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Referral Software - The Ultimate Guide

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Studies show that every day, in the United States, there are roughly 2.4 billion conversations related to brands. The online landscape has changed dramatically over the years, and with it, the behavioural patterns of internet users. Nowadays, people interact with social media, businesses and products in a very unique way. They will frequently mention services and products they enjoy and trust. Since the beginning of time, people have shared experiences (both positive and negative) with their friends. They intuitively understand referrals.

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Another study shows that most buyers are emotional ones. Therefore, a referral from a friend will value ten times as much as an online review or product description. This must mean that customers who enjoy your services will automatically recommend you. Wrong. As a matter of fact, although 83% of satisfied customers are willing to refer your products, only 29% of them actually will. There has been a lot of heated debate on the topic of social media and content marketing, but it seems that the most effective way of attracting more customers is often overlooked.

Many internet marketers leave referrals to chance, because they have no idea how powerful they can be. Before we start the Ultimate Guide for Referral Marketing, let's take a look at some more stats that will encourage you to make the extra effort:

- Worth of mouth is, and forever will be, the most effective form of advertising. As a matter of fact, referred customers demonstrate stronger loyalty.

- People will pay two times more attention to recommendations they receive from friends or thought-leaders.

- 24% of internet users trust online banners, 37% trust search engine ads, but a staggering 92% of people ill trust recommendations they receive from friends.

- Matthwe Stinchomb, of Etsy, said that 90% of the site's growth comes from Word of Mouth Marketing (WOMM).

What is Referral Marketing?

Simply put, referral marketing means deliberately encouraging your clients to spread the word about your company. Instead of traditional advertising, smart companies use existing customers who are already satisfied with a service or product to help them. They offer small incentives and encourage customers to tell their friends about a service or product. Referral marketing is very similar to Word of Mouth marketing. WOM is also the principle behind viral content. Ideal referral marketing can produce the same effect as WOMM, but it generally offers some form of reward to the customer who does the referring.


Referrals should be a vital element of every business's marketing plan. The problem is that most companies nowadays take referrals for granted. They think that people who enjoy their service will automatically share their experience. Wouldn't that be great? As is the case with many marketing strategies in the world, you will have to sweat a bit to get your referral strategy going. In no time, you will be able to get the ultimate referral.

What is the ultimate referral? Let's take an example. Every company should know how to network strategically. If you have an auto company with a 10-mile service radius and 3 employees your goal isn't to attract people from other cities. Your mission should be to introduce yourself to people who are actually interested in the product that you have to offer. When it comes to referral marketing, anyone and everyone is not good enough. That's because building relationships and gaining trust is a major element of a successful referral campaign.

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Why Use Referral Marketing

The biggest problem with referral marketing is the fact that it's hard.

"But every type of marketing is hard" - you will say

Well, referral marketing is a special kind of hard. Imagine that you have a small jewellery shop, tucked away in the middle of nowhere. Having one of your clients tells the others about your shop, and offering him a necklace in return sounds doable. But what happens if you own a shop in the middle of New York? Bonuses for referrals can become very hard to handle.

If you are the owner of a massive brand you should consider hiring specialists for your referral marketing. You could also use a referral app that allows you to focus on your core business, make your customers happy, get referrals, and ultimately grow your business.

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Now that you know how to handle referral marketing for an ever-expanding business, let's take a look at the main reasons why referral marketing is important for your business.

- Automotive service companies, banks, health clubs, doctors/dentists/health professionals, retail & specialty stores, restaurants and travel agencies use referrals. A recent study shows that 65% of new business comes from referrals. In addition to this, customers for the aforementioned industries are 4 times more likely to make a purchase if they have received referrals from a friend.

- Did you know that referral marketing is arguably the least expensive of marketing strategies?

- Another interesting statistics shows that 80% of all B2B and B2C purchases have some form of WOM recommendation involved in the purchase cycle.

All in all, Referral marketing is clearly an effective means of promoting one's business and converting more customers. It is also one of the least explored marketing strategies at present. That is because, although WOM has always been used by businesses, it usually occurred online. The challenge was to make it work online. Social media and the increasing engagement of internet users and communities have made it possible.

Understanding the Nature of Referral Marketing

Before you can even hope of getting a referral from customers, you must build a trusting relationship with them. Before we dive deeper into the world of referral marketing, let's take a look at the best practices for establishing and solidifying the trust of your future referrers.

