Referral marketing: what is it and how exactly does it work?

As a company, we often worry about choosing the public figure or influencer who will act as our brand ambassador. However, we miss that customers themselves can be the best ambassadors. Word of mouth is one of the oldest and most effective weapons for a business to attract customers., so the more happy customers you get, the more likely they are to recommend your products or services. That’s what referral marketing is all about and in this article we want you to know all its keys so that you can start putting it into practice in your company.

What is Referral Marketing

He referral marketing consists in encourage customers to speak well of your products or services, always voluntarily. In this way, referrals will come to your business, that is, people who advance faster through the sales funnel and who, therefore, are much more qualified leads (potential clients).

Referral Marketing vs Affiliate Marketing

Although they may seem similar, the referral marketing and the affiliate marketing they are not the same. In affiliate marketing, clients usually obtain a commission or financial remuneration by attracting new clients through banners or links. Furthermore, in this case, The people who attract new clients are usually influencers and focus on a broader audience, such as his followers. Therefore, it is very common for affiliate marketing to take place on social networks or blogs.

For its part, referral marketing is something that is developed on a more personal and home level, since the person recommends the products and services to their friends, family or acquaintances through a link or code, receiving a discount or a gift for it and not a commission.

How to design a referral program

  1. Identify your ideal client: Before encouraging your current customers to recommend your brand, you must be clear about which audience you want to reach with referral marketing. Once you are clear about it, you can create the perfect copy to inform your clients of who they should recommend your brand to (friends, siblings, parents, co-workers…). This way, it will be easier for your strategy to be successful and for more qualified leads to come.

  2. Choose your strategy: In this case, there are three possible scenarios. One is to offer rewards only to customers who recommend your brand, another is to offer them only to referrals (the strategy that works the least) and the last is to offer them to both (the most widespread and recommended).

  3. Interesting reward ideas: Monetary rewards are not the only possible option, you can also choose to reward with some of your products or services, or with redeemable points.

  4. Choose a suitable program: We do not at all recommend that you do referral marketing manually, it is better to invest in a tool. The best known on the market are: ReferralCandy, Viral Loops and Referral Factory.

  5. Select how you are going to communicate your strategy: How will your current customers know that they can recommend your brand in exchange for a reward? Social networks, email marketing and the website are the most common channels through which to transmit this message. Furthermore, the latter is where customers usually manage it from, that is, it is where they will have the code that they can share, where they can see their rewards and from where they can redeem them.

  6. Analyze your performance: To know how your referral marketing strategy is working and to be able to implement improvements, it is essential that you carry out periodic monitoring that allows you to draw conclusions.

How to get customers to recommend your brand for your referral program

It is as important to define the ideal client that you want current clients to recommend your brand as it is to define which clients you are going to encourage to speak well of your company.. Keep in mind that not all clients will be the right fit, nor will they want to participate in a referral program. For example, customers who write negative reviews or don’t make regular purchases may not be the best fit for referral marketing. On the other hand, those who buy regularly and rate your brand highly will be the perfect customers.

However, most brands usually encourage all customers to do so, or at least give everyone the opportunity.

Referral program example

Wetaca and its “bring a friend” program

The prepared food delivery company Wetaca, offers all its customers the possibility of recommending its brand in exchange for discounts on their orders. In this case, the brand has opted for the hybrid strategy, whereby both current and referred customers receive a reward, some for recommending and others for purchasing.

Each customer is assigned a personalized code, which they can share infinitely with the people they want (as long as they have not made a purchase yet). Once that person uses it, they will receive the reward, and not before.

N26 and its “invite a friend” strategy

He N26 online bank offers all its clients the possibility of receiving a financial reward if they recommend anyone who joins the brand through their link. Again, this company uses the hybrid strategy, in which both client and potential client (referral) receive a reward. As we have already said, it is the most common, since it gives incentives to both parties, increasing the chances of both the client recommending it and the referral joining.

Bnext and its “invite friends” option

Like N26, the bnext bank It also offers incentives to both parties, in this case €5 to each. However, the company places a condition on the referral so that both can receive the reward, beyond joining the bank: send a transfer of more than €50 in another currency or buy cryptocurrencies for more than €50 from its application.