According to a study by McKinsey, word-of-mouth is directly responsible for 20%-50% of the purchase decisions; and another study finds that 92% of the people trust the referrals from people they know.

Have you purchased any product from the recommendation of your friends or family members? If yes, you are not alone! According to the data, 77% of the people are more likely to buy a new product if their friends or family member recommends it.

It goes to show the potential growth word-of-mouth can mean to your business. Hence, modern marketers have turned towards harnessing growth through word-of-mouth by encouraging existing customers to bring in referrals through their referral marketing programs.

What is Referral Marketing?

Referral Marketing is a form of marketing wherein you leverage the trust of your existing customers to get more customers. As the name suggests, it involves someone referring the product to another person; in this case, it is your customers recommending your product to their family or friends.

It works wonders! Why? Because people trust the opinions of real people compared to a traditional advertisement. According to a survey by Nielsen, people are four times more likely to purchase a product when referred by a friend.

To put it simply: Your existing customer recommends your product to a friend, a family member, or anyone in his network; the other person makes the purchase, and your existing customer gets rewarded in cash or kind for the effort.

Benefits of referral marketing:

Transfer of Trust:

Trust is the foundation of any form of marketing, and undoubtedly, it is one of the most compelling benefits of referral marketing. While making a purchase, the customers want to be sure that they are making the right decision and that the brand is trustable. With referral marketing, the trust of the existing customer is transferred to the potential customer because he/she is someone they already trust.

Moreover, when the existing customers have loved your product or services, they would be more than happy to share about it in their network.

Faster Growth:

With social media advancement, the networking capability of people has increased. A person today is networked with a much larger group, even thousands, compared to a much lesser reach in the olden days when they had to rely on face-to-face meetings. A post about your brand on their social media feeds could get you thousands of new customers in a short period. Hence, the possibilities of growth have increased. As per the data of Review42, social media posts published by friends influence the shopper’s purchase decision in the USA.

Better Customer retention rate:

According to Invesp, Customers referred by other customers have a 37% higher retention rate. The participating customers and referrals are more likely to stay with your company for the long-term. Existing customers would be excited and happy to share the products they love and feel rewarded for that. Referral Marketing is the process of making your most loyal customers your Brand ambassadors.

Laser Targeting and more reach:

Marketing to a segmented group of people works better in terms of results compared to a mass shout-out. There is a risk of losing money associated with it. The audience reached through the mass shout-outs, or any traditional form of advertising would include people who aren’t interested in your product or service. Marketing to such groups would yield very low or no results. But a targeted campaign yields better results comparatively. It explains why the demand for segmentation tools is increasing with time. Even if it comes to Email Marketing campaigns, brands prefer to segment the subscribers and send content that is relevant to them.

With referral marketing, your nail is on the right head already. According to the data by AnnexCloud, you can potentially get up to 20,000 new email addresses per month from referral-based marketing.

Increase brand awareness & reputation:

Do you have a brand story? Your customers should know it. Referral Marketing helps your customers know your story. As per data, it is the story that moves people. Hence, in this process, when your customers share your story with the people in their network, more and more people get to know it. It not only increases brand awareness but also creates a reputation for your brand in their minds. It gives a reason for more people to make the purchase. When a story is attached to a brand, people feel a sense of pride in associating with it.

Referrals are valuable customers:

While every customer is valuable, a referred customer is more valuable. A referred customer has purchased with an expectation of a similar experience to the person who had referred. If the referred customer feels delighted with the product or service, the chances are high that even the new customer would share across about your brand in his/her network. You are assured of much rapid growth of your customer network.

Better ROI:

The cost-per-lead is lowest in referral marketing compared to the other modes of marketing. Given that the giveaways as rewards can be of a low investment for the company, the ROI generated is better compared to other mediums. The companies can save a huge amount on their marketing budget that could be utilized for product development and other aspects of a company.

