After reviewing a report with findings from more than 2,000 referral programs and over 100,000 customer referrals, all the stats about referral marketing are proven to be true. Putting the power of word of mouth referrals back in your hands, referral programs offer businesses so much more than just a customer acquisition channel. With several trends that indicate referral programs to be the fastest-growing marketing channel, find out why referred customers buy sooner, spend more and stay longer.
Instant Customer Trust
Every day your customers are talking about your business, brand, or products to their friends. Of these conversations, up to 88% of referred friends are more likely to trust you because of the credibility passed on through word-of-mouth recommendations. We know that lasting customer relationships are based on trust. And, the fastest way to gain customer trust is through referrals. Throw in a reward every time a customer refers a qualified lead and you have a winning recipe for referral marketing success.
Easy To Use Referral Software
Now anyone, anywhere can run a referral program using plug-and-play referral software. No code referral software offers an easy-to-use solution to build, launch and manage your referral program. Fully customizable and in most instances offer integration features to automate your referral program, we love referral software because of how accessible these referral platforms have become to any business of any size.
Highly Qualified Leads
Referred customers are 18% more loyal and have a 16% higher lifetime value. Not only that but they have also been found to spend up to 13.2% more. Referral programs help to generate a large volume of high-quality leads through word-of-mouth referrals amongst like-minded customers.
92% of people trust recommendations from people they know, compared to 37% of people who trust search engine ads and 24% that trust online banner ads. While paid-for media is getting more expensive, the return on marketing investment is not reflective of this increase in cost. In contrast, referral leads have a 30% higher conversion rate than leads from any other paid-for channel. What’s more, 86% of businesses that run a well-planned referral program will experience a growth in revenue within two years.
Rapidly Evolving Marketing Channel
While Facebook, Instagram, and Google have always been the go-to advertising platforms, their cost per click continues to increase, in some instances as much as up to 23%. While the CPC increases, the return on investment has remained unchanged. On the other hand, referral marketing is a rapidly evolving marketing channel, statistically proven to lower the cost of customer acquisition and increase the lifetime value of your customers.
Need More Evidence?
We’ve all heard of the various growth success stories that companies such as Dropbox, Airbnb, and Uber have seen using referral marketing strategies. Citing massive growth at a very low cost, the results are apparent that the time to ride the referral marketing wave is now.
Closing The Referral Loop To Gain Greater ROI
So you’ve already spent the budget to acquire a customer base using paid-for media (albeit an expensive one). Reclaim a return on your investment on advertising spend by closing the referral loop. Lowering CPC by as much as 34%, using customers acquired through paid-for media to refer their friends using a referral program, closes the referral loop. This makes sure that the expense of acquiring customers via paid-for media sees a return.
Here’s an example to help explain what we mean by this: Say you spent $20 on an Instagram ad to acquire a new customer, and you then ask that customer to refer a friend for a $5 reward, your CPA goes from $20 to $12.50 because you have now acquired two customers for the total value spent.
So What Are The Risks Of Running A Referral Program?
In short, there aren’t any. Running a referral program will only require you to reward customers when the people that they refer qualify. So what we mean here is that referral programs operate based on how well they perform, rewarding referring customers only when a new prospect converts as a customer.
Referral programs shift your business cost from before customer acquisition to after customer acquisition – only paying for a reward, once you have actually acquired a new referred customer
Tips For Making Your Referral Program A Success
While referral software makes building, running, and managing your referral program easy, success will depend on your customer’s willingness to refer their friends. To make sure you are getting as many referrals as possible read the next three tips for referral success
Offer an appealing incentive and reward
The best performing referral programs offer an incentive and a reward. People feel good when they give. Most customers will be more inclined to refer their friends when they know the people they refer will get something too. This is why double-sided referral programs see a higher volume of user adoption than single-sided referrals.
Make sure the right person is rewarded.
Be sure to reward the person that’s doing the most work in the referral process. More often than not, and especially in the case of B2B referrals, customer referrals start with an individual that refers a potential lead. But when that lead converts it’s often the company that gets the reward and not the individual that did the referring. Make sure the individual doing the referral gets the reward and not just the business that benefits from the new lead.
Make Your Referral Program Visible
Market your referral program at every opportunity you get. The more people you tell about your referral program, the more people will join. Increase the visibility of your referral program and make sure as many people as possible know to join and start referring their friends.
What used to be expensive, time-consuming, and highly technical, building a referral program today has since become much easier to do. Referral software eliminates the need to hire a developer to build an in-house referral program. Plus, the best referral software offers integration features to fully automate your referral program. It’s now easier than ever before for marketers and business owners to build, style, and launch a referral program without writing a line of code or help from a referral marketing expert.
We hope you enjoyed these research findings that explain why running a referral program is the best way to get qualified leads and grow your business. To get more data, download the full referral marketing trends report produced by our European Agency Partner Referral Factory.
Get the report here.