Referral Marketing - An Unheralded Customer Acquisition Strategy
Referral marketing is an incredibly powerful way to grow a business through word of mouth recommendations.
22:54 17 June 2022
Referral marketing is an incredibly powerful way to grow a business through word of mouth recommendations. Yet despite the fact that personal recommendations are the oldest and quite often the most trusted form of advertising, this type of marketing has yet to gain the attention that the likes of influencer marketing and content marketing has.
However, there are some industries that have successfully implemented referral marketing strategies. We’ll be taking a look at two of those industries and revealing why all businesses should be taking a leaf from their book.
But before we get to that, let’s do some referral marketing 101.
What is referral marketing?
Referral marketing is exactly what it sounds like. It’s people buying products or services based on a personal recommendation usually from a friend or family member. This is most commonly known as word-of-mouth marketing.
It’s an extremely cost effective and reliable form of marketing that any small business can immediately implement through simply asking friends and acquaintances to recommend their services.
One of the main reasons that it is so effective is that those that recommend a product or service will usually only do so to people who they feel are genuinely interested. This laser-targeted marketing is highly effective for smaller businesses but can be difficult to scale up for larger companies. But it can be done and we’ll get to that later.
Is it the same as influencer marketing?
No, influencer marketing and referral marketing while similar are not quite the same. Influencer marketing is when a brand or company partners with a social media influencer who will agree to promote their brand to a large audience in the company’s target market.
Referral marketing, on the other hand, is much more personal and is usually a one-on-one referral. While this means that it can be a slower process, it does mean that conversion rates are likely to be much higher than influencer marketing.
Examples of referral marketing done right
The iGaming industry
Online casinos and sportsbooks were one of the first online industries to translate the effectiveness of referral marketing into the online space. This involved the extremely simple process of creating a referral program that rewarded existing customers for every new customer they brought in.
A straightforward yet highly effective example of this can be found in online sportsbook and casino free spin offers. This program rewards a customer with $100 in free site credit once a referred friend signs up and makes a deposit.
Bovada’s program is far from unique. In fact, the vast majority of iGaming companies have similar referral programs that offer everything from free spins at an online casino to free wagers at a sportsbook.
The software industry
It should come as no surprise that the software industry and the software as a service (SAAS) industry in particular have implemented referral marketing with great success. Much like the iGaming industry, this referral marketing strategy simply involved asking existing customers to refer the product or service to a friend in return for a reward.
Dropbox is one of the best examples of this in action. Through its referral program the company went from 100,000 sign ups to four million in the space of just 15 months. Dropbox went with dual-sided rewards. These came in the form of additional storage space to both the referrer and their friend that signed up. This limited initial costs and pushed the customers to an upgraded version of dropbox which, if they enjoyed using, they would eventually pay for at some point in the future.
With such impressive success stories from both the iGaming and SAAS industries, the question is why other industries have yet to fully embrace this cheap yet highly effective form of marketing. It’s true that many companies now offer referral rewards. But even so, the attention seems to be all on influencers and content when word of mouth is by far and away the highest converting form of marketing on the planet.