The marketing industry is a sphere that keeps on giving and of course, changing. There are countless tactics and strategies to consider, and a vast array of methods to combat and address pain points. We find ourselves in a position where consumers want to avoid banner and pop-up ads; where buyers prefer listening to the people they know and trust – Most of the time, that would be family, friends, peers, colleagues, and influencers/celebrities that they have built their trust around.
Studies have indicated that consumers and clients wish to seek referrals, but they also choose to act on it. Referral marketing is one of those countless strategies used to encourage passionate customers (and advocates) to directly refer their network to a certain business. Organic and altruistic forms and natures of referrals provides brands with the platform, and the tools to incentivize and manage the factors of referral marketing that structures a campaign.
Perhaps you have become aware, or even participated in a referral program. Most companies have seen the value that lies within the core structure of referral marketing and how it reaches new clients, customers, and value, yet there is still some confusion about the actual scaling of this strategy.
Companies either rely on a referral program that has been constructed in-house, while others try to manage it manually through e-mail and basic tools or software. However, most triumphant companies automate this process by using a single platform to enroll, track, manage and reward their ambassadors/providers.
With that all said, let’s dive into the top 8 reasons why referral marketing is something that has stood the test of time but has also proven to be a stable and effective channel to harness the power of authentic word-of-mouth in the aim to drive a steady stream of high-quality referrals to your business (and initiate growth in revenue as a result).
1. The Likelihood of Purchase via Personal Referrals:
A trusted referral program like that of ReferralMagic will do exactly the same for you and your campaign. It’s widely known that referral clients and customers become the voice of your campaign as ambassadors who convert more, close faster and maintain a higher customer lifetime value (C.L.V).
2. C.L.V For New Referrals Are 16% Higher Than That Of Non-Referrals:
This statement has become the backbone of a recent study completed at Wharton Business School and with the steady climb of digital channels available in the market, word-of-mouth strategies have certainly become easier to implement.
With digital channels on the rise, word of mouth marketing strategies have become easier to adopt. It’s not uncommon for people to discuss their purchases amongst peers or even resort to sharing it as content online. Referrals are a win-win structure when consumers share information about your product or brand and in this way, you directly benefit from the power that this form of marketing holds.
How so?
You can most certainly expect an improvement in customer engagement, higher conversions, lower churn rates, improved customer/brand loyalty, as well as increases in revenue – all thanks for referral marketing.
3. Social Media Has Boosted 31% Of Overall Traffic To Sites.
Social media has garnered a firm reputation when it comes to providing guidance to most consumers across various markets. Can your brand also capitalize on this? And if so, who would be the sector of individuals most likely to refer new, incoming business your way?
If your brand can specify what it is that your consumer needs and what they can gain from referral programs, then the next step would be to illustrate the value and benefits of referring a product or service. It’s most likely that when there are benefits involved, your brand will see higher conversions.
Large firms, established brands, and even small business owners are taking advantage of referral marketing with the help of services like that of ReferralMagic. Several programs are embedded into our website so that all content reaches users across all platforms and in turn, creates an opportunity for reaping great benefits from referral marketing.
4. 14% Of Customers Who Visit A Referral Page Takes Action.
When we take a look at the behavior of previously engaged users, we can see that they fall within the scope of those who are more highly likely to convert. This means that when existing users are consistently reached, they are essentially being primed for referral efforts.
At ReferralMagic, it became very clear that there is a large gap that lies between referred visitors who convert and sign up to a product, as opposed to previous users. By implementing a sales drive via loyal customers is probably the most trusted and obvious route to reach success. Communicating with existing users and customers not only retains them for higher C.L.V but it also increases the quality they maintain within your strategy as future brand ambassadors.
We also came to witness a pattern where referral deals took a very likely turn in converting once a customer made use of copy/paste structures and email campaigns in creating the actual referral. Making use of copy/paste structure and email campaigns are both easily accessible and user-friendly and even though social media provides that accessibility too, users and customers almost always fall back onto a 1:1 communication method to share something with friends, peers, and family.
