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Referral marketing: satisfied customers can attract new customers

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What is referral marketing?
How does referral marketing work?
What is the difference between referral marketing and word of mouth?
The three pillars of referral marketing
Advantages and disadvantages of referral marketing
Referral Marketing: Real Examples
Top Tips for a Successful Referral Marketing Strategy
Pillar 1: Satisfied customers
Pillar 2: The company's workers
Pillar 3: Communication and networking
Airbnb: Credit for your next reservations after making recommendations
N26: Financial compensation for inviting friends
Dropbox: Get more space by recommending the platform
Tip 1: Leave nothing to chance
Tip 2: Make Recommending Simple
Tip 3: reward referrals
Tip 4: Leave a positive impression
Tip 5: make your own recommendations
Tip 6: Interact with your reviews in a transparent way
Tip 7: Integrate influencer marketing into your strategy

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Referral marketing: satisfied customers can attract new customers

With traditional advertising, the companies themselves present their products or services. For a fee, they can advertise on television, on the Internet, on the radio, or in newspapers and magazines. Obviously, this advertising is not neutral, since companies will always highlight only the advantages of their services or products. Instead, so-called referral marketing is based on the authentic opinions of real customers . We explain why referral marketing is successful and how you can apply it in your own campaigns..

Index
  1. What is referral marketing?
  2. How does referral marketing work?
  3. What is the difference between referral marketing and word of mouth?
  4. The three pillars of referral marketing
    1. Pillar 1: Satisfied customers
    2. Pillar 2: The company's workers
    3. Pillar 3: Communication and networking
  5. Advantages and disadvantages of referral marketing
  6. Referral Marketing: Real Examples
    1. Airbnb: Credit for your next reservations after making recommendations
    2. N26: Financial compensation for inviting friends
    3. Dropbox: Get more space by recommending the platform
  7. Top Tips for a Successful Referral Marketing Strategy
    1. Tip 1: Leave nothing to chance
    2. Tip 2: Make Recommending Simple
    3. Tip 3: reward referrals
    4. Tip 4: Leave a positive impression
    5. Tip 5: make your own recommendations
    6. Tip 6: Interact with your reviews in a transparent way
    7. Tip 7: Integrate influencer marketing into your strategy

What is referral marketing?

With referral marketing , satisfied customers attract new customers with their recommendations. What exactly does this mean?

With this type of marketing, consumers become advertisers for the brand after being satisfied with the product or service. Customers can recommend your company or one of your products through different channels ; It can be in a conversation with friends or family, with an assessment on the Internet or through social networks. If you want to use referral marketing correctly, the most important thing is to motivate customers to share your recommendations . The larger your number of customers, the faster you will increase your sales with this method.

advice

To find potential customers without this type of recommendation, we explain in this article how to improve the online presence of your website..

The main goal of referral marketing is to find new customers and thereby increase sales . But not only that, with this marketing method the image and trust in the brand is also reinforced. Recommendations from real clients are compelling for their credibility and authenticity . For this reason, recommendation marketing is in many cases more effective than traditional advertising, and it also has a lower cost.

Note

The marketing recommendation is also known as referral marketing , MLM or network marketing ..

How does referral marketing work?

With referral marketing , customers become advertising partners in a way. To be able to use it it is essential to generate satisfied customers who have seen their wishes and expectations fulfilled, and to ensure that they are met, regular customer reviews and market research are required . Only with this type of study will you be able to better know your clients and their needs, in order to optimize your offer.

In the second step, customers must be motivated to share their positive experience with your business. A good tool is discounts and promotional gifts. In this way, if a client makes a recommendation, their relationship with the company will be strengthened in turn.

Note

Personal recommendations to friends or acquaintances are the ones that most influence customer loyalty.

Customers share recommendations primarily in person and online . Through rating platforms or with the feedback function in online stores or on social media, companies can actively offer their customers the possibility of publishing their ratings. As a positive side effect, the company will also have a better view of general customer opinions.

As in traditional advertising, measuring the success of a campaign is an equally important tool in referral marketing . In online stores, for example, the following procedure can help measure success: First, ask your existing customers if they would recommend your product or service. Ask new customers how they came to your business. This data will be used to calculate the recommendation rate as a business ratio .

What is the difference between referral marketing and word of mouth?

The terms " referral marketing " and "word of mouth" are often used synonymously. However, in its exact definition we can observe some differences: in " recommendation marketing " the disclosure of explicit recommendations and evaluations is sought. Satisfied customers talk about the value of the product and share their personal experience with it. Word of mouth, on the other hand, refers to the general spread of information . For example, if a consumer reports a store opening on a commercial street, this will not be considered a recommendation but rather a common example of "word of mouth" propaganda.

The three pillars of referral marketing

One of the foundations for successful referral marketing is a clear corporate identity. There are three closely related factors that form the three-pillar model of this type of marketing , and that are decisive for its structure and application.

Pillar 1: Satisfied customers

Satisfied customers are the foundation of referral marketing . Only satisfied customers recommend their purchases to potential customers and buyers. Therefore, investments in strengthening customer loyalty and satisfaction are of great importance. Professional advice, versatile help and seamless service in purchasing or servicing will influence your customer experience . Even after the service has been provided, companies can influence customer satisfaction, for example with greeting cards, promotional gifts or discounts.

Pillar 2: The company's workers

Employees are representatives of the company outside of it. On many occasions they are in direct contact with customers , physically in the establishment, by phone, email or social networks. Therefore, workers have a great influence on the customer's experience with the company. Competent, helpful and friendly workers will make a positive impression and lead to good recommendations. If you manage your relationships with your customers correctly, the concept called Customer-Relationship-Management, you will be able to optimize individual customer service and improve their experience.

