9 Ways For Referral Marketing Strategy | example | meaning | statistics | Definition


Referral Marketing Strategy – It is not easy to convince consumers to buy a product. They are exposed to hundreds of advertisements on a regular basis on newspapers, television, radio, and hoardings. Even as they are partly influenced by the images, sounds, and video they are bombarded with, a lot of people are still skeptical about it. And they tend to seek the help of friends, colleagues, acquaintances or even product reviews before deciding to part with their money.

Most products are bought not because of the impact of ads alone but through word-of-mouth. If someone has bought a mobile phone and is happy with it, he or she is likely to tell it to at least 10-12 people about the merits of the product. This kind of marketing comes free for the company and in a way it is a reflection of the branding effort taken by the company.

A cash-rich company may spend millions of dollars to get their product endorsed by a celebrity from the film industry, business, fashion, sports or any other field of activity. It is very unlikely that an actress is looking beautiful because of a face cream or soap, consumers know it!

Word-of-mouth marketing comes free and there is no way to quantify it. However, when companies are confident of their product quality and service, they can as well think of incentivizing those who are willing to spread the good word about your brand or product. When word-of-mouth marketing is given a monetary or some other incentive by the company, it is called Referral Marketing.

Most major companies and brands have used Referral Marketing example with good results and there is no reason why you can’t benefit.  For many US companies, 65% of the new sales happen through referral marketing. A survey by Nielsen revealed that customers are highly influenced by referrals giving good weight for recommendations made by friends.

Channels for Referral Marketing

  • The company employee: (Referral Marketing Strategy)

Your employees are your greatest ambassadors. If they are endorsing your product it shows that the company is taking good care of them and they have good faith in the product too. Many companies provide incentives to employees for promoting their products. In banks, clerical staffs are given monetary incentives to promote some saving schemes or mutual funds. The best performers among them may be periodically recognized by giving a gold coin on a monthly or quarterly basis.

Employees promoting company’s own products have twin benefits- it reflects company’s top line growth and employees stand to gain not only by way of incentives but salary hike at the end of the year if the efforts reflect on the bottom line too.

The other referral marketing advantage is that unlike a marketing executive or associate there are no retainers costs involved in utilizing employees for marketing.

  • Your own customers: (Referral Marketing Strategy)

A satisfied customer is your best marketing executive and therefore a company could tap into its rich customer database to utilize them by giving incentives for referrals. Citibank gives Rs 2000 per referral for credit cards to its existing customers, while Google has announced $7.50 per referral to its account holders for promoting Adwords campaigns. Many top-selling magazines such as Readers’ Digest, The Week, India Today have all used referral marketing over the years to boost business. Sometimes, the incentive may be a collection of best articles that have already appeared in the magazine since inception or it could be a useful booklet that the reader can keep as a reference.

Dropbox, a leading online file storage company implemented a referral marketing program for its subscribers in 2009. In referral marketing program, those who signed up and those who referred got free space. Within a year, referral accounted for more than 35% of the new business for Dropbox. There are several examples from industry all over the world that have employed referral marketing –AT&T gives customers an opportunity to earn up to $575 per year through referrals.

  • The tie-up with complementary businesses: (referral marketing strategy)

When many global mutual funds and life insurance companies came to India they tied up with banks to promote business. When banks with a tradition of providing good service endorse an investment product it is more likely to be accepted by the customers. Aviva launched their life insurance products through Canara Bank before going out on their own and thus got a good customer base to work on.

Other ways of referral marketing are seen in an automobile, oil retailing companies promoting credit cards, air conditioner firms promoting stabilizers.

Steps to ensure better results with referral marketing

  1. Good product/service and customer service: (referral marketing strategy)

The essential prerequisite for referral campaign to succeed is to have a good product or service and impeccable after sales service. Without a good product or brand, you are not going to make much headway and not many will be willing to refer in the first place.

  1. Targets should be achievable, rewards appealing: (Referral Marketing Strategy)

The targets for referrals should not look impossible or difficult to achieve. Referring up to 15 may be easy but most companies offer benefits even if five customers are referred and result in conversions.  Whether it is cash or products or other benefits, the rewards should be good enough for customers, employees to take that extra effort. It should be clearly mentioned whether the rewards are given for lead generation or for sales conversion.

  1. In B2B business don’t begin with a referral request: (Referral Marketing Strategy)

Many customers may not be willing to take part in referral marketing program simply because they don’t know how the personal details collected will be used by the company. It is better to build rapport with the company by asking them to rate your product or subscribe to newsletters. Before announcing the referral marketing program, privacy clauses and confidentiality clauses should be communicated to them so that they feel confident about referring people to you.

The whole process of contacting the referred customers should be informed beforehand mentioning the benefits and rewards for referral marketing business.

