Many people have a trusting relationship with our friends, relatives, and loved ones; and their testimonies, reviews, recommendations, and social media referrals influence us. When a company follows referral marketing as its business strategy, then it helps the company to differentiate itself from the competitors. Today, we’ll discuss the top 10 major benefits of referral marketing.
What is Referral Marketing?
Referral marketing is a marketing strategy that employs word of mouth techniques and recommendations to establish the database of customers through the reference of current customers. It could work in many ways, but its goal is to make your fans market your brand. In other words, referral marketing is to convert your existing customers into brand ambassadors and brand advocates.
- Half of the American citizens follow word of mouth if they choose one source of information from the potential purchase
- The conversion of referral leads is 30% higher and could generate 16% better lifetime value than other channels
- Customers that the company acquires through referrals, spend 2 times more and make 2 times more
- Word of mouth impressions generate 5 times more sales than paid impressions
3 Referral Marketing Myths
Some of the myths relevant to referral marketing are as follows;
- Referrals are Leads. Marketers and salesmen know that you don’t have to spend any time on the lead if someone doesn’t refer anyone to your business. It’s important to mention here that not all referrals turn out to be the actual customer. Usually, you have to spend some time with the referral. You won’t have to if they come to you through some source.
- Referrals Create New Business. You can’t predict or control the total number and frequency of referrals. Often, businesses and companies depend on referrals as their primary source of orders and earnings. That’s why it’s difficult for the new businesses to manage the cash flow and the monthly revenue stream.
- Referrals have Highest ROI. The ROI (return on investment) of the referral marketing programs is higher than other types of marketing. It’s true to some extent because many new businesses and even profitable clients are pursuing this program.
Major Benefits of Referral Marketing
Some of the main benefits of the referral marketing area are as follows;
Increase Customer Engagement
The most important thing in business is to exploit the opportunity to connect with your target customers anytime whenever it’s available. Establishinbenefits of the referral marketing a relationship with your target audience is equally important in referral programs because it allows you to employ a relationship marketing strategy. There will be some customers that would speak on your behalf. You can measure the performance by looking at the metrics and statistics.
Now, the question is how this program would create customer engagement. When the company share content on social media and send emails and newsletter, then it becomes much easier for the company to engage with each other and the company.
Tool for Measuring Customer Satisfaction
Referral marketing is an excellent tool to measure the performance of customer satisfaction levels. When the referral program brings a large number of referrers, then it proves the success of the program and the satisfaction of customers. If you aren’t getting sufficient referrals, then you should get feedback from customers and learn how you can improve the customer experience level.
Expand Market Reach
If your referral marketing program is good and has the potential for growth, then it would amplify your market reach in a short time. If you offer the right and attractive incentives, then the customer would prefer your product/service with their friends and relatives; either personally or on social media. However, when a celebrity or an influencer would refer your product/service, then market coverage would increase dramatically.
Identify and Target Loyal Customers
Your target customers would feel special when you appreciate them, and they would promote your business due to the perceived differentiation. The referrals marketing program would allow you to tack, recognize, and reward your most loyal customers. You can do so in many ways like appreciating them, offering them a personalized experience, discounts, incentives, etc.
Increase Brand Awareness & Reputation
Referral marketing is a great tool for customers to be familiar with your company’s brand story. Customers are very careful about the product or the brand they use, and they usually preferred authentic and honest brands. However, when customers share a brand story that feels authentic and resonates with them, then it would help you to establish the reputation of your brand.
Improved Customer Retention Rate
Referrals marketing programs would help you to establish a long-term relationship with the consumer by allowing you to gain an insight into the expectation and motivations of customers. Resultantly, customers who actively participate in the referrals programs, tend to stay with the company. The cost of finding new customers is higher than retaining the existing ones, and customer retention is one of the top benefits of a referrals program.
Improved Conversion Rate
Referrals programs allow you to amplify the conversion rate in many ways. When someone refers the potential customers to your brand, then they would close the deal once they come across the sale page that they could trust. However, social media engagement due to referrals is proof of your brand reputation and it encourages customers to buy your products/services.
User-Friendly Customization and Tweaking
Many businesses and companies employ online referrals platforms on social media to run their referrals programs. Such platforms are easy to modify and customize and user-friendly. However, if you want to apply the new strategy, make changes, or run some tests, then you should make some adjustments with the lowest efforts.
Cost-effective Marketing Strategy
Referrals marketing depend on the word of mouth marketing, and it reduces the marketing cost to a great extent. Promoting your product or brand to new customers is highly expensive than targeting the existing customers. However, the recommendation of customers is highly convincing than just marketing advertisements.
Enables Word of Mouth
Word of mouth marketing helps marketers to generate more leads and it offers scalability, and the campaign helps you to reach a large pool of target audience. It would help you to leverage your social media channels.
According to WOMMA (word of mouth marketing association, approximately 2.4 billion conversations occurs daily in the US due to word of mouth. When you integrate it with referral marketing that people are already talking about it, then it becomes the major lead.
Word of mouth marketing is highly important for your business because it attracts new customers. The personal recommendation of your product or brand would help you to establish trust and the best advertisement.
After a careful study of the benefits of referral marketing; we’ve realized that a referrals marketing program helps you to drive conversation and boost marketing ROI. It builds up the social currency and social proof and engages with customers on various social media channels to target the right audience.