What is referral marketing?
Referral marketing is when you get your customers to tell their friends about you.
Like any marketing, referral marketing (also known as word-of-mouth marketing) usually happens organically. It happens whether or not marketers get involved in the process.
However, as I previously mentioned, this doesn’t happen organically enough.
Thus, the role of a referral marketer is to deliberately influence the process so that more people will share about you with their friends.
Why is referral marketing so powerful?
Humans are, by nature, social creatures. We naturally share our experiences with our friends.
If we had a good experience, we are wired intuitively to tell all our friends about it. Why wouldn’t we! We want our family and friends to enjoy the great things that we’ve experienced.
Similarly, if we had an awful experience, you’ll be damn sure we’re sharing it with them as well. After all, this is the best way to avoid pain and frustration. By learning from other people’s mistakes, we learn how to avoid those mistakes.
Nielsen says 92% of consumers trust recommendations from people they know.
And this is why referral marketing is so powerful. It’s in-built into us. It’s natural and biological. Like it or not, it happens. And since you can’t stop it from happening, it’s much preferable that you do something about it deliberately (and of course, ensure that they’re sharing positive things about you!)
Too fluffy for you data-oriented person? Don’t worry, this phenomenon has been backed up by statistics as well.
According to McKinsey, referrals influences up to 50% of ALL purchasing decisions. Not only that, referrals generates more than two times the sales of paid advertising.
Plus, according to another study published in the AMA Journal of Marketing, referred customers are more loyal, and bring higher profit margins. How much? As high as 25%!
And here’s something else that might peak your interest.
Referral marketing is essentially free!
Think about it – referral marketing is essentially your customers spreading the word for you. It’s your customers evangelizing about your brand to their friends and family.
Sure, you might need to prepare some assets upfront to seed the initial referrals, but when it kicks off, it’ll be like a virus. Your customers will refer their friends, who will refer their friends, who will refer their friends…
Best Referral Marketing Examples
Now that you’ve seen how you can leverage referral marketing in your marketing strategy, it’s time to look at some good examples on how effective referral marketing can be executed.
You can also take a leaf out of their books and emulate their success.
In a post on Tim Ferriss’s blog, Jeff raider, the co-founder of Harry’s (a grooming company) describes step-by-step how they used referral marketing to acquire over 100,000 emails in preparation for their launch.
Harry’s created a two-page microsite that gave away different products to potential customers depending on how many friends they referred.
This was their campaign:
Their campaign was a roaring success, and today Harry’s is valued at over $350 million.
eJuices is one of the world’s largest online e-cigarettes distributors. Billy Wilson, the founder, had started the company after meeting his current business partner Paul Davey. They initially started by selling vapes in retail stores, but decided to move the company online.
To grow the company, they looked for different marketing channels. They tried participating in trade shows, sold their products in-store and even built their own website.
But true exponential growth came when they started to use referral marketing.
Here’s their referral program:
Their customers love eJuices, and were more than happy to share about it with them. After observing the infinite loop of customers bringing friends, and their friends bringing friends, eJuices knew they had found their most powerful marketing channel.
Today, eJuices carries 1,700 brands with several million dollars in sales.
Referral marketing can be a powerful component of your marketing mix.
Don’t leave things to chance. Don’t wait for it to happen organically.
Try out some of the strategies mentioned in the article to help you increase your brand’s audience and customer base.