Suppose you are looking to buy a sofa, what is the first form of market research you engage in? It is most likely that the answer to that question is asking your friends and family members about where they found their furniture and whether they like their purchase. Similarly, when you come across a new company that you like, you most probably recommend it to others. This practice of conversing about products among consumers is known as word to mouth and companies are now using it as a marketing strategy of their own.
Known as referral programs, companies encourage word to mouth initiatives wherein they incentivize their customers through discounts and free services to recommend their brand to friends and family. These programs are highly successful because consumers get to enjoy the fruits of their referral labour through the tangible prizes that they earn by promoting the brand.
Such referral marketing is popular among tons of large corporations like Google and Uber. Google pays its customers $15 for every successful sign-up that they gather for the ‘Google Apps for Work’ branch of the company. And similarly, Uber provides customers with free rides whenever someone joins the app with the referral code that has been personalised for them. These initiatives entice customers and further improve the chances of the company becoming all the more successful.
Referral programs are a marketing strategy for every business and below are 15 reasons why it’s the right fit for your brand too.
1. Referral programs have an unbelievably easy implementation
Unlike other marketing strategies that require investments of endless hours and money, referral programs are easy to initiate. It is a misconception that businesses need to code a referral software from scratch and hire expensive professionals to do so. There is a great variety of softwares available in the market that do all the work for you with very little information about your business and at a minimal cost.
2. Referral programs make customers feel like they are a part of your brand
Because your customers are working to further build your client base they feel like they are contributing to your brand and are a part of your business. This festers loyalty and kindles a passion among them that drives them to do everything in their power to ensure the success of your brand. Through constant prizes and incentives it is also assured that they will keep purchasing from your company and provide in a financial capacity as well.
3. Referral programs create a chain of never ending cycle of referrals
Satisfied customers always promote brands through word of mouth. This is why when a company gains a customer through referrals and offers them an opportunity to get involved in the program themselves, they create a chain with constant consumers looking to associate themselves with the company’s referral program and bringing in more clients.
4. Referral programs have a stronger reach than conventional marketing strategies
Social media campaigns and advertisements are always the go to strategy for businesses when looking to promote their brand. This is a huge mistake as in the process they often overlook the most effective strategy of them all: referral programs.
People tend to skip over social media advertisements but when directed towards a company by a friend or colleague they make the effort to check out the company and end up purchasing goods or services from them. This makes referral programs a stronger marketing strategy than conventionally chosen means like social media.
5. Referral programs attract clients more likely to become repeat customers
Being referred to a company gives customers a positive first impression of their service since it has been recommended to them following somebody else’s positive experience. This means that not only are they more likely to make a purchase to a company through referrals as compared to companies they come across on their own, but also that the positive impressions create a cycle which makes them repeat customers.
6. Referral programs cost neither the company nor the initiative members
Businesses often set up referral programs before they work on any other marketing strategy because it costs them nothing. When a customer makes a referral to a friend they do so for free and the company they make the referral for receives promotions at no cost. This means that both parties benefit without any expenses of their own.
7. Referral programs are an effective profit making strategy
With no costs to bear, businesses can make huge profits from their referral programs. Many companies make the mistake of assuming that the minimal costs of starting a referral initiative are expended when providing benefits to the customers who successfully refer more clients when in reality the costs of providing the benefits cut into less than ⅓ of the profits earned with every new consumer.
8. Referral programs eliminate most cart abandonments
Many businesses suffer losses due to customers deciding last minute that they no longer want to make their purchase. A strategy that effectively limits the number of cart abandonments is referral initiative. This is because a referral program that is introduced close to checkout gives the customer a reason to place their order and involve themselves in the company’s program to receive benefits.
9. Referral programs are self-driven marketing strategies
No business wants to invest an ungodly amount of hours into running their business promotions when their time and energy can be better used somewhere else. Referral programs are an automated system that work on customer promotions and do not require constant monitoring, thus allowing marketing divisions in companies to utilise their resources better.
10. Referral programs build brand credibility
New businesses often struggle with convincing people to purchase their products or avail their services; this is because their status as a new entrant into the market makes potential customers skeptical about their effectiveness. In such cases, having a referral program would allow consumers to be introduced to a company through a trustable source, making them more likely to join their customer base.
11. Referral programs have a higher likelihood of success
Because customers only gain rewards when another consumer successfully purchases from your business, they are unlikely to refer your company to people who would not engage themselves with your business giving this marketing strategy a high likelihood of success.
12. Referral programs are easy to track
The effectiveness of social media campaigns is difficult to track however, this is not the case with referral programs. Referral softwares allows businesses to track and monitor the user engagement and level of success of the initiative to make the appropriate changes to achieve highest efficiency and effectiveness.
13. Referral programs increase website traffic
Customers who are part of your client base are likely to check your website regularly for any new referral initiatives. This would increase the traffic on your website and improve its ranking, making it a top search result.
14. Referral programs pave the way for other marketing strategies
Referral programs themselves can be used for brand promotions. Advertisements can be put out to attract more customers and encourage them to involve themselves with the company’s referral initiatives.
15. Referral programs can elevate your marketing strategies
Businesses often involve celebrities and influencers in their promotional campaigns. They do this by providing them with personalised discount codes that can be shared with their respective fan bases, attracting more customers through mainstream media.