5. 84% of B2B Decision-makers Process Purchases Via Referrals.
Business management needs to remain in a constant loop where viable steps are being taken to accelerate or boost growth – and this is applicable especially when there are a limited time frame and much higher stakes at risk than with the average customer or user. Many top-tier establishments have come to understand the ultimate power of referrals and what they can deliver.
87% of frontlines sales reps, 82% of sales leaders, and 78% of marketers surveyed agree that referrals are the best leads your business can get.
With this in mind, we can clearly see that referrals are responsible for paving a way towards a boost in revenue. And while this also serves the sales department of a company in terms of closing more deals, your marketing strategies will see more conversions with more engagement and repeat buyers.
6. 92% Of Respondents Trusted Made Use Of Referrals From People They Know.
This was made public by Nielsen in their Global Trust In Advertising Report. The marketplace is crowded and constantly flowing with information that sometimes simply takes up unnecessary space and time. Time has proven over and over again how we should rely on our closest network for the solutions and what the benefits of referrals provide in the long run. And as your brand builds more relationships, the results are more than likely to expand as well.
However, this will always depend on how wide your reach and the velocity in scale is – thanks to the speed and the frequency of your referrals. Within the digital sphere, opinions are shared instantaneously and as brands, we must consider the power of social media and the influencers that work these platforms with finesse.
Your referral program should be designed to accelerate the frequency that your brand gets noticed, talked about and most importantly, purchased from.
7. Most Referrals Converts An Average Of 2.68 Invites.
Referral SaaSquatch Data Science published a very insightful article that displays some insightful statistics about consumer behaviors within referral programs. This applies mostly to a survey and report of mid-level B2C businesses in 2016 but still makes as much sense now as it did then.
The captured data clearly illustrates how each engaged customer or client reaches almost three friends or peers by means of a referral offer. By utilizing our ReferralMagic program that implements practices like an enticing reward offers and a streamlined onboarding flow, you can expect those referred customers to convert at surprising rates.
8. Companies with formalized referral programs experience 86% more revenue growth over the past two years when compared to the rest.
But, in hindsight…
Only 30% of companies surveyed have a formalized referral program. What explains this breakdown?
It could possibly be ignorance in some cases, but it is more likely confusion that debilitates the efforts of how to effectively execute a referral program. This can lie within how to structure customer incentives, the scaling of referral invites and possibly the development and management of this referral structure. This is not a cheap mistake to make and yes, while there are plenty of ways to correct this, the most important factor to consider is a referral program from a trusted source or software that eliminates hurdles that might cost a business more money.
By implementing referral tools and software into your marketing strategy, you are more than likely to see 3 times more in the acceleration of referral generation and conversion. Yet, there are less than 30% of businesses worldwide who have software or tools available to effectively scale their programs.
With the right tools, your organization can implement a structured process for monitoring, tracking and rewarding your customers. And over time, campaign analytics can show you key areas of the referral funnel that need improvement.
ReferralMagic has observed that referral deals were more than likely to convert when a customer or client made use of a copy/paste system or e-mailing program to make the referral. The Copy/paste is a familiar and easy method for users, as is emailing. Though social media is accessible, users preferred to stay to use 1:1 communication methods to share with their friends.
How exactly do these channels convert?
In most cases, the one-click convenience of copy/paste and e-mail shares has proven to be, by far, the most effective strategy in comparison to social media platforms and what they have to offer. Referral invites tend to capture a better reception when delivered from a personal stand-point and angle. Users convert at a higher rate when convenience is created alongside a trusted source.
The same way we do not enter a battle without a sword applies to how we manage our businesses and strategize their growth without implementing a referral program. Making use of this effective tool is one way to create a name for yourself, but it’s also a way to maintain what it is that you have built.
Like these 8 points above shown, your brand will observe growth and expansion by actively encouraging referrals and the power that lies within its reach. Not only does a referral create a new customer, but it reinforces brand loyalty and helps retain existing customers.
And is that not perhaps one of the most vital cornerstones of creating, building and managing a brand or a product? Well, we for one certainly think so…