Does referral marketing work?

referral marketing, recommendation marketing whether word-of-mouth marketing is basically three terms for one phenomenon. When meeting clients who ask if this type of marketing works, you can clearly feel what is behind the question. If they ask, it means that references don't work for them. The truth is, references do work. But only if certain conditions are met.

Who do you think is the more reliable ambassador of your company - you or a satisfied customer? While you probably know your products best yourself, it doesn't really matter to consumers. They want objective evidence that they are worth investing in. For this one reason only, the importance of references cannot be overestimated. The more that the data is ruthless. 9 out of 10 people trust more what the customer says about the company than what the company says about itself. Even if he speaks in superlatives. Moreover, customers are willing to spend more on the products or services of a company that has good customer feedback. Reference Marketing it's a vein of gold. It is up to you whether and how you use it.

What is referral marketing?

Reference Marketing is a relatively inexpensive, but extremely effective form of promotion. No wonder, it is based on simple psychological mechanisms. According to them, we are much more likely to believe in what we are recommended by known or trusted people than in an artificially created advertisement.

Reference marketing is one of the most effective ways to gain the trust of new customers today. It consists in disseminating positive opinions about a product or service by a group of satisfied customers, brand ambassadors or opinion leaders who have a real impact on purchasing decisions their friends, resistant to other forms of promotion.

We distinguish between different levels of recommendation. Starting from an unjustified recommendation of a given company, through a detailed description or depiction of the impressions related to the use of a specific offer, to the active solicitation of recommending persons to finalize transactions with people to whom they recommend a specific offer. Recommendation marketing may take the form of activities spread over time, appreciating the loyalty of the recommenders or the form of a quick promotional campaign, using the mechanism of the passing time, which is to provide additional motivation to act.

Recommendation marketing is time-consuming, as it requires a lot of work, both at the stage of planning activities, selecting the appropriate group of recommending people, choosing an attractive motivation system, and measuring the results of specific campaigns. Conducting reference marketing is based on building valuable, deep and long-term relationships, and such relationships require appropriate care. You should take care not only of the recommending person, but also of the client who was acquired thanks to their actions.

Reference Marketing - Definition

Also known as word of mouth marketing, referral marketing is a relatively new concept in the marketing marketplace. Many companies, even if they know about its existence, unfortunately do not understand it. In "Marketing Communication Tools and Techniques of the 21st Century" you can find an explanation of this concept: "marketing activities aimed at reaching the recipient with marketing information through a direct, seemingly spontaneous oral message, in order to evoke positive associations with the product or brand.” It means provoking consumers to talk about your products or services and express their opinion about them. This can be done through direct contact, telephone and the Internet.

Reference marketing takes many forms: word of mouth, virtual communities, appointing brand ambassadors and the so-called viral marketing. Each of them differs in the way they provide information to consumers.

• Word of mouth - typical communication "from mouth to mouth". It is not as effective as the Internet, but still important to be taken into account, especially in the case of positive opinions, which should be strengthened, for example, by providing samples of goods to your consumers.
• Virtual communities - knowledge base and contacts with a huge range. On the Internet, it is about creating an Internet community, i.e. forums around a product or service, where consumers' opinions are exchanged, often supported by companies.
• Brand ambassadors - they recommend products and services to their friends. These are people who differ from each other in terms of age, social status, profession, appearance, etc.
• Viral Marketing - the so-called disseminating positive opinions about products or services via spam or aggressive spots on internet portals.

Reference marketing is the part of marketing that is distinguished by a lack of control and planning as it involves spontaneous conversations with consumers. The most important thing is to use the right tools to further spread positive opinions about the company.

Reference marketing is also the convincing art of telling a story about your product / service. If you properly engage with the customer and enter into a relationship with them, you will provide them with information about the benefits of using your product. So you create a chance that he will buy it in the future.