Automation & Ease of tracking:

All you will have to do for a successful referral marketing campaign is to set up a quality referral marketing platform. You can either build it in-house or use platforms like Viral Loops. Once the platform has been set up along with the allotment of the reward points, you will see the sales soaring.

Since it is technology-based, the tracking is taken care of by the platform. The user reports would be made available to you for review on the success and further decision-making.

Examples of successful Referral marketing campaigns:

Dropbox:

Dropbox is a popular file-sharing platform. It is one of the success stories of a referral marketing program using which they grew from 100K registered users in September 2008 to 33.9mn registered users in lesser than a decade (September 2017). It grew by 3900%.



Airbnb:

Another example of successful referral marketing is Airbnb, the home-sharing platform. It grew from having 20K guests in 2009 to 80mn guests by the end of 2016.



Tesla:

Tesla is a popular name in the automotive industry. Tesla, through its products and services, enjoys the highest customer satisfaction rate of 89 out of 100. Hence, the customer loved sharing about it with their peers, and word-of-mouth was very high. They launched a referral program in 2015, and it was a huge success. It was able to drive 40X ROI with their referral program and boost sales without any spending on advertising.

Now that you know the benefits of a referral program for the growth of your business, the most important step would be to choose the right platform. While there are a few platforms available, but they are no match to the quality provided by Viral Loops.

What is Viral Loops?

Viral Loops is a template-based solution for viral & referral marketing for modern marketers. There are more than 13000 campaigns created on this platform already that are generating leads. It provides you with the templates of successful referral marketing campaigns so that you can duplicate it and boost the growth of your organization. It comes with the following features:

The Campaign Wizard:

Need help creating campaigns? Campaign Wizard is there for you! You would be guided through the step-by-step process to create a successful campaign.

1. Templates that fit your needs.

Viral Loops provides you with a plethora of templates to choose from. You can choose the template that fits your business to maximize the output.

2. Viral Loops Pages:

You are a startup in the pre-launch stage and don’t yet have a website to host the referral program. You don’t have to worry! Viral Loops provides you free access to a landing page builder using which you can create your own landing page.

3. Integrations

Viral Loops comes with integration to many of the popular tools. In case, it doesn’t integrate with the tool you use, it comes with webhooks to ease the process of integration.

4. Real-time Dashboard:

You can keep a real-time tab on the performance of your referral campaign and make changes if you desire to.



Types of Templates:

1. The Milestone Referral: Rewarding the audience with more rewards for more referrals.

2. The Startup Prelaunch: Let the users or early adopters join the waitlist. The more people they refer to, they climb the list.

3. The Tempting Giveaway: Rewarding the audience with Giveaways for the referrals they bring in.

4. The Viral Loops Shopify app: If you an eCommerce store owner on Shopify. It is for you! Induce the power of referrals in your store and see the sales soaring.

5. Refer a Friend: Encourage product trials by rewarding the people to invite their network to try your product.

6. The Leaderboard Giveaway: Create a Leaderboard for your referrals to climb up the ladder of the leaderboard with more referrals. By doing so, you are opening the door to the pipeline of leads.

7. The Altruistic Referral Template: Create a referral program with two-sided rewards. Reward both the referrer and the one who joined.

8. Messenger Bot Giveaway: You have an active audience on the Facebook page, Great! Build a referral program to engage them and reward them with giveaways in return.

9. The Milestone Referral for Messenger: Rewarding the audience with rewards for referrals but through Messenger.

Conclusion:

There are myriad benefits of referral marketing. Hence, it is, without a doubt, one of the most effective forms of marketing and sales. Get quality leads, have a better conversion rate, enjoy the benefits of higher customer loyalty, create a higher reputation in the industry, and enjoy the snowball effect that would get created henceforth. If you haven’t still implemented for your business, you are missing out on a lot. Moreover, Viral Loops makes it easy for you to capitalize on referral marketing by eliminating the need of having to invest in technology and building it in-house. It takes the entire onus, but you still enjoy complete control. Do you think we have missed any point in this article? Let us know in the comments below.