Referral marketing - the power of recommendation

Minutes well spent

August 1, 2023
Jessy
Online marketing, SEO

New customers are recruited from satisfied customers

More and more people are placing a high value on reliable experiences. That's why it's important for your business to drive the growth of positive referrals and focus on referral marketing.

In our blog article, you'll learn everything you need to know about referral marketing, how effective a referral can be, and learn about the benefits.

Referral marketing - definition

Referral marketing is often also referred to as "word of mouth" and is a essential component for the acquisition of new customers. With the help of referral marketing, customers are actively encouraged to recommend products and services to acquaintances, friends and family and to provide reviews and references. The recommendations can be both personal as well as digitalfor example, via social media or rating platforms.

3 important advantages of referral marketing

Credibility & Trust
If products or services are positively evaluated and recommended by friends or trusted people, this creates greater credibility and has a more trusting effect than conventional advertising. Recommendations serve as a useful orientation aid and influence the purchase decision. According to a study (Nielsen study) from 2021, 92% of consumers are more likely to trust a recommendation from friends and family than other forms of advertising.
Lower costs
Compared to other marketing strategies, this type of marketing is cost-effective because you need to invest less in advertising and you can use the voice of your customers. Because, as you've probably already noticed - satisfied customers voluntarily and willingly share their positive experiences. Since your business saves on advertising costs due to organic word of mouth, you can use your budget more efficiently.
Reach & viral potential
Recommendations and ratings offer the particular advantage of rapid dissemination. Especially when using social media channels, recommendations can spread exponentially.

Types of referral marketing

Referrals and reviews can be more than just verbal. Referral marketing comes in many different forms.

Personal recommendations
Personal recommendations or classic word-of-mouth advertising is probably the oldest and most familiar form of advertising. This is a recommendation that takes place directly in the consumer's circle of friends or social environment. The following applies: trust and recommendations go hand in hand - the greater the trust in the person, the more effective his recommendation.

- User-generated content (UGC)
  The experiences are shared by customers online, especially on social networks. However, influencers are not meant here. Influencer marketing provides awareness and reach. UGC, on the other hand, strengthens trust among new customers for the product and the brand.
  Online reviews can be both a positive experience at a restaurant, posting a new bag, or reactions on review portals and price comparison sites.

Product review
Product reviews are a decisive purchasing decision factor. Potential buyers place great value on authentic experiences from existing customers. The number of reviews for a product also plays an important role in the purchase decision.

Trials
Trials = sample
It's hard to imagine digital products without trials. Other industries have also already recognized the advantages of "buy-by-trial". Trials are therefore becoming more and more widespread and are now also very common in other industries.

Seal for customer satisfaction
Customer satisfaction seals" are a special form of recommendation marketing. They are positive experiences and reviews in the form of marketing metrics. They build trust with customers and are especially suitable for potential customers who do not want to read and compare hundreds of product reviews individually.

The 3 pillars in referral marketing

Referral marketing involves three pillars that are closely related and should therefore be given equal attention.

Pillar - Existing customers & customer satisfaction
Satisfied customers are the cornerstone of referral marketing. Only satisfied customers will recommend your product or service to other people with conviction.
You can influence the satisfaction of your customers even after the service has been provided. For this purpose, you can use small attentions and freebies, such as discounts, greeting cards, giveaways and much more.
In this way, you not only strengthen and win customer loyalty, but also remain in positive memory.

Pillar - Employees

Your employees represent your company to the outside world and can therefore either help or hurt you in referral marketing. It is often the case that employees are in direct contact with customers, whether in person, by e-mail or telephone, or via social media channels.

Your employees shape both the customer experience and customer satisfaction. While helpful, competent and friendly employees leave a positive impression on your customers, unfriendly employees damage your brand image.

Another important component of the "employee pillar" - if they stand behind your product or service, they will automatically recommend your company to other people, while creating a positive working environment.

For example, you can motivate your employees with respectful treatment, bonuses, company outings & events, and much more.

Pillar - Network & Communication

The 3rd pillar forms the basis for positive and above all customer-oriented communication and is therefore particularly important for successful marketing. The focus here should be on Credibility and honesty lie

Regular activities in social networks are suitable for attracting new customers and retaining existing ones.

Always listen to your customers, offer them solutions to problems and rely on friendly communication.

Also respond to the needs, wishes, suggestions and feedback of your customers. You can also support them with tips. You can thank them for their feedback, inform them that you will forward the request to the appropriate department, or apologize for the disappointment or bad experience and offer a solution or even tips.

11 tips for successful Referral marketing

Customer analysis
Analyze your customers - what are their expectations and needs?
Relationship building
A trusting relationship with the customer is essential. Show interest and conduct personal conversations
Positive impression
Offer your customers high-quality products and services and respond quickly to customer requests. This is how you ensure a positive customer experience.
Own recommendations
To be perceived as a trustworthy partner, it helps to actively recommend products and services to other companies.
Actively ask for reviews
Ask your customers for a recommendation or a review.
Dealing with recommendations
Communicate openly how you handle referrals and explain to your customers what happens to the referral (e.g. publicly on your website)
Rewards
You can motivate your customers to make referrals, for example with small giveaways, discounts or rewards.
Inspire customers
Small promotional gifts are also suitable for inspiring customers and strengthening their brand loyalty.
Employee engagement
A positive working atmosphere makes for satisfied employees. Satisfied employees stand by the company and are happy to recommend it to others.
Ensure easy referral
If recommendations and reviews are very laborious for the customer to build, you are unlikely to get referrals. Make sure that your customers can effortlessly recommend your business on social media, for example.
The reach of influencers
You can also strengthen your referral marketing with the help of influencers. Use influencer marketing to get positive recommendations and attract new customers.