How to use Referral Marketing for your business

Referral Marketing

What is Referral Marketing?

Referral Marketing, or Influence Marketing, is when you earn a referral for your product or service from a third party. Well known, this was the classic word-of-mouth. Referrals can come from acquaintances or friends, but for these referrals to be sustainable it is necessary that your clients are referring you to new clients!

Word of mouth is already recognized as one of the most powerful sales tools. This is easy to understand, as people tend to believe in others much more than institutional advertising.

According to a survey by Invespro, the reference of other people is very important in the purchase decision process.

  • 90% of consumers read reviews before going to an establishment;
  • 53% of people won’t make reservations at hotels that don’t have reviews;
  • 81% of people who travel frequently consider reviews important;
  • 31% of consumers are willing to spend more on establishments with excellent reviews.

In the United States alone, it is estimated that every day there are approximately 2.4 billion conversations related to brands. People often talk about the products and services they consume and the companies they provide.

According to the New York Times, 65% of all new businesses come from referrals. This means that, on average, two-thirds of consumers shop because someone they know recommended a specific product or service.

Complementing this, recent Nielsen research points to the incredible potential of influence marketing. These surveys found that people are four times more likely to buy when referred by a friend. Added to this it is known that:

  • Referral programs are among the least expensive marketing strategies;
  • Referred customers spend on average 13.2% more than regular customers.

Does Referral Marketing Really Work?

This is due, according to Kotler, in his book Marketing 4.0: “current consumers have become highly dependent on the opinions of others”. Kotler reckons that, in many cases, friends’ point of view even overlaps with personal preference and communications used by traditional and interruption marketing.

Simply put, influence marketing strives to spread the word about a product or service through a company’s existing customers rather than through traditional advertising.

Social media also emerged as a great facilitator of referral marketing, as they created a solid tool for referrals to happen in a practical and assertive way, impacting several of your friends at the same time.

However, with the rise of online marketing in companies, the referral strategy was left behind, which is big nonsense.

Currently, marketing managers focus only on attracting new leads at the top of their sales funnel, increasing the conversion rate of those leads, increasing the average ticket of each purchase, selling more to the same customer. Okay, this is not “just”, it’s a lot of work! But, my point is that they are forgetting a great tool and perhaps the most important and simple one: using your client as a reference.

Fortunately, some segments have already identified the potential of referral marketing and have come a long way. Among them are:

  • Retail stores and speciality stores;
  • Restaurants;
  • Automotive service companies;
  • Delivery apps;
  • transport applications;
  • Hotels and travel agencies;
  • Banks;
  • Health clubs and gyms.

These strategies are effective from small enterprising companies to large corporations and virtually any industry. Many companies that offer products or services can implement referral marketing campaigns.

As already said, the digital world has arrived to further assist referral marketing, providing a possibility to identify the origin of these referrals. A Referral program within a company consists of stimulating this process and channelling it in an orderly manner in order to maximize the gains from this tool.

But, how to structure a Referral Marketing program in your company?

Ask for references

This simple and effective strategy involves mentioning a referral program to as many customers as possible. A computer repair company used this strategy effectively, stamping “We Want Referrals” on every paper customer it received – including newsletters, marketing materials and invoices.

Employee training

In conjunction with requesting referrals, many companies have a training process that equips employees with the knowledge to effectively market the referral program to each client.

Create real benefits for those who refer you

Studies show that most customers prefer a company not for their own benefit, but for their own benefit! In other words, it is important that the benefits are real and tangible. Programs that are based on discounts for referrals usually do not have the same result as programs that have discounts for referrals! Also, offering a discount can work, but offering something more concrete like products, gifts and cash is usually much more attractive.

Joint Venture References

Some companies partner with complementary businesses to promote each other’s customer base. This strategy involves each company offering discounts or other incentives to the referring company’s customers, usually in exchange for a percentage of the referring company’s sales.

Create an official referral system

Today, what prevents your customers from referring you and what do they get out of it? It is necessary to create a simple and easy tool where your customers understand what they gain from referrals and can share it with their contacts.

There are some possibilities, it all depends on your internal structure and pocket. If you have few customers, just creating a page with campaign rules can be enough. Then just create a link with an utm_source for each of the customers and follow the result on Google.

Another very useful tool is Dica Boa, an exclusive influence marketing program that does everything for you and still charges for performance. That is, a percentage of sales made by your customers.

Promote your program

It’s no use having a ready-made program, adequate incentives, well-written emails, etc., if your program isn’t publicized. For example, Airbnb’s first nomination program was considered a failure because it was not well-publicized. They found that even their employees didn’t know about it.

Some companies place signs in physical stores, usually near cash registers that invite customers to participate in the program. A common strategy is to create brochures that customers can take with them that contain information about the referral program and provide consumers with a physical reminder of the program.

Be sure to include the referral program in your marketing plan, especially in digital! This is one of the strategies that generate the most sales and technology offers you several possibilities to explore this at a lower cost and with effective measurement mechanisms.


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