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Referral Marketing: Definition, Best Practices, & Strategies

Choosing the best marketing strategy for your business can be one of the most difficult aspects of promoting your products or services. With so many marketing strategies available, knowing which approach will be most effective for your business can be challenging.

The marketing plan that works for one company could potentially cause the opposite result in another business. This is why marketing plans need to be tailored to each organization after considering several aspects of the company. It doesn't matter if you're a small business owner, you have a mid-sized organization, or you run a large enterprise; you can expect a better outcome with a cutting-edge marketing strategy.

More and more business owners are discovering the benefits of a referral marketing strategy. In the past, word of mouth was free, and it was often effective. This type of marketing works because it's a carefully implemented program that can provide impressive results.

What is referral marketing?

A type of promotion that entails the use of word of mouth marketing from current and former customers as a means of driving more business to a company. The idea is that you go above and beyond to provide your customers with amazing services, which makes them more likely to make recommendations to friends, family, and co-workers. Happy customers can even make recommendations to complete strangers in certain situations.

With a referral program, the strategy used to attract new customers doesn't rely on customers engaging in word of mouth of their own accord. Instead, marketers work to foster the implementation of this tactic among former and new customers. While some businesses focus on both types of customers , others only focus on existing ones.

Who should use referral marketing?

Referral programs are one of the least expensive promotion strategies available, which makes it excellent for business owners who may not have a huge budget for marketing. However, this marketing strategy shouldn't be limited to small businesses since it has the potential to work wonders for B2B and B2C organizations of all sizes. All companies experience customer churn at one time or another, but this can be minimized by using referral marketing campaigns in addition to other business marketing tactics.

Top-notch customer care is critical if you expect to be successful with this marketing technique. Too many companies fail to screen their applicants properly, and they end up hiring employees who are rude and unhelpful. Excellent service and customer acquisition go hand-in-hand, so if you want loyal customers and repeat business, you must take your time to hire caring, hardworking, and efficient employees to perform optimally while representing your company at the same time.

If you provide great products or services to your customers and you're there to offer the support they need, then you're building a healthy relationship with your customers, which is essential for success. The more you work hard to ensure the customer journey of everyone you've done business with is positive, the less you'll wonder whether your customers will refer your business to their friends; it's simply a matter of "when."

How to create a referral marketing strategy

A referral program can be difficult to build and implement, especially if you've never developed such a plan in the past. It takes practice and experience to create a sound referral marketing plan. Not only must you identify your target audience for the strategy to work, but you'll also need to do the following:

How to create a referral marketing strategy

Identify ways to incentivize customers

In order for referral marketing to be successful, you must provide a viable incentive to offer old and new customers. Most businesses only focus on existing customers since they've shown loyalty by making frequent purchases or interacting with your brand.

It's equally as important to choose the right referral incentive. The wrong type could backfire, which won't help your marketing strategy and possibly even hurt it. So, how do you determine what rewards to offer your customers in return for their help spreading the word about your business? Also, is it acceptable to provide the same incentive to all customers?

First of all, incentivizing customers allows you to work with your clients and request they refer a friend to your company. Once a customer refers a friend and that friend makes a purchase or signs up for services with your company, you can provide them both with whatever reward you've decided on. This could be a gift card, cash, or credits on their account, just to name a few examples.

When choosing referral incentives, be sure to select ones that are enticing to customers and affordable for your company. While you don't want to pick a high-dollar reward that'll cause you to lose money, you also don't want to offer one that's so undesirable that customers never refer their friends. Also, when it comes to providing the same incentives to all customers, that's perfectly fine. In fact, it's the norm because it can be too time-consuming and confusing to keep up with and offer customized rewards to your customers.

Choose the right marketing software

Choosing the right marketing software is absolutely essential when it comes to referral marketing and many other promotion strategies. Mailchimp offers a highly sophisticated program with a positive track record for providing the results that businesses want. Mailchimp has several unique and very successful marketing tools to choose from, whether you're looking to use referral marketing or you're hoping to combine multiple strategies customized for your specific business, we can help you achieve your professional goals.

The wrong marketing partner may be inexperienced in implementing a sound referral marketing program. The marketing partner may also execute a program incorrectly. Marketing plans need to be customized to a specific company, as they can't be a one-size-fits-all program to be a success.

Promote your referral program

Promoting your referral program is just as important as marketing your products and services. If customers aren't aware that your referral program exists, they can't participate. Many satisfied customers never refer their friends and families for a business or service, and it's not because they dislike a company's services. It may be because referrals aren't at the forefront of their mind.

Of course, if a friend asks one of your customers to refer them to a company that provides excellent service, the customer will likely direct them to your organization. However, offering incentives for them to do so is a lot more effective because you can't wait for any possible scenarios to happen.

Referral marketing benefits

Referral marketing benefits

If you’re not sure whether this marketing tactic is right for you, here are a few benefits to keep in mind:

  • Increases your audience–An increase in referred customers allows you to drive traffic to your website, grow your contact list, and potentially earn more profit.
  • Generates social proof–When it comes to building a meaningful and reputable standing in the social community, referral marketing can help immensely.
  • Boosts loyalty–By offering incentives to your customers, they're more likely to remain loyal to you and your company.
  • Ensures more qualified leads–Even if every friend referred doesn't sign up for products or services with your company, you're still collecting more qualified leads that can result in revenue and success.
  • Cost-effective–Referral marketing is one of the most affordable forms of marketing there is, plus it's effective.

Best practices for referral marketing

It's imperative to follow best practices when it comes to marketing your business, especially when using a brand new strategy. The following best practices are all critical for a successful referral program.

Best practices for referral marketing
  • Know your audience–Knowing who your audience is can help you create incentives that are appealing and will build customer loyalty.
  • Be honest–It's best to be honest and transparent about the type of rewards customers will receive. By keeping your word, you can encourage customers to refer your brand to friends and establish trust.
  • Work with influencers–Providing influencers with a unique referral link allows them to easily direct their followers to your business.
  • Offer customers value–When it comes to referral rewards, always provide value. This ensures customers and brand ambassadors are actually rewarded for their time.

Enhance your referral marketing strategy with Mailchimp

As you can see, referral marketing is a low-cost and effective way to market your products or services. All you have to do is encourage your current customers to do the work for you. Of course, you'll have to pay them for doing so through incentives, such as cash or credits. Still, the new business you generate and how much you earn can outweigh the cost of these incentives, allowing you to generate a profit easily.

If you're thinking of creating a referral campaign for your business, use Mailchimp to enhance your strategy. With Mailchimp, you'll have access to several marketing tools, including email automation, digital ads, postcards, and more, to ensure the success of your campaign. Get started today and see the difference an all-in-one marketing platform can make in your organization.

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