7 Referral Marketing Best Practices

Jun 30, 2022

Arlen Robinson

Referral marketing has proven to be a better way of attracting and retaining customers compared to traditional marketing. It is expected, seeing that in this time and age, coupled with past disappointments, people are quick to distrust what they see in ads.

In a report, the Word of Mouth Marketing Association claimed that there are usually more than two billion brand-related conversations daily.It is in human nature to talk about things that we enjoy, and when a product or service fulfills the purpose of its purchase, the buyer would inevitably talk about it to family members and friends.

When this happens, it is almost as sure that someone in need of that product or service would opt for the recommended one instead of a random one. It is consistent with the New York Times report, which suggested that 65% of all new business comes from referrals. It would mean that on average, two-thirds of customers would purchase because someone they know used it and recommended it.

For these reasons, a business that wishes to experience good returns and turnover must not ignore the potential of referral marketing, but rather, exploit it. A marketing strategy that has been observed to make consumers four times more likely to make a purchase is one that should not be ignored. You also need great tools that help you to identify where to market your affiliate program.

By strategically using referral marketing and influencing customer recommendations, a business can achieve spectacular results and build a more substantial customer base.

Referral marketing is simply a way of getting your loyal customers to be brand advocates and spread the word about your product or service by giving them an incentive to do so. These incentives could include cash discounts, freebies, or any other things that are particularly appealing to the business's target audience.

Asides from being effective in causing customer conversion, it is also cost-efficient. Since one cannot just hope that customers would refer their friends, it is essential to have a referral program. The referral program ensures that customers deliberate about sharing positive experiences with your product or service to other people.

Your referral program may include using software to track customers' referrals through a referral code, link, or a rewards card. And the use of this software allows automated payouts of referral rewards and bonuses.

Here are some reasons why referral marketing is the way you should go to ramp up your customer base:

a) It Is Cost-Efficient

Referral marketing does not require the expensive costs that come with traditional marketing. Unlike traditional marketing, where it is uncertain whether one would receive returns as compensation for high price outlays, returns are sure with referral marketing.

It is because for every customer referred, purchases are made. Also, the cost incurred for providing rewards of any kind is made up forby the referred customer's purchase. If you've ever run a social media ad before, you probably know how expensive it is to run an ad. Studies show that digital marketing is fast-rising past inflation, making referral program an ideal route for marketers and businesses. Another cost-effective tool for cost-efficient referral marketing that can replace getambassador is Omnistar Tell.

b) Time And Energy-Efficient

As mentioned above, traditional marketing methods are quite tasking. They require significant time and effort to find and analyze data, create and design copies, map out strategies, and write copy. It is no different from how to promote Shopify store but should take less time.

It is not so with referral programs. Referring a friend requires a reasonable amount of time to set up and launch. In reality, it is the customers who refer to others that do the brunt of the work. It also does not require intensive monitoring to check progress. It runs on its own accord as long as the structure for referrals and rewards is in place.

Seeing how efficient referral marketing methods are, how, then, can one strategize and put an effective referral program into place?

This article considers the seven best practices one can adopt to create and maintain a referral marketing strategy that spurs customer conversion, retention, and increased sales turnover. They are:

1.    Define Your Service Standards

It is essential to note that satisfied customers give recommendations for other people to make purchases on products and services. It is for this reason that businesses need to streamline and define their service terms.

These terms must be attractive and consistent, but it must also be feasible, as you want to ensure that what is obtainable by one customer is also available to another. Referrals are a customer repeating your offering to a friend; therefore, quality control should be ensured, such that the referee is not disappointed after a recommendation.

One way of ensuring this is by offering cashback policies, good warranties, and refund policies to satisfy their purchase quality.

2.    It Must Be Easy To Discover

Considering how the success of referral marketing depends on a customer's recommendation, the method of referrals must be easy to find.Customers need to be aware of your referral program, and its details are supposed to be transparent and shared knowledge with them.

In a case where referral links are used, you do not expect customers to be enthusiastic about giving out recommendations to people to buy your products or services when a detail as simple as the referral link cannot be found easily.

Statistics show that over 80 percent of customers are willing to recommend a product or service they have used, but only less than 20percent. It is because, for that 20 percent, there is an existing and known referral structure. It is vital to note that referral marketing programs must be prominent and visible, or customers would be unable to take advantage of it.

3.    Incentivize Referrals

Everyone loves freebies and adequate rewards for actions.That is why you should incentivize referrals that loyal customers make by rewarding them with anything useful to them. People are more inclined to make more purchases and give recommendations when rewarded for making a purchase.The right timing is also essential when doing this.

