What is referral program marketing?
Referral program marketing is attracting new customers through existing ones. This is a marketing direction in which methods are developed to encourage customers to recommend it to their friends. At the same time, a new buyer, an existing one or both, will receive benefits, bonuses, discounts. The one who gives the recommendations is the referee. You can also meet such names as affiliate, referrer, sponsor. The one who used the advice is a referral.
Referral program marketing strategy
Let us analyze how referral marketing works with examples. The action “Bring a friend” is often found in different companies. For example, an Internet provider offers a promotion with such conditions: everyone who connects to the company during the promotion period and indicates that he recommended (told, persuaded, advised, convinced …) another client of the company connects, receives a 50% discount on payment for three months. The existing subscriber is also rewarded — his discount is 20% for three months. In this case, all three parties are satisfied. The users save money, the provider has new customers and the confidence that the old ones are satisfied and will not go to competitors.
Other options are possible when referral marketing is applied: not always new and existing customers receive benefits; sometimes the bonus is not material, but in the form of a product — for example, connection speed increase for a period of time. There are conditions when it is necessary to attract a certain number of new customers to receive a reward. On services where users receive income (for example, for writing articles, selling photos or other works), a user who has a new member registered through the link receives a certain percentage of their income. These are all types of referral programs.
Why do you need referral marketing?
The results of marketing research convincingly prove that a person will talk about some kind of negative experience more than positive. For example, we will tell many people about the cafe where they cook not tasty food and the waiters are rude. And what we liked in another place, where, moreover, prices are affordable, we will tell you only when someone asked to advise where to eat tasty and cheap.
It is quite another thing if for each new visitor who came on your recommendation, you get free pizza, coffee or a discount for the next visit. Then it will be more wish to advise the cafe to your friends. The likelihood that others will use the recommendation will increase quickly if they know about nice bonuses for themselves: discounts, a dish as a gift. And, in turn, they will bring new visitors — after all, it is beneficial to both parties.
Who uses referral program strategy services?
To verify the effectiveness of referral marketing, just look at the results and those customers who use the strategy. Dropbox cloud storage, which has clients more than 20 million people, used a referral program strategy for its promotion. If a user registers with another client’s link, then both receive an additional 500 MB of storage space for their files. And you can invite not one, but several users. The number of registrations increased by 60%, for the month the number of referrals exceeded 2.8 million.
The popular game World of Warcraft gives you the opportunity to earn more abilities and experience in the game, when inviting friends. After payment for game participation by a novice, the user who invited him will receive a month of free access. The creators admit that this decision was successful for the growth of game popularity.
Uber — after sending an invitation to use the service, you can receive up to $ 30 when an invited new customer uses the service. Airbnb — $ 25 bonus credits the account to the referee and referral after his first perfect trip. WebMoney, banks, telecommunications companies, Internet providers — the list of companies that felt referral program benefits is huge.
What is better — advertising or referral marketing?
The effectiveness of referral marketing is growing, and for the reason that there is advertising overflow in the modern world, we have ceased to trust it. Only 24% of people are guided by traditional advertising (television, radio, advertising stands) when choosing goods and services. And even such a relatively new type of online marketing, as advertising in social networks affects only 36% of consumers. That’s why people are more willing to listen to the advice and recommendations of friends, colleagues (92% of respondents). Moreover, when a client initially trusts the company, he is kindly set up, as he relies on the friend’s advice, he buys more (up to 15%).
Why does it work?
This type of customer-company interaction is effective because:
- recommendation received from a person you know;
- the advice is not given by the seller who is trying to sell his goods by any means;
- there is an additional benefit of the offer (discount, bonus …);
- Information is available to a wide range of people, even those who do not use the Internet or certain websites. Simply communicate with other people.
Which referral program companies apply it?
This strategy successfully works in companies that work through:
- online stores;
- ISPs and cable/satellite operators;
- food delivery via the Internet.
Registered clients of the website will spend just a couple of seconds to send a recommendation to their contacts and subscribers. Let us apply referral marketing where there are extra charges on a product — in retail chains the sale of clothing, shoes and equipment. And even if it is impossible to make a discount on products, customers can offer goods left over from previous collections and not sold as a gift. Such marketing works well in SaaS companies (translation “software as a service”). They offer the client software products via the Internet for a fee.