Referral marketing still proves to be one of the most effective methods for customer acquisition and retention.
What is referral marketing?
A referral is when customers recommend a product or service to other people. It’s usually an organic process that doesn’t necessarily require much effort from marketers.
Referrals are powerful, with 84% of B2B buyers beginning the buying process with one.
without a referral marketing strategy, you’d be missing out on a lot of opportunities.
Referral marketing scores highly on both relevance and trust
In an ideal world, you’d be getting referrals left and right for your excellent product or service. However, this isn’t always the case. Most of the time, and despite having a great experience with your business, your customers will forget to tell their acquaintances about you. A survey conducted by Texas Tech highlights this discrepancy, which they call the “referral gap”. 83% of satisfied consumers are willing to refer a business but only 29% actually do
With referred customers more likely to spend 25% more and refer your business to someone else, not having enough referrals can translate to a loss of potential revenue.
Having a well-thought-out marketing strategy can increase the odds of your business getting referrals, which, in turn, would help fuel business growth.
Leads vs. Referrals
But, what about leads?
While both leads and referrals have the potential to generate sales for your business, they differ in many aspects. One of their biggest differences is that the former isn’t endorsed and doesn’t have that guarantee of approval by friends or family. They’re also more challenging to pursue and don’t guarantee an opportunity for a sale. Referrals, meanwhile, are recommendations from a trusted source.
Referral Marketing Objectives
One of the objectives of referral marketing is using your existing customer base to bring in new customers.
Increasing customer loyalty
Retaining current customer base
Re-engaging contacts
Getting higher lifetime value
Why is it a powerful tool?
Word-of-mouth plays a big role in purchasing decisions. It’s directly responsible for 19% of purchases and it influences as much as 90% of decisions.
Simply put, referrals can give you the best leads. Why? It’s no secret that humans are social beings, and it’s natural for us to share our experiences, whether good or bad, with our family and friends. There’s a need to rely on each other to survive daily challenges. Friends and family are also less likely to give us misleading or bad recommendations.
The benefits of referrals
Generating more revenue
Growing a targeted audience
Giving you a cost-effective means to reach out to customers
Enabling you to offer an alternative form of engagement
Increasing brand awareness
Creating a personalized buying experience
Tips on Building a Better Referral Marketing Strategy
Ask for referrals
Identify who your target referrers are
Determine what your incentives will be
Consider creating a rewards or a referral program
Utilize analytics and tracking
Don’t forget to thank your referrers
Examples of Impressive Referral Marketing Programs
Dropbox
Rothy’s
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