Referral Marketing: Turning Customers into Advocates

What is the most powerful and effective form of marketing? It's not a clever ad or a high-ranking blog post. It's a recommendation from a trusted friend.

Referral marketing is the strategy of encouraging and incentivizing your existing happy customers to spread the word about your business to their friends, their family, and their network. It's about systematically turning your best customers into a powerful and authentic sales force.

A well-designed referral program can be one of the most cost-effective and highest-converting customer acquisition channels you have.

Why is Referral Marketing So Powerful?

• It's Built on Trust: A recommendation from a friend is the most trusted form of advertising. We are far more likely to trust a recommendation from someone we know than we are to trust a traditional ad.
• It Attracts High-Quality Customers: The customers that are referred to your business are often a great fit, because they are similar to your existing happy customers. They also tend to have a higher lifetime value and a lower churn rate.
• It's Incredibly Cost-Effective: A referral program often has a much lower cost per acquisition (CPA) than a traditional paid advertising campaign. You are only paying for a successful result.

The Key Components of a Successful Referral Program

A successful referral program needs to be a "win-win-win" scenario. It needs to be a win for the existing customer (the advocate), a win for the new customer (the friend), and a win for the business.

1. The Advocate's Incentive

You need to give your existing customer a compelling reason to make a referral.

• What to offer: This could be a discount on their next purchase, a cash reward, store credit, or a free gift.

2. The Friend's Incentive

You also need to give the new, referred customer an incentive to make their first purchase.

• What to offer: This is typically a special introductory offer, like a percentage discount on their first order.
• Why it's important: This makes your advocate feel good about sharing, because they are giving their friend a valuable deal, not just promoting a company.

3. It Must Be Easy to Use

The process of making a referral must be incredibly simple and frictionless.

• How it works: You should provide your customers with a unique, personal referral link or a code that they can easily share.
• The Tool: You will need a referral marketing software to automate this process. The software will generate the unique links, will track the referrals, and will automatically deliver the rewards when a successful referral is made.

How to Launch Your Referral Program

1. Choose Your Referral Marketing Software

There are many great tools that integrate with major e-commerce platforms. Popular options include ReferralCandy, Friendbuy, and Smile.io.

2. Decide on Your Incentives

Choose a "double-sided" incentive that rewards both the advocate and their friend. A common and effective offer is: "Give your friends $20 off their first purchase, and get $20 in store credit for every friend who buys."

3. Promote Your Program to Your Existing Customers

Your customers won't use your referral program if they don't know it exists.

• Promote it to your best customers first. Send a dedicated email to your most loyal, repeat customers to invite them to join the program.
• Include it in your post-purchase emails. The moment after a customer has made a purchase is a great time to ask them to refer a friend.
• Create a dedicated landing page on your website that explains how the program works.

4. Track Your Results

Monitor the performance of your program. How many referrals are you getting? What is your cost per acquisition?

Conclusion

Your happy customers are your most powerful and most underutilized marketing asset. A referral marketing program provides the structure and the incentive to activate this asset. By making it easy and rewarding for your customers to share your brand with their network, you can build a powerful, trusted, and highly profitable new channel for customer acquisition.