Referral Marketing What is it? How does it work?

Internet Trends, from October 1 to November 1, 2020.
November 2, 2020

The normal behavior of human beings is to ask their acquaintances for opinions about a product or service before consuming it. This reinforcement becomes advice and the consumer feels calmer and more confident in making the decision to consume a product or service.

This is always usual, but in the world of B2B business much more. Think about it, when a consumer wants to buy a chocolate they almost never ask their friends what chocolate to buy. However, when it comes to hiring a service company or making an acquisition of a business asset, a person would always ask their friend or a professional they respect for a reference. This behavioral presence around referrals can be a gold mine for a B2B brand if they figure out how to put it to use within their marketing strategies.

Referral marketing is nothing more than word of mouth advertising. Refers to people who purchase a product or service based solely on the opinion or influence of another person in whom they trust. That trust is transferred from the reference to the product or service. Additionally, it is a marketing strategy that has a low customer acquisition cost (CAC).

Generally people trust the opinion of other people around them or a person they respect, which includes family, friends, influencers and celebrities. This makes sense, and it is very common for people to turn to their friends and family for advice on movies, restaurants, books, and all kinds of products and services, relying on their opinion. It’s all about sharing experiences, and consumers are always interested in sharing theirs regarding the brands or products they choose.

Currently, social networks have exponentially increased the scope of the references that each consumer issues. With any type of social media post, an ordinary consumer can now quickly reach hundreds or thousands of friends who trust their opinions, that is why in recent years there has been a great growth of referral marketing, and it has It has become a very important issue within the strategy of the brands.

A referral marketing strategy.

The first thing is to achieve excellence in your products or services.

A dissatisfied customer does a lot of damage to your brand reputation. And now with the power of social networks much more. It is for that reason that we recommend first focusing on achieving excellence in your product or service before establishing a benchmark marketing strategy. Assuming that you continuously seek and have achieved excellence in your product (s) or service (s) then you are able to develop a referral marketing strategy.

Your customers must be delighted with your brand to recommend it to their friends. To do this, continuously measure satisfaction and provide exceptional care and support, and formulate action plans for continuous improvement.

Incentive plan for clients for referrals.

Establish an incentive plan. This incentive can be done in various ways, from a discount on your services to an extra service per referral. However, it should be thought of according to the type of product or service that your brand offers, and the margin available for sacrifice. Remember that a referral to the right person can generate certain sales. If your client making continuous referrals generates substantial profits, then the incentive makes perfect sense. It’s like turning a customer into a salesperson, but the effective salespeople.

Be in control of your references.

With the right satisfaction and encouragement, your customer will recommend your brand, but without proper control, your strategy can lose effectiveness. To do this, know exactly how many clients each ambassador brings. Also, try to do customer development, get closer to your customers and understand how they see your referral program, to make the necessary adjustments. It is advisable to use tools that run your referral program automatically in order to have full control of your campaign. Lack of control can create noise in your incentive plan and generate noise from satisfied customers who refer you looking for the reward, but if they do not get it, they can easily become dissatisfied customers.

Implement massive referrals by hiring influencers.

In each market niche there are influencers who are reference authorities followed and respected by many people. Establish campaigns to disseminate your products and services with influencers who do not behave as sellers of your brand’s products and services, but rather as recommenders. You will see results immediately.

Here is an article of ours that can help you understand how to handle influencer marketing:

Another interesting referral marketing strategy.

There is a company called Business for Breakfast that has an interesting proposal to implement a referral marketing plan that is not the conventional one described above.

They do work groups between companies. They are like business clubs that unite businessmen and entrepreneurs who in their regular meetings help to establish a network of business and personal contacts so that each member can grow.

The network established in each working group is not made up of consumers who refer, it is “referrers”. Provides a new generation of business facilitation through the construction of a high quality network, which promotes participation, business and personal relationships, qualified references, recommendations, individual meetings and strategic alliances to help bring better businesses to those who make up a group.

As the trust relationship of a work group increases, it develops a relationship of mutual understanding with each of the members, who later are in charge of actively promoting the businesses, products or services of the group members. As there is only in each group a single member who works in a given business sector, the group constantly refers to each member, after learning about their products or services and their specific quality in detail.

Whichever option you implement, referral marketing is important to your brand’s marketing strategy, not only for its effectiveness but also for its low cost of customer acquisition. Ahead!

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