How to Use Referral Marketing Effectively?

April 8, 2023 | Content Marketing

Have you ever bought a TV or watch because your sister recommended it? Or start a new series or movie because your friend said it’s good? If yes, then you have experienced the influence of word of mouth marketing.

It is obvious for us humans to try or buy things that our close circle suggests. Referral marketing is very similar to word of mouth marketing, except the former provides benefits to customers. 

But how is referral advertising useful for you? Can it bring good results to your business? How can you use this form of engagement effectively? We will answer all of these questions and more in this article.

What Is Referral Marketing?

Before moving forward to types of referral marketing, its use cases, benefits, and other sections, we need to understand the term’s exact meaning.

Referral advertising is the type of marketing that involves providing incentives or other forms of benefits for customers when they refer your service or products to their friends and family. It helps create a group of targeted customers interested in the brand’s products and services and become its cheerleaders in exchange for benefits.

an illustrated man holding a gift and speaker emerging from a mobile screen

Though word of mouth advertising is effective, you can’t have any control over it as people suggest or refer only when they remember the product or are talking about similar services. 

But when we talk about referral advertising, brands have some control. The referral program gives them a list of people who refer their services to friends and family, and the chain continues. Here, brands know that the entire chain contains loyal customers who will help their company grow.

a man in a purple shirt and blue pants surrounded by graphical illustration

Is advocacy marketing really important? There are other forms of marketing as well. Yes, there are other engagement methods, but referral advertising yields maximum results compared to other forms. 

Why? That’s because people trust their friends and close ones more than any celebrity in an advertisement.

Tips on Building a Strong Referral Marketing Program

If done well, referral advertising can be your strongest weapon. But how can you improve your forte in referral advertising? Here are a few tips on improving your referral program and how you can take advantage of it.

1. Benefit Both Parties

One major mistake that several organizations make while designing a referral program is not providing benefits to both parties. Why would a person recommend your service to their friends or family if they do not get any benefit from it?

boy and girl sitting in chairs giving high five, blue laptop and graphical illustrations in the background

Yes, word of mouth promotion and recommending of their own free will is still present, but a tiny token of appreciation will push them to refer your brand to their circle. Moreover, it’s better to go the extra mile and provide benefits for both parties.

For example, you can try tactics like “Give 15% off to your friend and get 20% off on your next purchase” or “Give 5$ and Get 5$ upon referring to our services.” 

By providing such incentives, you will get good returns on your referral program. People love it when they and their friends get the same benefit from a particular service. Many brands have applied such tactics and have created a large base of loyal customers.

2. Improve Product Quality

People hesitate to enter a referral program because, most of the time, the products are not of good quality. Obviously, you wouldn’t recommend a low-quality product or service to your friend, even if the brand is providing good benefits for the referrals.

No one wants to risk their reputation by suggesting bad services as they won’t use the same product or service. That’s why, before you conduct a solid referral program, improve the quality of your services.

man in light blue shirt and woman in pink top attentively watching woman in purple dress holding orange bottle emerging from laptop screen

Put yourself in your customers’ shoes and see if you would use your services. What improvements can you make so that your customers will happily recommend you to their friends? What loopholes do you need to close?

Remove all the hurdles and then re-release the service to your customers. However, test the product before releasing it for your target audience. 

By improving the quality of your product, service, and customer experience, you will get a positive response to your referral program.

3. Email Marketing

Who doesn’t love it when brands send personalized emails or messages? It shows that the company is trying to connect with its customers on a personal level.

Referral programs are designed for existing customers, and what better way to promote them than sending personalized emails? Send in the details of your referral program in your weekly newsletter or the next time you send emails to your customers.

man in red shirt holding speaker emerging from a laptop screen

Let your customers know what benefits they can get from the referral program, what steps they need to follow, and the time period till which the program will remain active.

Sending personalized emails to targeted customers will increase the reach rate of your referral program, thus improving its engagement rate.

The best time to send in these emails is right after a customer buys from your website. You can also email customers who have not bought anything from you for a few months. Tell them about your new referral programs, and also send in an extra discount or coupon code for an additional boost. 

The more you add personalization to your email, the better would be the results. 

4. Be Friends With Social Media

Referral marketing with social media marketing is a combination that we didn’t know we needed, but it came in handy.

Since most of the world’s population is on social media, you need to make your presence known here. Establish a proper social media handle on each platform and start promoting your referral program.