On the other hand, reference marketing can also be defined as a strategy that aims to encourage loyal customers to recommend our company and our products directly. In this case, he uses the nature of a person who, if he is satisfied with the product, recommends it to his relatives. Enterprises took advantage of these customer behaviors and created referral marketing consumer referral programs that combine with numerous benefits for the clerk. Referrals are the driving force behind new customers and their value.

However, some marketers distinguish between word of mouth and referential marketing. They indicate that word of mouth marketing is the result of friends talking about products who persuade them to try them without any benefits for themselves. Reference marketing, on the other hand, is an attempt to leverage customer support with tools that encourage, reward, and track customer recommendations.

Reference Marketing - Quotes

Reference marketing can be associated with: news, public opinion, or even word of mouth. Generally speaking, it means "informal and private communication, sociological interpersonal communication channel, in which the subject are friends, family, acquaintances - and even strangers, expressing their opinions about a product or company. " - explains Philip Kotler.

Easier to put it: "reference marketing is marketing activities influencing consumers so that they create and provide other (subsequent) potential consumers with marketing-relevant information about goods or services. "  

In another way, referral marketing is explained by Emanuel Rosen in "Fama: the anatomy of word of mouth marketing": "sum of all comments made by people on a given product over a period of time. "  She emphasizes that trust in the person who talks about the product or service is important in the whole process, although this is not the most important thing. Good referral marketing is one that comes from a third party and not from the manufacturer. "It encourages and rewards the referrer for converting the initial customer. " - he says "Referral marketing: Harnessing the power of your customers."

Reference Marketing is "Customer satisfaction function - the greater the satisfaction, the more positive the opinion about the company."  - points out Paweł Jóźwiakowski in "Whispered marketing as informal interpersonal communication."

The importance of references in business

References are the icing on the cake that many modern customers need to seal the deal. In a world of fake news and distrust of brand-paid 'influencers', consumers are looking for genuinely unbiased opinions to rely on. This is why referral marketing - if it is not already - should become part of your marketing strategy. Here are 5 reasons why.

Reference marketing is building trust and credibility

In business, reputation is everything. It is easy to check it on your own example, after all, you are also a consumer. Which company will you use the most - one without a review or with hundreds of positive comments? Exactly. This is the essence of the power of recommendations. Referral Marketing requires gaining the most enthusiastic followers of your brand to vouch for your reputation on your behalf.

72% consumers say positive reviews and testimonials make them trust companies more. The 88% trusts consumers online as much as they trust personal recommendations.

These are huge amounts of faith that can turn into cash in your wallet. Take advantage of them with well-written feedback from real customers.

References are social proof

Have you ever bought a product because a famous celebrity recommended it? Or maybe you decided to book a hotel because your friends recommended it, they were genuinely delighted with their last stay? Here's how the simple message of social proof works: "If they're happy, I'll probably be too." When used correctly, it is valuable sales tool.

People's 95% says reviews - both positive and negative - influence their purchasing decisions.

Someone's testimony fits in with our herd mentality. Well, we're all sheep. Social evidence convinces us that we definitely need the product or service in question because everyone else can't be wrong, right?

Customer feedback shows you how you solve their problems

Referral marketing can be a great illustration of how you've successfully solved customer problems. Comments on specific needs that have been met thanks to your products or services are ideal for this. What's more, thanks to the references, you will reach your recipients with this message much faster than, for example, a press release. Especially if it is video testimonials.

According to the 68% study, people say they would rather find out about a new product or service by watching a short video, while for text-based articles the figure is just 15%.

By combining the power of a video presentation with opinions real users, you take all measures to engage your customers as much as possible.

Reference marketing humanizes the brand

We all love knowing good stories. Our curiosity and empathy towards other people are rooted in our psyche. This is another reason why reference they are so effective. They provide a human point of view that enables the company's customers to identify with the values of the brand and better understand the products and services it offers them.