  1. B2B marketing is time-consuming, keep the customer informed: (Referral Marketing Strategy)

Once you get a referral and start contacting them, the customer who referred should be informed of the progress of the marketing process until the closure of the deal.  However, care should be taken not to bombard the new potential customer with emails and phone calls which will be embarrassing for the customer who referred it to you.

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  1. Rewards should be given in a time-bound manner: (Referral Marketing Strategy)

When a reward is promised for referrals, it should be given in a time-bound manner, the same week or next month. When rewards are delayed or not given, the company is shutting its doors to any possible success in future referral marketing programs.

  1. Make your website, social media suitable for referrals: (Referral Marketing Strategy)

Make your website and social media suitable for sharing and rewarding just as undergarments company My undies did. They created a special section called invite to boost referral marketing business. They offered $20 for the customer and 20% off for the person who bought on that referral. Or it could be several tiers of rewards based on business volumes and not a single reward. Now for even small businesses, it is easy to implement referral marketing programs on the website with several apps available for customization: some of them are AmbassadorFriendbuy, Referrify, Extole, Referralcandy.

With the rapid explosion of social media, businesses can now utilize solution developed for Facebook, Twitter, Linkedin, Google+ to make your customers share promotions and discount offers. Many of them use big data analytics to send the right offers to the target audience.

  1. Join a referral marketing network: (Referral Marketing Strategy)

Many small and medium businesses can join a business network such as BNI (Business Network International) which has chapters all over the world to help its members promote business through referrals. Each referral is much more valuable than a lead as conversion rate could be near 90-100% while a qualified lead gained from any other forms of marketing have one-fourth chance of being converted to business.

Referral marketing networks also help build relationships as they have weekly meetings where they discuss strategies, how to make presentations and proposals. They also hold workshops giving new ideas on business promotion and strategies. BNI reported at the end of 2015 that it has 7,300 chapters, and generated 7.7 million referrals valued at $9.3 bn. The total membership of the organization is 190,000 in 64 nations.

  1. Use a mix of cash, non-cash and multi-pronged strategy: (Referral Marketing Strategy)

You may use both cash or non-cash incentives for referral marketing example, but a Chicago University study found that non-monetary incentives were more effective than cash benefits by 24%. It is also better to not confine referral to customers or employees alone, referral marketing websites can also be used to new customers and lure them into referral marketing programs.

  1. Communicate the buyer persona to your customers: (Referral Marketing Strategy)

When asking for referrals, most often companies forget the target group they are looking at. Every friend or colleague of your customer may not be a prospect and get a long list of prospects, spending time on them may not bring the desired result. In such cases, the company can outline a client profile- desired age group, income, interests, industry, gender, hobbies so that results would be better.

Who can employ referral marketing?

Retail stores, magazines, banks, doctors, credit card companies, automotive industry, airports, hotels, travel agencies, stock broking firms, mutual funds, online trading companies. It is suitable for both B2B and B2C business and service companies. Worldwide, it is small and medium companies that have gained more from referral marketing example.

Advantages of referral marketing Example?

Why should anyone try out the laborious route to referral marketing?  It is much cheaper than conventional marketing and gives a better return on investment (ROI).  It has been found that companies who deploy referral marketing definition properly have considerably cut down on traditional advertising on mass media. Customers feel important as they are rewarded and share the rewards with their friends who also benefit from getting a good product.

With the growth in information technology (IT) several applications are available for web, social media, mobile and email to automate your referral campaigns targeting offers to the right audience. They also employ big data to deliver better results in referral marketing definition.

Apart from monetary or non-monetary benefits customers get, it also generates goodwill among customers and forges a better business-customer relationship. This, in turn, makes the company focus on quality, innovation and speed to drive the business higher.


Despite the many referral marketing example advantages has over conventional marketing hardly 25% of businesses make use of referral marketing strategy. Analysts point out that it requires careful planning, identifying the right target for referrals and build upon them.

It is important to evaluate to results of a referral campaign before embarking on another. Many small businesses do not make much headway because they don’t ask for it. Unless you ask you don’t get and this applies very much to referral marketing statistics too.

Studies have shown that success with referral campaign is 2% but is much better than direct mail campaigns which have a success rate of only 1%. Some marketers feel asking for a referral could damage the relationship with the customer. Companies that are not willing to seek referrals can take the indirect route by establishing their expertise through better visibility in websites, blogs, podcasts, YouTube, appearing on TV among other options. This, in turn, may help the company get references from people who aren’t its customers.

It is only possible to learn from success stories across the globe. For example, there are companies that purely generate referral marketing meaning business without any advertisements.

William Davey’s firm Fred’s Best Windows, Doors, Siding and Roofing is one such firm that spends zero money on advertising and grows on referrals got from customers, real estate agents, referral groups, and partners.  Davey’s success is due to the training he gives to referral sources regarding how and the kind of people to be referred and ensuring his firm has the qualities that make it preferable. William Davey’s book on referral marketing titled ‘ The Referral Factory” is due to be released in September this year.

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