According to the New York Times, 65% of all new business comes from referrals. Referral marketing is spreading the word about a company or product through a business’ existing consumers, rather than traditional marketing via print or social media. Generally, there is a reward for the customers referring the company or product.
For example, Dropbox, an online file storage company, implemented the referral program in 2009 by offering both the existing customer and the referred customer would additional storage. By 2010, referrals accounted for 35% of Dropbox’s daily signups and signups increased by 60% overall.
Now, we are not saying everyone should offer referral discounts, only if its right for your company but it works well for companies whose marketing plan it fits in to. However, just like every other aspect of marketing, it must be carefully planned out and appeal to customers. According to Nielsen, 92% of consumers believe recommendations from friends and family over all forms of advertising.
Tips to a good referral program:
- The customer must see a value in your offers in order to make them work for it. The person referring your company must see the benefits of putting their reputation on the line for your company and the person being referred will be more driven to commit if there was also a reward. The first thing marketers think of are offering discounts to both sides but the results have proven to provide lower long-term loyalty. Other rewards your company could offer: cash rewards, early access to sales or customer experience rewards.
- Timing is important when asking a customer to refer your goods or services. Wait until there is a relationship built. Asking a customer to refer your company right after signing up won’t producing any leads because they don’t know your company yet. Waiting a month into the relationship, then present the opportunity.
- After the referral is complete, tracking the journey after referral will help plan out your next marketing move. Keep customers engaged in your company and keep building on the relationship.
- Finally, always say Thanks! This one is a no brainer.
Has your company had success using a referral program? We want to hear about it. Comment below!