1. You must develop a strategic plan and commit to it. It will take a while for your referral strategy to take off.

2. You must always treat your referral prospects with the utmost respect and appreciation. Even if they have come to your site, they are still unsure whether or not they wish to make a purchase. The way you treat your new prospect during the initial stages will impact your future relationship, not only with him/her, but also with the person who has referred him/her to you. Even if the prospect does not convert, you still want them to say great things about your business.

3. What many business people do not know is the fact that the lifespan of a referral is very short. If the referral was made on a social media channel, it will disappear in a matter of hours from news-feeds. This is why you must act immediately. Otherwise, you risk damaging a relationship with your referrer or missing out on a new opportunity.

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4. In most situations, the referrer will only recommend a product or service if he/she truly believes in it. In addition to this, the referrer is also genuinely interested in the experience of people he referred. Let him know about your progress with the prospect. If the prospect converts into a customer, the referrer will be more likely to promote your business in the future.

5. Don't forget to thank your referral sources for new clients and customers. This is one of the most important elements of your referral strategy. Not only will it help your business gain the trust of customers, but it is also the right thing to do. Call it business etiquette.

6. Besides giving thanks to your referral source, you should also reward it promptly. A small token of appreciation, a discount or a gift will be greatly valued by the referral source.

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The First Step of a Successful Referral Campaign: Research

One of the most successful referral programs in the online world belongs to Dropbox. If you've ever used the service you know what I'm talking about. Back in 2009, the company told its customers that if they share the word about their service, it will offer additional storage space. Both the referrer and the referral benefitted from this campaign. The company also increased the number of users. Everybody won. By 2010 Dropbox's daily signups had permanently increased by 60%. More than 2.8 million direct referrals were sent.


This is a great example, but how exactly can it help you? Understanding the concept behind referral programs can inspire your own campaign. The first question you must ask yourself is: What kind of customers will respond to a referral marketing campaign? This is a question that all businesses should ask themselves. Assuming that you are monitoring your demographic analytics data, you probably have a pretty good idea about the type of customers that prefer your products.

The first and most important step of referral campaign is research. Once you understand what customers want, you will be able to offer them attractive bonuses and packages in return for referrals.

Research Tips Prior to Your Referral Marketing Campaign:

1. You could have your marketing personnel study the buying patterns of your clients. This way you can find out what services/products they enjoy the most. Offer discounts and gifts based on these preferences.

2. Another idea would be to use customer surveys. Mind you, they can be very annoying if they appear as annoying pop-ups. If you decide to go for surveys you should definitely make them short and to the point. Ask your clients what incentives would motivate them to participate in a referral program.

3. Use tracking software to see exactly how your users are interacting with the page and products. There are several tools that can show you a customer's screen.

4. Find out about the most successful referral programs of top-ranking companies and try to implement similar strategies.

Best Practices of Referral Marketing

#1 It all starts with the Irresistible Offer

We've been talking about incentives, bonuses and gifts for quite some time no. The offer is undoubtedly the most important element of your referring strategy. It has the power to make or break your entire strategy. There is a reason why you have to conduct extensive research about your clients: you want to come up with the perfect offer for them. Offers should have 4 key components. The first component is attractiveness. You must provide your customer advocates with a reason to recommend you to their friends. Offers may include, but are not limited to free goods, loyalty points, gift cards, charitable donations, discounts, tokens etc.

The second component of a successful offer is a balanced offer structure. You must maintain a sense of equality & integrity will motivate future referrers. The third component consists of testing and optimizing. Chances are that you won't get it right from the first try. Even if you think you do, you should still use different types of incentives and monitor their performance. Last but not least, the fourth component of an irresistible offer is the incentive for the referred. As you could see with the Dropbox example, the 'friend' also received something for accepting his referrer's invitation. An unique offer that only a referrer can benefit from is sure to attract more potential customers.

#2 Make it Easy to Share

Internet users lose interest quickly, especially when it comes to referring businesses. There are several channels that you can use to promote your products and services. You are probably already familiar with some of them from your social media marketing and content marketing campaigns. We are talking about email newsletters, social networks (Twitter, Google+, Facebook etc.) and URLs. In order to make it easy for people to share your referral marketing programs you will have to test, optimize, and test again.


Of course, you do not have to utilize all the channels mentioned above. Based on the type of business that you own, and the social channels where you are most successful, you will make your own choice. We will tell you, however, that email represents the most effective channel for referral programs. Experts recommend businesses to use 2 to 4 sharing channels for referral programs.

