What is referral marketing? A guide to make it a key part of your marketing strategy

Simply put, referral marketing is when existing customers tell others about your product or service. It’s an organic form of marketing that can also be described as word-of-mouth because it happens without intervention from the brand or business.

If you can make referral marketing a key part of your strategy, it will be invaluable for your business growth thanks to three things:

1. It’s a win-win-win situation for all parties . Your business gets cost-effective marketing, your customers get social validation for recommending something that everyone loves and the referred person gets a recommendation from a trusted source
2. Referral marketing builds trust in your brand . When people have had a good experience, they like to let their friends and family know about it. This creates a sense of trust between your business and your potential customers. In fact, 92% of customers trust recommendations from people they know, while 74% of consumers identify word of mouth as a key influencing factor in their purchasing decisions
3. Referrals also create a buzz around your brand . If people are genuinely excited about your offering, and they aren’t being paid to promote it as an advert, then it hooks the interest of others as they want to find out what all the hype is about

In reality, referral marketing doesn’t happen nearly as often as it should. That’s because it’s easy for your customers to forget to tell their friends about you. If they aren’t receiving any prompts to share the recommendation, they’ll most likely not think to do so or will simply forget.

Rather than leaving it up to chance, put in place specific strategies to encourage your customers to refer others.

How to make referral marketing a key part of your marketing strategy

Implement a referral program

Make referral marketing a crucial part of your overall marketing strategy by incentivising customers to make active referrals to their friends. Using a loyalty program to achieve this is a great place to start. Learn how loyalty programs and referrals work together.

Importantly, the incentive to refer has to be right – it must be meaningful for both the advocate and the friends they are referring.

For example, Esqido Lashes gives the advocate 3,000 points and the referred customer a $5 voucher to spend in-store

It’s all very well having a referral program, but if no one knows it’s there then no one can reap the benefits from it. It’s therefore important to promote your referral program effectively.

You can do this by letting existing customers know the benefits of the program through your email marketing . You could set up an automation email for customers who have already left a positive review and encourage them to refer a friend in return for loyalty points.

For shoppers who are browsing your site, why not display a modal window on-site that lists the benefits of referring friends through your loyalty program. Then, make sure you provide an easy way for customers to copy and share their referral URL to earn points.

You could also try targeting customers at the point when they’re most invested in your business (i.e. directly after they’ve made a purchase) by displaying a pop-up on checkout that prompts them to sign up to your referral program.

Reviews garner trust

88% of people trust online reviews written by other customers as much as they trust recommendations from personal contacts such as friends and family. However, only 33% of businesses are actively seeking out and collecting customer reviews.

To gather more reviews on your site, reward customers with loyalty points for leaving feedback as a way to follow through. Check out the review apps that work with LoyaltyLion to achieve this.

To motivate your customers to leave you reviews, use post-purchase emails to follow up with customers who have just bought from you. Educate them about how they can earn loyalty points for leaving feedback. After all, it’s the perfect time to ask as their purchase is fresh in their mind.

Once you’ve collected some great reviews, make sure you show them off! Try displaying honest reviews on social media, on your website, or on specific product pages to demonstrate to new customers that your brand is trustworthy.

Build trust through user-generated content

Imagery and video content posted by other shoppers feels more trustworthy because it’s a glimpse into how a product looks in real life – rather than through the edited and filtered lens of a brand’s marketing campaign. In fact, 85% of users find visual UGC more influential than brand photos or videos. Not only is this content more engaging than sales collateral put out by the brand but it also costs far less.

You can generate more UGC by offering customers loyalty points as a reward for following you on your social media channels or for using your specific Instagram hashtag when posting about your products.

Not only will your existing shoppers get more rewards to redeem against future purchases, but you could also give them additional exposure by sharing their UGC on your own website, social media channels or newsletters.

Firstly, you’ll delight the customer whose photo you’ve chosen to represent your brand, as well as providing social proof for new customers.

Urban Outfitters does this well with through their #UOCommunity hashtag and curated website page full of UGC showing customers using their products. The individuals wearing their products get a shout-out on the site, meanwhile, new shoppers are inspired by novel ways to wear Urban Outfitter’s clothes.

Referral marketing is invaluable for your business growth, but too many businesses are missing out by not making it a key part of their customer engagement strategy. If you implement a clear approach to keep word-of-mouth referrals pouring in, you’ll find that you can quickly build trust and create a buzz around your business.

The three key ways to improve your referral marketing strategy are:

• Implementing a referral program
• Gathering and using positive reviews to build trust
• Collecting and using UGC as a way to inspire new customers

Learn how other brands are using referral marketing to boost their revenue and reputation in the LoyaltyLion Hall of Fame .