found that referred customers are 18% less likely to churn compared to non-referred customers.

How to create a successful referral marketing campaign

Now you’re convinced you need a referral marketing strategy; how do you create one? Below we share 5 easy steps to create your strategy:

Step 1 – Set your goals

Set out what you hope to achieve from your referral marketing campaign e.g., business growth, more clients, building trust with a wider audience, gaining referrals from 10% of your client base.

Define these goals in detail and then define where you are now and the results you are getting: Have you already been asking for referrals? Who has been doing it? How successful have they been? What is the conversion rate of referrals?

This will help you identify what you need to do to reach your referral goals.

Step 2 – Identify and target your ideal referrers

The next step in creating a successful referral marketing campaign is to identify your ideal referrers. These are the customers or business contacts (we call them Professional Referral Sources) who are most likely to refer your products or services to others. To identify your ideal referrers, analyse your customer, supplier and professional network base and look for patterns.

Who are your most satisfied customers or contacts? Who has referred others to your business in the past? By understanding your ideal referrers, you can tailor your referral marketing efforts to target them specifically.

Step 3 – Make it easy for people to refer

Once you’ve identified your ideal referrers, it’s important to make it easy for them to refer your business. Provide them with tools and resources that they can easily share with their network.

This can include referral links, social media share buttons, forwarding email newsletters, or even physical referral cards. The more convenient it is for your referrers to make a referral, the more likely they are to do so.

Step 4 – Incentivise referrals

Incentives play a crucial role in motivating your network to refer your business. By offering rewards or incentives, you can provide an extra push for your referrers to take action. The key is to offer incentives that are valuable and relevant to your referrers. This can include discounts, freebies, exclusive access, or even cash rewards. Experiment with different incentives to see what resonates best with your network.

It’s also important to reward your referrers for their efforts. Recognise and appreciate their contributions by sending personalised thank-you notes, featuring them on your website or social media, putting on special events to thank them or even offering additional rewards for multiple referrals.

By showing your appreciation, you not only encourage repeat referrals but also strengthen the relationship with your referrers.

Step 5 – Shout about your referral programme

Once you’ve created the programme, shout about it! You could do this via:

• Adding a little section on your newsletters
• Blogs
• Email signatures
• Social media

With your list of potential referrers, send them each a personalised email. We’ve put together a few template emails you can send, download them using the form below.

How to automate the referral marketing process

To maximise the efficiency and effectiveness of your referral marketing efforts, and reduce your time spent, it’s essential to leverage technology.

There are various referral marketing software and tools available that can automate the entire process for you. These tools can help you track and monitor referrals, manage incentives and rewards, and provide analytics to measure the success of your referral marketing campaigns. By automating the process, you can save time and resources while ensuring a seamless experience for your referrers and referees.

When choosing a referral marketing software, consider factors such as ease of use, integration with other platforms, scalability, and customer support. Look for a solution that aligns with your business goals and provides the features and functionalities you need to run a successful referral marketing program.

We can help choose the right tool that integrates with your current software. Book a call with us to discuss your options and we’ll help you find the right fit.

Track and measure your referral marketing efforts

To determine the effectiveness of your referral marketing efforts, it’s important to track and measure their impact. Set clear goals and key performance indicators (KPIs) to track. This can include metrics such as the number of referrals generated, conversion rate of referred customers, customer lifetime value, and return on investment (ROI) from referral marketing.

You also need to track:

• Who was referred and who referred them
• When they were referred
• Whether they converted

This will allow you to provide the incentives and track who your top referrers are.

Examples of successful referral marketing campaigns

To further illustrate the power of referral marketing, let’s take a look at some real-life case studies:

Dropbox

Dropbox is known for its highly successful referral marketing program, which helped the company grow from 100,000 to 4 million users in just 15 months. Dropbox incentivised its users to refer their friends by offering additional storage space for every successful referral. This simple yet effective referral program not only increased customer acquisition but also improved user engagement and retention.

Airbnb

Airbnb’s referral marketing program is another great example of success. By offering travel credits to both the referrer and the referee, Airbnb encouraged its users to refer their friends and family. This referral program played a significant role in Airbnb’s rapid expansion and global reach. Today, referrals account for a significant portion of Airbnb’s bookings and revenue.

Tesla

Tesla’s referral marketing program is unique in that it incentivizes both the referrer and the referee with various rewards, including cash, exclusive events, and even a chance to win a free Tesla car. This program not only generated a significant number of referrals but also created a strong sense of community and loyalty among Tesla owners.

These case studies demonstrate the power of referral marketing when implemented effectively. By understanding your audience, offering valuable incentives, and leveraging technology, you can create a referral marketing program that drives significant business growth.

We can help

With the right tools and messaging, referral marketing can be an extremely powerful and cost-effective marketing tool for your business.

Building the right referral marketing programme hugely depends upon the product or service you are selling. If you’d like help putting your own referral marketing programme together and would like to discuss the specifics and details of how it can work in your business, get in touch with us.

The better your referral marketing strategy, the more your company will grow.

Email enquiries@a4g-llp.co.uk or call 01474 853 856.