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Referral Marketing Guide: Everything You Need To Know


With all the technological advancements, the number of people using and spending time on the Internet has skyrocketed. People love sharing their opinions and experiences on the Internet via social media or blogs or articles, etc. Among all these talks, brand-related conversations have also sneaked in due to the brand pages, promotions, and ads.

People enjoy sharing their experiences with the products and services they enjoy using and talk about the brand offering them. And sometimes, these conversations act like recommendations that have been playing a significant role in generating new business for the brands.

About two-thirds of the consumers purchase products or services based on recommendations from their known. Actually, when referred by a friend or acquaintance, people are four times more likely to buy something. This observation has led to businesses being able to recognize the power of referral marketing. Using referral marketing as a well-thought strategy allows businesses to leverage the remarkable potential of customer recommendations to achieve outstanding results.

What Is Referral Marketing?

In simple words, referral marketing refers to spreading a positive word about a product or service via existing customers of your business instead of traditional marketing practice. The word-of-mouth marketing is also considered as a form of referral marketing where people tell each other about a company.

Referral marketing works on the principle of creating a buzz among people and making a product/service viral. Usually, the businesses set an incentive or reward for consumers who refer their offerings to other people.

Who Practices Referral Marketing?

Referral Marketing is widely practiced across the world by many businesses. Implementing this strategy can bring exceptional profits, whether it is a small business or a large company or a multinational organization in any industry. Every business that offers products/services can practice referral marketing.

Typically, these businesses practice referral marketing:

  • Retail stores
  • Health clubs
  • Gyms
  • Hotels
  • Restaurants
  • Specialty stores
  • Travel agencies
  • Airports
  • Automobile companies
  • Health professionals
  • Ecommerce websites

Online companies are getting more involved with referral marketing now. This type of marketing can do wonders in an online environment because of the popularity and number of active users on social media and other sharing websites. Internet referral marketing can spread typically faster than offline marketing strategies and reach a wider audience.

However, non-profit organizations can also utilize referral marketing with the objective to increase their publicity and entice more donors to support their charitable cause. One of the most common referral marketing strategies that non-profit organizations use is a joint venture where they partner with a profit-making business that offers a bonus for each referral.

What Type Of Customers are Targeted With Referral Marketing?

A referral marketing strategy can be used to reach a variety of target audiences due to the incredible benefits it can potentially bring to your business.

But businesses need to find an answer to the question – who is inspired to refer people to our business? When offered a reward or incentive, consumers are more likely to refer their family and friends.

The more incentives you offer for each referral, the more efforts your consumers will put into finding potential referrals.

Planning, Creating and Implementing of Referral Marketing

Just like any other marketing strategy, the first step of the referral marketing strategy is research. The beginning of this research will involve identifying what your customers want. If your incentives or rewards are worthless to your existing customer base, they won’t be interested in participating in your referral marketing campaign.

There are multiple ways to carry out your initial research. The marketing team can start observing their customers’ purchasing habits to find out the products or services they enjoy using the most. Depending on your industry, you can offer something like discounts, add-on services, free products, or bill credits.

Another method businesses use to discover their consumers’ needs is by conducting a survey. These surveys can simply ask away from the customers what incentives or rewards would convince them enough to participate in a referral program. Marketers prepare a list of all the possible rewards and bonuses to include in the survey while also allowing the customers to propose their own suggestions simultaneously.

Moreover, the marketers also need to decide on the process for crediting referrals, the number of referrals required to claim the incentive or reward, and other required tools to prove the referrals that actually happened. For example, if you own a mobile service company, you can offer a two-month free service for each successful referral. To track which consumers should get the referral credit, you can set up a separate referral program signup page where the new customers will enter the phone number of the individual who referred them.

Now, the next step is marketing your referral program. You need to spread the word about this program to attract more customers to join it. Typically the most effective way is Internet marketing for both online and physical businesses. You can do this by starting an email marketing campaign or social media campaign or banner advertising.

Some businesses also place sign-ins in physical stores, generally near the cash counter, to catch the attention of people. You can also create brochures with complete details about your referral program that customers can carry with them.

During the ongoing referral program, the marketing team continues to carry out marketing exposure for the program and also track its progress. Doing this helps the companies to gain insights about the strategies that are working out more effectively for the referrals and allowing them to focus on those successful strategies even more to achieve the best results.

So this was all about referral marketing that you need to know. If you are looking forward to starting your own referral marketing campaign for your business, then go for it. The number of opportunities this program can open for your company is unlimited. Putting the right efforts and building a well-planned and calculated strategy will definitely help your business to gain some valuable prospects while reaching new business heights.

We hope this information was useful for you. Let us know how referral marketing works out or has worked out in the past for your business by leaving them in the comments below.