Big brands spend millions on brilliant ad campaigns to reveal the human side of their business. You can achieve the same result for a fraction of the cost. How? Putting on PR and acquiring great references. It's worth the effort to get referral marketing given that only 34% buyers in the B2B sector is willing to find the content related to the providers trustworthy.

Is it always worth using referral marketing?

In order for recommendation marketing to achieve its intended goals, we need to properly prepare for it. Referrals can only help those companies that are valued by their customers and represent a brand that stands out on the market. The necessary condition for recommendation marketing is the presence of a group of satisfied and loyal customers. Before we start acting, we must properly analyze our offer. We must be aware of its strengths and weaknesses and learn to look at our product or service with a critical eye. People involved in the referral system will certainly not only notice our advantages and disadvantages very quickly. They will also properly display them in their communication with their observers.

In the next step, we must select the appropriate group of people to whom we will commission further recommendations of our services. It is important that they are our actual customers, i.e. people who had a chance to actually use our offer. Loyal customers are the greatest value of any organization. Marketing specialists, thanks to the right tools, can turn them into faithful ambassadors of our brand.

One of the most important conditions for successful referral marketing is an appropriate remuneration system for each referral. The rewards system may take the form of a loyalty program, motivating the recommender to maintain a long-term relationship with the company. It is important to develop a mechanism that will allow you to reward both recommenders and people who have been successfully acquired through their actions. The reward does not necessarily have to be typical remuneration for the work done, but e.g. free access to other products or services or attractive company gadgets.

Recommendation marketing works especially for innovative products or services that have not been available on the market so far. It is also a perfect idea when it interests us target group it is resistant to traditional forms of advertising. References can also be used when we want to quickly obtain attractive and engaging content, i.e. lifestyle videos and photos, showing how our products or services work in everyday life and realistically solve specific problems of customers satisfied with the purchase.

Referral Marketing Increases Conversions

Consumers who interact with reviews from other customers have a 58% more likely to convert. 50 or more reviews can generate a 4.6% increase in conversion rate. What does this show? These numbers show that the more positive feedback you get from your customers, the more likely you will get more conversions.

Getting testimonials from your customers is easier than you think. Research shows that 80% reviews come from regular email correspondence. 68% issued a recommendation to the company when the company asked for them. What is the conclusion of this? It is better to be active and seek references than to leave the fate of your company to chance.

Do you want to take matters into your own hands even more? contact us. We will develop a strategy to strengthen customer relations and train your team in the field of reference marketing.

Reference Marketing and Viral Marketing

Reference marketing is activities aimed at encouraging customers to share their positive experiences and favorable opinions about a brand, its products or services. In other words, it is an organized form of promoting the company's products / services by satisfied customers. Everything is done informally. However, the company should initiate it (motivate customers to leave feedback) and control it in such a way that it does not turn against it.

How does reference marketing compare to other forms of marketing? Let's look at an example viral ads. Viral marketing is an extremely interesting form of promoting brands or specific services / products. It consists in creating a non-standard advertising message that will arouse so much interest in recipients that they will share it voluntarily. The goal is to create a natural buzz around the company. A well-prepared advertisement spreads like a virus (hence the name of this form of marketing), and thanks to this, the company gains publicity. Viral materials most often come in the form of intriguing graphics or films. They are often humorous.

What are the differences between referral and viral marketing?

The goal of viral marketing is to create an advertisement that will evoke strong emotions, so that recipients will be happy to pass it on. The prepared message is to create a natural hype around the brand, a specific product or service - and whether this will actually happen depends on the Internet users. The boom for viral advertising usually lasts a while - until the recipients get bored with the message. In reference marketing, the content that is shared and commented on is the product or service itself. The goal of marketing is to attract new customers and build a positive one brand image by posting positive reviews. Referral marketing is usually controlled by the company. The effect is spread over time and lasts throughout the period of discovering the product or service by subsequent customers.