As far as the message is concerned, it can be a generic one, or a customized one. Without a doubt, the most lucrative message is that created by the advocate. Simply let your referrer create a message that will act as a call-to-action for his friends. These type of messages perform 40% better than default ones. Here are a few tips for each sharing channel:

(P)URL: This practice refers to the sharing of personalized links. They can be shared across all channels and networks. They can be one-to-one or one-to-many and they are linked to the referrer. You can offer discounts and bonuses based on the number of clicks on a PURL.

Facebook: This is without a doubt the best place to promote products and services. Facebook has the most engaged community among all networks. People here trust each other's opinions, and a great referral on Facebook could do wonders. All social networks are one-to-many sharing systems, where the advocate talks about a service with his friends. It will receive huge amplification.

Email: as we already mentioned, Email is the most popular and personal sharing method. Recommendation emails are considered personal, and therefore, will be highly effective and trusted. This is a one-to-one promotion method.

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#3 Remarketing and Gamification

Referral marketing is a continuous effort. One moment of lost focus may cost you your entire campaign. Advocates and prospects lose interest in referral programs very quickly if they aren't encouraged to participate. This is exactly why companies must come up with original and fresh ideas for their referral program. This is where tools like remarketing or gamification become useful.

Gamification takes advantage of one of humanity's major characteristics: the need to compete and be rewarded for their achievements. Gamification techniques include leaderboards or other incentives where advocates can check the effectiveness of their sharing. Use this strategy to reward your top advocates and encourage them to share more.

Remarketing has a very simple concept behind it: you have to continuously feed your prospects and advocates with a slow and steady stream of email campaigns. This will ensure that participants to your referral program keep it at the top of their mind. Remind them about rewards as often as possible to encourage action.

#4 Make it Personal

Customers want to be treated online, the same way they would be treated in a brick-and-mortar store. They absolutely love and thrive on personalized experiences. It may be a big challenging to make your campaign personal, but it will definitely be worth it on the long run. A personalized experience fosters strong relationships and builds trust. One of the easiest ways to achieve a personalized experience is through the friend's landing page (the page that a referred individual sees upon clicking on a PURL or trusted recommendation on social networks).

This page should contain a Call-to-Action that is short and to the point. The friend page should contain information about the offer or incentive, personal information to reinforce the idea that the recommendation is one of a kind, and a simple CTA. The idea is to clear the shortest path to conversion and not waste the time of a prospect.

Additional Tips for your Referral Campaign

It's vital to test the effectiveness of your campaign regularly. This will help you understand which call to actions give you the best responses, what offers your clients are interacting with, and how new prospects are navigating your website. Make sure to segment your analytics sessions according to the changes which you implement in your marketing strategy.

It is also very important to create a personalized landing page for your customers. If one of your clients refers your website, you will want his friends to land on a customized page. This will reinforce the notion that the friend is there based on a recommendation. Make your offer as clear as possible to ensure that the prospect converts.

What Not to do with Referral Marketing

There are two major pitfalls of referral marketing:

- assuming that people will give you referrals for nothing

- providing people who provide referrals with cash rewards

First of all, people will rarely give a referral to someone. That's not because they don't enjoy the services and products they enjoy online. They simply share stuff like this on their networks only when they are blown away by them. In addition to this, not many people actively respond to a referral, at least, not consistently. But why don't people like referring business? In general, they have no idea if this is in their best interests.

Many businesses think that by offering a 25, 50 or 100 dollar discount incentive for a specific number of referrals will attract more customers. They are wrong. Nowadays, clients and shoppers are looking for more than cash inducements. Then, there's the problem of perception of your referral marketing practices. Do you really want other prospects to think that you are bribing advocates into bringing new customers in?

To make sure you never resort to this type of referral marketing you should conduct a market study and find out what your customers really want. Invest in your relationship with clients and encourage them to share their opinion based on personal experience and satisfaction.

How to Get the Ultimate Referral

Earlier in our guide we mentioned the ultimate referral. It can only be obtained through strategical networking. If you really want to get the ultimate referral you must understand the desires and needs of your audience. You don't want referrals to anyone or everyone. You want to share your products with the ideal customer. If you know this type of customer already you have to invest in a relationship with him.

The easiest way to meet the ideal client is by asking your already existing clients to introduce you to other vendors. This will demonstrate that you are capable, and have clients who are willing to refer you. Of course, this strategy may sound simple but it will take a while until it becomes effective. Once you connect with new vendors you have to create a strong relationship with them.

Last but not least, the ultimate referral is a two-way street (like the Dropbox example). You reward not only the referrer but also the referred individual. Rather than referring that single client, you can refer them to complimentary service providers that can refer them to two new customers and so on. Always try to leverage your influence on social media and network strategically.

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