Employees also have the possibility to make recommendations: The fact that employees convey a good work environment and work with the products offered is an important factor in recommendation marketing . That is why it is important to invest in the well-being of your workers . Rewards, travel, events, a transparent company culture, and respectful interaction with them are some of the ways to motivate employees.

Pillar 3: Communication and networking

Companies come into contact with customers in different ways: in person, in writing and orally. A positive and focused on customer communication is the third pillar of a strategy of marketing recommendation of success. In most cases, workers are in charge of communication with customers. Therefore, investing in the communication skills of workers will automatically improve the communication of your business.

Another aspect of communication is the authenticity and sincerity of your company's statements. Advertising messages with truthful content create long-term trust in the consumer. If employees or customers are the ones delivering this message, credibility is even higher. Use your network and invest in relationships with business partners.

Advantages and disadvantages of referral marketing

Referral marketing is characterized by high efficiency and being very profitable. We show you the rest of the advantages.

  • Credibility: The experience of real satisfied customers makes a credible and authentic impression.
  • Quicker purchase decision: With personal recommendations, potential customers tend to convince themselves faster and have fewer objections to purchases.
  • Building brand and trust: The main goal of referral marketing is to achieve a high conversion rate (for example, a purchase, a download or a subscription to a newsletter ). At the same time, this form of marketing also helps companies to strengthen their customers' trust in the brand.
  • Increased consumption of existing customers: When customers give a recommendation, their loyalty to the company increases. This also increases the number of fixed customers and their regular consumption.

Some of the downsides of referral marketing are as follows:

  • Customers are needed as a sine qua non : The principle of referral marketing is that existing customers share experiences with others. Therefore, this type of marketing is difficult for startups with few customers.
  • Criticism and dissatisfaction can be an obstacle : Dissatisfied customers are hard to avoid. When asking for ratings from each consumer, negative opinions may also appear.
  • Public Ratings: Public platforms like Google Reviews or Trusted Shops Ratings also make it easy to post deliberate negative reviews from competitors or dissatisfied customers.
advice

SEO optimization of your company's website with external agencies can also be a guarantee of success, but many small companies cannot afford it. With the IONOS coach ranking you will be able to check the positioning of your website economically.

Referral Marketing: Real Examples

Many companies use referral marketing , encouraging referral outreach in different ways. In the following examples we show you different approaches from different companies in practice.

Airbnb: Credit for your next reservations after making recommendations

Airbnb is one of the brands that has applied referral marketing to its business strategy. When a user registers on the platform through a recommendation, they will receive a credit that can be deducted from the price of their next reservations . Once this credit has been used, the person who made the recommendation will also receive it and can use it.

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By referring new customers, the Airbnb user receives credit for their next reservations. (source: https://es.airbnb.com/help/article/84/c%C3%B3mo-puedo-conseguir-cr%C3%A9dito-al-recomendar-airbnb-a-un-amigo)

N26: Financial compensation for inviting friends

The relatively new online bank N26 has also started using this method to increase its number of customers. By recommending the platform to a friend or acquaintance, users can receive different types of rewards, including financial compensation .

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N26 rewards clients who make referrals with financial compensation on their accounts. (source: https://n26.com/es-es/invita-amigos)

Dropbox: Get more space by recommending the platform

Dropbox is one of the best known examples of a business that has grown up with referral marketing . When a new user signs up through a recommendation, Dropbox rewards the new and old customer with 500 megabytes of additional storage space . This also increases the probability that the new customer will also make a new recommendation. The company performs this process individually and also offers several options to invite friends.

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One of the best-known examples of referral marketing: Dropbox compensates the old and the new customer when the latter signs up. (source: https://help.dropbox.com/es-la/accounts-billing/space-storage/earn-space-referring-friends)

Top Tips for a Successful Referral Marketing Strategy

You already know what referral marketing is . Now the question is: How to use it correctly? We have prepared the best tips for you to develop this strategy successfully.

Tip 1: Leave nothing to chance

Satisfied customers don't always share your experience. Referral marketing requires a systematic approach. Actively encourage your customers to rate your company on rating platforms or share their experience with friends or online.

advice

The Social Selling can promote positive customer experiences and a closer relationship with the company. If you want to know more about this concept, we recommend our article on Social Selling: commercial relationships on social networks.

Tip 2: Make Recommending Simple

The easier the rating process is for customers, the more frequently they will use this feature. A good example is the social media buttons, with which customers can share reviews with acquaintances and friends through a single click.

Tip 3: reward referrals

Not only can you motivate your customers to recommend you, you can also reward them if they do. For this you can use prizes, discounts or promotional gifts.

advice

The newsletters offer companies an economical solution to inform customers about new promotions. With the IONOS email marketing tool, you can organize your contacts, create emails and automate their sending.

Tip 4: Leave a positive impression

When customers are satisfied with your company, many times it is not only because of the product, but also because of the service provided . Offering accessibility and easy sales processes are part of the positive customer experience. Respond to requests, criticisms or comments quickly and effectively. The rapid search for solutions has a very positive influence on the consumer experience.

Tip 5: make your own recommendations

Not only do you motivate your customers to talk, but also offer your own positive experiences . This conveys honesty and authenticity, especially in the B2B sector, and can help in acquiring new customers.

Tip 6: Interact with your reviews in a transparent way

Communicate clearly with the people who evaluate you. If you publish reviews of your customers on the Internet, do not forget to notify them.

Tip 7: Integrate influencer marketing into your strategy

Getting started in referral marketing is n't always easy, especially for startups with a small number of clients. With influencer marketing you will achieve a strategy between traditional advertising and personal recommendations . In this way, new companies have the opportunity to quickly promote their products and increase their clientele.

advice

Inbound marketing also poses an economic possibility to direct the attention of potential customers to your product.


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