Social media can make and break your brand, so use it wisely. Target audiences relevant to your brand’s services and attract them to your website.

boy wearing yellow shirt and shoes with gray pants sits under a tree with gray and yellow social media icons hanging on it

To ensure your referral program gets a targeted audience, contact influencers who can promote your brand and the referral program on their page. 

Since social media influencers have tons of followers, getting a shoutout from them will bring in a good amount of customers.

Besides, you can also provide the influencers with personalized coupon codes that their followers can use to get discounts while the influencers get incentives or related benefits. 

By doing so, you are extending your customer base and developing a good relationship with influencers who will support you in future collaborations. 

5. Make the Entire Program Easy-to-Understand

man in blue shirt and black pants pointing at 3 icons in lightbulbs

Let’s say you heard about an amazing referral program providing incentives. You just have to fill out a form, and the incentive will be yours. But once you open the form, it has more than 30 questions, takes time to load, and has bugs. Would you still continue to fill out the form or close the tab and shop from another website?

The majority would choose the latter option as that seems convenient. Similarly, a referral program that’s difficult to understand will not garner much attention as a simple one does.

Your referral program should always be easy to understand, have a maximum of 3 to 5 small steps, and is easily accessible. 

Such referral programs are highly appreciated by customers, and they do gather a higher response rate than complicated ones.

As most people use mobile phones to participate in a referral program, you must ensure that your website is mobile-friendly. 

Use RankWatch’s mobile friendliness checker to understand whether your website is compatible with smartphones or not and if the loading speed is good enough to make a user stay.

Another thing you should remember is to make your referral program highly visible on your website. Introduce the program on the home page and landing pages, or create a separate page for the referral program and highlight it on the website. 

RankWatch’s website analysis tool can be of great help over here. It will give you an in-detail report on how your website is working, what flaws need immediate attention and other factors that come in handy while launching a referral program on your website.

Your referral program can only succeed if it’s highly visible and simple to understand. Do not enter unnecessary steps, and keep the process as smooth as possible. Believe us; your customers will love you for this.

6. Create Scarcity

Two stores are selling the same products, but one has 50% off for the next 48 hours, whereas the other is providing 50% off, which is valid for one week. 

Now, which one will you go for? The first one, right? Because you know that the 50% off is valid for a few hours, you can buy from the second store anytime in the upcoming week.

Orange background with 'LIMITED TIME ONLY BLACK FRIDAY SALE GET UPTO 50% OFF' text

The above situation shows you the value of scarcity. Though both stores provide amazing discounts for a limited period, customers will go towards the first store as the time period is less there.

The same goes for referral advertising as well. Once you state that the program will last for a few days or hours, customers will immediately react to it. There have been brands that have used this tactic to gather loyal customers.

While launching the referral program, state that it will last for a few days or till a specific holiday so that people will realize its importance and participate in the program. 

Limited offers give off a sense of urgency and scarcity, enabling customers to opt for such products and services.

7. Introduction Over Referrals

Gen Z hates it when companies try to sell them anything. They want brands to be more creative in advertising than being salesy. It is also applicable in the case of advocacy marketing.

boy holding skateboard, girl standing with mobile supported by Z, girl sitting on Z with laptop on lap, and graphical illustrations in background

Instead of asking customers to refer your brand to their friends, ask them to introduce you. The choice of words matters a lot while designing a referral program. When you ask your customers to introduce you to their friends, it sounds more personal and not salesy.

Moreover, it enables your existing customers to introduce your brand to people they think will benefit from your services. By doing so, you get a more streamlined customer base who are actually interested in your services instead of people who just add to your list.

Secret Behind The Success Of Referral Marketing

Have you ever wondered why referral advertising is more successful than other forms of engagement? Well, we have found some major reasons that will surely convince you to adopt advocacy marketing in your business.

1. Facts Over Commercials

dark blue comment box with speaker illustration and 'DID YOU KNOW?' text

Would you rather try a drink recommended by your best friend or one with celebrity endorsement for its advertising? Obviously, the first one, right? That’s because you trust your best friend more than a celebrity who was paid to do the advertisement.

People trust facts and statistics more than a guarantee card from a celebrity. Due to this, around 90% of people look for reviews and testimonials before trying out any product or service. And during such times, if their friends or family members recommend a product they have been using and have got good results, the user will become biased towards it. 

