Referral Marketing: A Simple Explanation.
What is known as Referral marketing is a form of Referral marketing that is actively pursued by businesses in the face of dust. Existing members of a company recommend a product or service, eg b. to their family or friends. Usually, the company offers an incentive or reward for it, which the advertiser receives in exchange for his recommendation. Companies use different communication channels to generate referrals. The Internet in particular has established itself as a channel for Referral marketing.
Detailed explanation:
According to the Word of Mouth Marketing Association, there are an average of 2.4 million conversations about brands every day in the US alone. And according to Nielsen, 84% of people trust recommendations from friends as the most trusted source when making purchasing decisions. No wonder people are four times more likely to buy a product if it's recommended to them. These numbers show the great potential of Referral marketing for businesses.
Referral marketing is a process designed to generate more word-of-mouth recommendations. Word-of-mouth or word of mouth refers to the expression of opinions between consumers about brands, products, and companies. This can be achieved by rewarding customers for recommending brands' products, whether online or offline. Referral marketing works so well because people usually trust the opinions of their friends, family, or acquaintances more than traditional advertising.
Referral marketing can be very effective, especially online. It can spread faster on the internet than most offline marketing strategies. The reach via social media, which can be achieved via a Facebook post, a tweet, or an image on Instagram, has made a significant contribution to Referral marketing becoming even more important in recent years. By tracking buying behavior online, Referral marketing can also be used in a targeted manner to increase brand awareness and ultimately generate more sales through more recommendations.
Because Referral marketing is often internet-based these days, recommendations from social media influencers and bloggers also play an important role for companies. Many companies, therefore, try to generate referrals via social media and use recommendations as a purchase trigger. For example, they actively call for people to write reviews and reports in groups and forums. Online reviews can also lead to referrals and have a positive impact on a company's Referral marketing program.
Cost and Value of Referral Programs.
A study by the Goethe University Frankfurt and the University of Pennsylvania found that customers who were won through a recommendation are more loyal and more profitable than others. They also generate more sales. Referred customers are therefore the more valuable customers.
Typically, companies offer a reward for referrals. Referral marketing programs are therefore initially associated with costs for companies. However, despite the initial financial investment, Referral marketing is often worthwhile due to the high value of the customers referred, according to the study by Goethe University.
Businesses can engage in online Referral marketing in a variety of ways, including:
- Email Marketing Campaigns
- Banner Ads
- SEO
- social media
- Influencer marketing (e.g. via bloggers, YouTubers, Instagrammers, etc.)
- Links to referral page in employee email signatures
A prerequisite for successful Referral marketing is a good customer base with trusting relationships. Only then will customers recommend a brand. A positive buying experience and good customer service are particularly important for this. Customer loyalty programs are also helpful, for example with loyalty points, bonuses, discounts, etc. Training employees with regard to Referral marketing is also useful.
The referral traffic of a website can be viewed in Google Analytics. This is the traffic where users come to a page via links instead of entering the URL directly (direct traffic) or via search engines (SEO traffic). Referral traffic can be used to analyze which pages (e.g. blogs) bring users to a company's website. It is additionally envisaged to examine external sites that carry site-qualifying claims and are along these lines of particular interest to the organization.
Examples of referral marketing.
There are basically referral programs in all industries. Many banks and fitness studios as well as companies in the e-commerce sector rely on Referral marketing.
In Germany, for example, the Comdirect Bank and the ING-DiBa pay a bonus of 20 euros to every customer who recruits a new customer or give the recruiter a bonus in kind.
The cloud provider Dropbox is also a well-known example of successful Referral marketing. The company implemented its referral program back in 2009 and offered users more storage space for each successful recommendation. The customer referred also benefited from additional storage space.
US satellite television operator DIRECTV customers who successfully refer a friend will receive a $100 credit. The new customer also received $100 in credit.
Even if the success story of the online design shop Fab.com seems to be over for the time being: Thanks to its referral program, Fab managed to gain several million users in a very short time. The advertiser and the new customer each received a shopping voucher.
Conclusion:
Referrals have a huge impact on a company's business. Referral marketing is therefore considered one of the most successful marketing strategies for companies.
Referral marketing programs are widespread in many industries and have gained popularity through social media channels such as Facebook and YouTube, as well as referral sites.
Experts advise investing in Referral marketing, especially for complex and high-priced products. By using Referral marketing, companies can increase brand awareness and speed up the buying process.