A great time to give a reward is immediately after the purchase is made, or shortly after. Doing this is excellent because the instant gratification provides a shopping with high that could make a customer purchase more or quickly recommend a friend. Incentivizing referrals do not necessarily have to be costly.

It can be as simple as free shipping, a percentage discount on the next purchase, or free installation service. Worthy of note is that referral marketing is more effective when both the referrer and referee are getting rewarded. An incentive that rewards both parties, like coupons or discounts off when the referee makes the purchase is an excellent choice for incentives.

4.    Know what your customer wants

This part is the most crucial in planning a referral marketing program. It is essential to know what drives your customers to make a referral. Incentives can be anything ranging from a coupon to a gift card or even cash prizes. Whether you are selling Drum Set Lab or Hunting Bow Lab, you must know what customers would appreciate as a bonus.

It is best to research to discover what appeals the most to your target audience. Free vouchers can be a winner for older people and gift cards for younger ones. It is all in knowing what your customers would prize above others. A good bet is to compare the incentives that other businesses in a similar industry give and provide more than one option of incentives as referral rewards.  

5.    Ask At The Right Time

The success of your referral marketing program also depends on the timing of its presentation. A customer may get turned off by request fora referral if it happens way too early. They might even forget to recommend your products to others if you ask too late or do not ask at all.

It is best to request for a referral when the customer is happy and shows enthusiasm and satisfaction for the product or service purchased from you. Another great strategy is asking for a referral after a support call or sending a thank you mail. A satisfied customer would always be willing to recommend your products to someone else.

6.   Engage Customers

Keeping your customers in the loop about your referral programs must also extend to them being aware of the business that their referrals have brought your way. You can do this through smart email campaigns.

The emails do not have to be for distributing rewards for referrals. It can be as simple as notifying the customer when the referee makes a purchase or sending a thank you note.

When these emails are consistent, they both serve as a customer retention strategy and a way of reminding customers to recommend your products and services more. It should also be a personalized experience. A mistake that business owners are usually quick to make is failing to establish an environment where each customer feels connected to the brand.

Every business should have a sound CRM system that collects vital information about loyal customers and little details. If a customer feels connected to the company that provides a product or service that they enjoy, they are more likely to recommend their friends.

7.    Invest The Time And Resources Necessary

The fact that referral marketing is not as resource and time-consuming as traditional marketing methods does not mean reasonable efforts should not be placed to map out a good strategy and ensure its success.

If you want to see real results, your business must intentionally take referral marketing as seriously as any other kind of marketing initiatives that it is committed to. A referral program should not be seen as an afterthought but a core part of its marketing strategy.

Employees are also to be well-informed about presenting referral and reward opportunities to customers, so it is essential to educate them about it. It takes effort to make referral marketing work, and one must be committed to it.

By implementing these practices into your referral program, you would be making the most of your marketing strategies as more turnover and a broader customer base would follow.

It is relatively common to make some mistakes while implementing your referral marketing strategy. These mistakes can occur unaware, but it impedes your chances of getting referral marketing right. One such error is having the wrong choice of incentive.

You might begin to think, how can an incentive be wrong?Well, it sometimes is. An incentive may be significant to you, but it might not be for your customer. That is why adequate data must be collected, and research is done to ensure that the incentive is right and is one that compels your customer to recommend you to others.

Here is a good example; if your customer purchases, say a car from you, it is unreasonable to offer a discount on the next purchase as an incentive.

The car is most likely going to be useful for a while, and the customer may never need that discount. While this may work for something like a bouquet purchase, it is not a good reward for buying a car. An incentive must be something that has immediate significant value to your customer. This way, it leaves more of an impression.

Another mistake marketers make having a complicated referral and reward process. Nobody wants to go through a maze-like method to get something as small as a coupon. For this reason, you must keep it simple. Let referral links be accessible with a click of a button and rewards, easily obtainable.This way, customers are more encouraged to make purchases and give more recommendations.

Also, remember to make the process visible to the public. A referral marketing program is only as effective as it is known. So, include it in your newsletters, ads, and emails. Remind customers that it is rewarding to purchase from you. By doing this, you strategically take advantage of human relationships to increase your customer reach.

Arlen Robinson is the co-founder and VP ofBusiness Development at OSI Affiliate Software.

He is also the host of The EcommerceMarketing Podcast where he discusses marketing strategies withexperts from all over the world.