RankWatch’s expert interviews contain some of the best digital marketing professionals who can suggest which tools and techniques will benefit your business in the long run.

2. Experience Sharing

Not all customers share their good experiences with everyone. Even if they love your products and are a recurring customer, they are less likely to refer your product to their friends and family. 

But, with a referral program in view, like discounts, coupon codes, or surprise gifts, they will definitely share their experience with their circle and hence increase your customer base.

illustration of a monitor screen showing star rankings, with a man standing on the left and a girl holding a star on the right

Besides, you can also arrange a referral program where the customer gets rewards after sharing their honest reviews on major e-Commerce platforms or on your website itself.

RankWatch’s case study contains in-detail reports from clients who have used the tool and the benefits they got from it. Testimonials like these help you understand whether the service is good for your business.

3. Streamlined Market

One of the strongest reasons for the success of advocacy marketing is that it targets only specific customers who are interested in using the products. As the existing customers suggest or refer your products to people who are interested in the same background, you get customers who will buy products from you and not those who are just there on your list for the sake of it.

Benefits Of Referral Marketing

Still confused about whether referral advertising is useful for your business or not? Here are a few benefits of advocacy advertising you can get by designing a solid program.

1. Loyal Customers

Since advocacy advertising benefits your customers, they become your brand’s advocates without any hesitation. Besides, the circle in which they refer you contains people looking for similar products but are afraid to try them. Since their friend recommended and has used your services, it builds a sense of trust in them. Thus, they also become your loyal customers

a girl in a blue top and yellow pants and a boy in a purple top and dark blue pants, shaking hands and a yellow shopping bag in the background

2. Cost-effective All the Way

It is well known that advocacy marketing costs way less than any other form of marketing. That’s because you only need to design a good referral program and use software to generate unique referral links or codes for each individual.

boy wearing orange shirt and blue pants holding a laptop and pointing to mobile screen with 3 dollar coins and a graph

Apart from that, you don’t need to spend any capital on advocacy advertising. Besides, you can also co-relate referral programs with social media marketing and email marketing, thus adjusting within the budget limit of the above formats.

3. Increase Brand Awareness

When it comes to brand awareness, nothing works as well as advocacy advertising. For example, when influencers participate in your referral program, their target audience will know about your brand. Even if they don’t sign up immediately, your brand’s name will be stuck in their minds, and they will return to you.

girl in red coat and black pants holding red and black colored speaker, surrounded by graphical illustrations

Brand awareness is a big thing as it helps you make your presence known in the market. If your brand’s presence is not known, it won’t gather an audience.

4. Increase In Conversion Rate

Referral advertising has higher conversion rates than any other form of marketing. People are most likely to purchase products recommended by their friends, thus improving your conversion rate. Instead of aimlessly targeting an audience, start a referral program that will improve your conversion rate and bring in tons of benefits.

man in light blue shirt and gray coat dropping referrals in funnel, demonstrating increased conversion rate

5. Higher Customer Retention

A well-designed referral program also has the chance to increase your customer retention rate.

man holding a magnet, attracting customers in a circular graphic demonstrating high customer retention, with coins in the background representing profit gain

How? If your product is good, and you have a solid referral program, then customers will come back to you for the product and also for participating in the referral program from time to time. Offer recurring discounts, loyalty points, and similar things to maintain the retention rate.

Referral marketing has been in the industry for ages. It has seen continuous evolution, with people recommending services out of their own free will, to companies providing benefits to customers in exchange for a referral. But conducting a referral program and keeping proper track of it can be difficult. This is where RankWatch’s backlink analyzer comes in to help you out. You can easily check website backlinks of bloggers and partners who refer back to you and ones who failed to keep their part of the promise. Besides, RankWatch has other advanced tools as well that can help you throughout the program timeline.

Hope this blog helps you design an amazing referral program!

See you next time!

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1 Comment

  1. I completely agree that referral marketing can be a powerful tool for businesses. In fact, I have personally recommended products to my friends and family because of positive experiences I’ve had with them. The tips you’ve provided for building a strong referral marketing program are really helpful. I think it’s important to make sure that both parties benefit from the program, and offering personalized incentives is a great way to do that. Additionally, making the referral program easy to understand and mobile-friendly is key in today’s digital age. Overall, I found this article informative and practical. Thank you for sharing!

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