Last Updated on October 18, 2018
Your best friend tells you about the most comfortable shoes he’s ever worn, and you try on a pair for yourself. Your sister exclaims about the terrible service at that new restaurant, and you know to stay away. You listen when your loved ones tell you about their experiences with different businesses – and your customers do, too.
Word-of-mouth marketing is easily the most effective way to build awareness of and loyalty to your business, but there are only a couple of ways to encourage your customers to spread the word. The first is excellent customer service, but even with smiling, helpful salespeople, businesses aren’t always recognized for their positive atmosphere. Therefore, many businesses strive to complete the second option for spreading word-of-mouth: referral marketing.
Unfortunately, referrals aren’t necessarily easy to achieve. You need a good strategy, the right tools, and a bit of luck to see success from referral marketing – but when you find the perfect combination for your business, you will reap unending rewards. This guide should help you tread the best path on your journey through referral marketing.
A Good Strategy
Referral marketing is effective for three distinct reasons:
- Trust. Trust is easily one of the primary building blocks of marketing: If your audience doesn’t trust you, they won’t buy. With referral marketing, you are using inherently trustworthy sources – i.e. friends and family – to promote you, which means you have a much greater chance of winning new customers.
- Accuracy. You can blow your marketing budget in a matter of hours by purchasing non-targeted ads all over the web. Conversely, you can devote your dollars to a strategy that uses your existing customer base to spread your message to like-minded consumers. Referrals are more effective because they expand your reach to those already likely to buy.
- Speed. Social media marketing may be a worthwhile marketing investment, but it takes time and finesse for businesses to see results from Facebook, Twitter, and other sites. In contrast, an individual social media user might influence hundreds or thousands of friends with a referral. These days, word-of-mouth is actually text-on-screen, meaning a single message from a popular happy customer can provide unending marketing benefits.
To make the most of these powerful marketing effects, your referral marketing campaign should attempt to target as many customers as possible. Your most loyal customers will spread your message without much goading, but the best strategy convinces even first-time buyers to extoll you far and wide.
Rewarding your customers for spreading the word is a wise way to generate more buzz from happy consumers. The beauty of this strategy is its flexibility: You can decide what to award and when. Plus, most consumers are highly motivated by gifts they deem free. However, before you start handing out items to everyone in your store, you need the right tools to manage your referral campaign.
The Right Tools
All marketing campaigns are complex, containing a number of moving parts that need subtle management, but referral campaigns are particularly intricate.
You must have a method of tracking customers and their referrals, so you can provide the appropriate rewards for their efforts. This monumental task requires digital tools, and not any customer tracking system will provide the control you need to get referral marketing right.
Primarily, you will need a referral marketing platform that is customizable to your brand and strategy. Such a platform should be effective over multiple channels, including your business website, social media sites, email, and more.
Then, you must devote resources to promoting your referral program everywhere you would typically advertise, so even new consumers recognize how well you care for your loyal fans. Eventually, you might promote some of your most effective referrers to brand advocates, providing them even more benefits for their loyalty and hard work.
A Bit of Luck
Referral marketing is a smart way to push your customers into spreading your message, but it doesn’t work unless you already have objectively good products and services. Though it might not count as luck, performing market research and analysis before starting your business will ensure you have a solid foundation upon which to build a referral marketing campaign.
Additionally, following marketing trends related to referrals will help you stay relevant and continue to generate the referrals that bring in business. A good strategy and the right tools are nothing without luck, but with preparation and open-mindedness, you can engineer your own good fortune.