What is referral marketing?

Referral marketing is the most effective method that has ever existed for recruiting new interested customers (leads). It is based on two factors: first, the human instinct and need for communication, and second, the trust built between people. The recommendations that people pass on come with a "quality stamp" of the recommender. A Nielsen study found that over 90% of consumers worldwide believe and trust the recommendations from family and friends, above all other advertisement channels.

According to this method, the marketing is done by independent people to acquaintances or any person with whom they communicate and to whom they have decided to pass on the information.

Two human qualities help to promote referral marketing:

  • A satisfied customer will want to share his positive experience with his loved ones so they can enjoy it as well.
  • Human beings are social creatures and when faced with a dilemma (purchasing something, enrolling in a class, etc.), they will prefer to do it together with other people over alone.

The benefits of referral marketing:

  • No financial investment - While almost all other marketing methods require investing money to market the business, in referral marketing you do not have to pay money for your customer to recommend you to his friends and family.
  • It saves time - setting up an advertising campaign? Building a website? Promoting on Google / Facebook? These are all time-consuming (regardless of whether it is done within the organization or external).
  • Social proof - Customers are always looking for people who have used the product, who have something to express and recommend. Meaning, referrals are based on trust, that’s what makes it so effective. Your satisfied customer is social proof of your business, better than a recommendation that appears casually on some site.
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  • A springboard at the beginning - customers who recommend to customers is especially important and critical at the beginning of the business. 
  • Can be leveraged - viral marketing? Media buzz? PR? Everything can be created because of your customer's recommendation, especially in the online communication channels. 
  • Can be combined with other methods - you can easily combine referral marketing with other methods. For example, integration with social networks can lead to a situation where the customer shares a conversation with you, responds to positive reviews, recommends to the community, and more.
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7 Tips for establishing a good referral marketing program

  1. Provide exceptional service: To enjoy the benefits of referral marketing, you need to focus on one goal: make your customers happy. According to the STATE OF GLOBAL CUSTOMER SERVICE REPORT from 2017 - 96% of the customers say that service is the most important factor in their choice to stay loyal to a brand. Once you meet this goal and turn your customers into fans, they will already do the work for you.
  2. Don’t be shy! Ask for action: The first and most basic and effective way is to ask an existing customer to recommend you to a friend or acquaintance. Pay attention! Anyone who refers customers to you takes responsibility. They certainly don’t want you to embarrass them. If they are not 100% sure of you, they will not recommend you.
  3. Keep records of your referrals: Prepare a list of existing and potential customers. This list will help you properly manage your communication with customers in the past, present, and future.
  4. Thank your referrals: If someone has referred a customer to your business, find out who it was and send a personalized thank you note or give them a call. A thank you is done to ensure they refer more customers to you. If it is not possible to find out who it was, ask the customer to thank the recommender. This will show the new customer your appreciation towards your loyal customers and it may lead to this new customer becoming a recommender themself.
  5. Monitor and handle each complaint: A business that wants to speed up referral marketing must monitor and handle each complaint immediately. Allocate your customers a place where they can complain and express their dissatisfaction. This place should be effective and fast so that they will have no reason to talk about it elsewhere. Thanks to quick troubleshooting, it is possible to turn a dissatisfied customer into a fan of your business.
  6. Use social media: Post valuable materials – articles, tips, etc., and encourage your customers to share your posts. Respond and comment on their posts to create mutual commitment. Upload videos and photos with customers where they look good, which will encourage them to share more. This creates a lot of viral curiosity among friends and makes them aware that they are our satisfied customers.
  7. Offer incentives for referrals: According to Forbes, retaining your customer by giving them incentives once they recommend you to others, saves money.  Offer attractive pricing to customers who set up successful referrals. You can do this because no money was invested in attracting them. In addition, you can offer rewards to your customers who are referring to you and contributing to your business. 

 

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In summary:

Referral marketing is a necessary and important marketing method. It can save you a lot of money in advertising and marketing your product. Be good to your customers, invest in them, and keep them satisfied with your service or product. This way they will be happy to share it with their friends and family. They can be excellent ambassadors for you and your business. Moreover, they can also counter any negative opinions you may receive about your business.