Both referral and viral marketing can bring spectacular results. It all depends on the commitment, idea and time devoted to the implementation of specific activities. No matter which marketing model you choose, first of all, you need a well-thought-out, detailed plan. In order to achieve success, it is necessary to have excellent knowledge of the target group (what interests recipients, what form of advertising will bring the best results, etc.), the environment in which the brand operates (what steps are taken by the competition, what the market looks like) and marketing tools. A detailed analysis, a well-prepared strategy, thoughtful implementation of individual activities and consistency in their implementation are the recipe for success.

The most important features of referral marketing

Reference marketing can be really effective. However, in order to bring the expected benefits, it must meet several conditions. What characterizes good referral marketing?

• He's credible.

Reference marketing has nothing to do with ethically questionable reviews from paid individuals. These are testimonials left by real people, real customers. Behind each opinion is a person (someone we know, whom we trust - e.g. a friend or relative) who will not recommend poor-quality products or poor services, because this may have a negative impact on their image and credibility. Referral Marketing is honest and genuine. And that's why it's so effective.

• It is purposeful and controlled.

A brand that would like to incorporate referral marketing into its own strategymust initialize it. First of all, it should ensure that it offers products / services of excellent quality. The highest level of customer service as well as the form and speed of execution of orders / orders are also important. A satisfied customer will be happy to give a favorable opinion - on his own, without any additional impulses. The brand can also motivate customers to share their positive experiences. From the very beginning of planning your brand strategy, you should define how you want to encourage customers to give feedback. A popular solution is to offer discounts for the referrer and the referral recipient. Gift vouchers or small gifts are also an interesting option.

• It is based on trust.

Before we decide to buy a specific product, we look for opinions on the Internet about it or ask someone we know for their opinion. We are susceptible to suggestions. We trust people to whom we are strongly attached. This is why referral marketing is so beneficial. It consists in promoting products / services among your friends and relatives. Recipients trust the recommender, so they are willing to follow his suggestions.

• It has clear and logical rules.

A company deciding to use reference marketing should prepare clear, transparent recommendation procedures. The referral program can be automated - so that referrals can easily and quickly share opinions.

How to implement referral marketing?

The referral program is a chance to reach a wide range of new customers, increasing sales, generating more profits, building a positive brand image and achieving a stable position on the market. Numerous studies confirm that recommendations are of great value. Research from Wharton University shows that people are 4 times more likely to make a purchase when they receive a recommendation from family or friends.

This is also confirmed by the Ogliva study in cooperation with Google and TNS, the results of which clearly show that recommendations are a key factor in making purchasing decisions. According to Nielsen's analyzes, as many as 92% customers trust the recommendations of their friends, and 77% of them is willing to buy the recommended product under the influence of their relatives' opinions. Moreover, over 80% respondents declare that they will be happy to recommend the product to others. Unfortunately, reality shows that not everyone does it. In practice, fewer than 30% customers leave positive feedback. Why? People don't feel the need to provide references. They need an impulse to recommend certain products or services to their friends. The role of the company is to provide them with this impetus. Effective motivation to promote her and her services / products.

How to implement referral marketing? The first step is to assess the company's readiness. A brand should carefully examine its offer and evaluate it with a critical eye - whether it offers the highest quality products, whether customer service is at a satisfactory level, and whether the products / services are worth recommending. Customers will not recommend poor-quality products or services. Such action may adversely affect their credibility.

The second step is to analyze your target audience. The entrepreneur should define the target marketing audience. This will allow him to choose the right tools and plan well-thought-out activities. At this point, consideration should also be given to how we will encourage existing clients to join the referral program. The motivational element can be discount codes, bonuses or financial salaries. The method of rewarding should be carefully considered and adjusted to the best of your clients. A poorly chosen one can effectively scare them away, and an attempt to introduce reference marketing will turn out to be a failure.

The final stage is the creation of a logical recommendation procedure and a system for documenting their effectiveness.