Referral marketing. For whom?
In theory, it should work for any company. There is, however, a fundamental condition:
It is crucial to have customers who are content with the offered services or products.
The most important thing to understand is that referral marketing is not better or worse from the above-mentioned strategies. It has both its advantages and disadvantages. Some may say that referral marketing is less effective for online shops which are just getting started because they only generate a very modest number of monthly visits and do not have loyal customers yet. In such a case it may be advantageous to set up a partner program and look for a partner who will advertise your e-shop on behalf of the company.
For online shops who have been operating already for a longer period of time, referral marketing may work as an efficient automated marketing channel in order to boost sales since it only requires limited resources. To automate the whole process webshops need proper tools which do not only motivate customers to recommend a shop but also enables them to do so easily and without any problems.
How can referral marketing look like?
Airbnb is a platform which allows renting a flat, room or bad by a private individual. In the case of Airbnb, referral marketing is simply a referral program with a win-win situation. Both parties, the one referring and the person receiving the recommendation profit, which increases the number of referrals and the effectiveness of the program.
A referral received $25 when a person who received a recommendation just went on a journey and $77 in the case in which the receiver of a recommendation decided to become a host as well. The person who received the recommendation (after creating an Airbnb account) got a $25 discount for the first trip.
Airbnb provided us with data considering the benefits of referral marketing. In comparison to the rest of the customers, Airbnb earned an additional profit of 13% through referral customers. Also, the likelihood of being recommended via the referral program increased up to 264%.
In the case of hosts, the effects were even better. The value of the user who had received a recommendation was higher by 146% compared to the average Airbnb host.
How to introduce referral marketing in a simple and quick way?
The example of Airbnb introducing referral marketing is just one out of many which were proven to be successful. The company operates on a global basis. However, this does not mean, that small and midsized companies cannot use this strategy as well. Referral marketing is a good solution for every shop which has gained content customers.
Just like in the case of other marketing techniques used in e-commerce, there is a variety of tools allowing to introduce referral marketing. They differ in effectiveness, the way they work and the level of personalisation.
Refericon aims at high effectiveness through the simplification of the whole process connected with sending referrals. After the implementation of the app, the Refericon widget appears on the webpage. A client, by clicking the widget, has the opportunity to recommend a shop to a friend, without leaving the page. Additionally, he or she may receive a discount for the next purchase.
Average CTR (Click-through-rate) for the icon is 5%. Around 10% of people who click the widget send a referral. Of course, the data is global and abbreviated. The conversion rate heavily depends on the product, category, the line of business and some other factors.
We have just shown what referral marketing is and what pointed out the differences to other popular strategies. In order to get a better overview, we have decided to use an illustration that summarizes the topics explained which makes it easier to remember them: