Blog

Referral Marketing: The power of recommendations

Getting new customers is challenging, especially in this competitive industry. The acquisition cost is rising for both eCommerce and physical stores. This is why, retailers need to find better, less expensive ways to attract new customers. 

In this article, we are going to focus on referral marketing. This type of marketing can be used by many businesses, from small brick-and-mortar stores to eCommerce platforms. Let’s see how to reduce the cost of acquisition and increase customer loyalty. 

What is referral marketing?

Referral marketing is a type of marketing in which your existing customers recommend your product or business to their friends or family members. As you know, word-of-mouth marketing is one of the most powerful types of marketing. Why? Because people trust their friends and family much more than they trust any type of advertising from a brand. 

Statistics show that 92% of people trust recommendations from their friends and family members. This means that people are more likely to purchase a product or visit a store if a friend recommended it. With referral marketing, you can use this to your advantage. 

Types of referral marketing campaigns

  1. One-way referral


    This is one of the most common types of referrals. A 1-way referral is when you reward your customer for recommending your products or store to a friend. Depending on the type of business, the existing customer, also known as the referrer, can receive discounts, special offers, or free products. 

  2. Two-way referral

    As you might already imagine, the two-way referral consists of offering an incentive to both the referrer and the referee (the new customer). Another difference is that the referrer (the loyal customer) can receive the incentive only after the referee makes a purchase from your store. 

The benefits of referral marketing

Referral marketing is a great way to attract new shoppers. Some of the most important benefits of referral marketing are: 

Lower acquisition costs and bigger lifetime value

In the last few years, CAC (customer acquisition cost) has increased by 60%. Retailers and other businesses that relied on paid ads and other marketing tactics to attract new shoppers saw a decrease in the number of new customers and an increase in costs. Referral marketing makes it easier (and more cost-effective) for businesses to attract new shoppers. Plus, when a new customer comes from a recommendation, it tends to have a bigger CLV (customer lifetime value). 

It builds trust

The new shoppers heard about you when their friends raved about your products. This means that they already trust your store or products and they are willing to try them out. New customers who came from referrals are more likely to make a purchase, compared to customers acquired with different marketing tactics. 

It increases customer loyalty

When you offer customers an incentive to recommend something they already love, this can lead to an increase in customer loyalty. Plus, people who received recommendations are more likely to become loyal customers if they enjoy your products. 

How to include referral marketing into your strategy

1. Choose the type of referral program

First off, you need to decide which type of referral program works best for your business and your customers. You can start out with the 1-way referral program just to test it out and see how it performs. 

2. Select the incentive(s)

After you’ve decided on the type of campaign, you will need to decide how you are going to convince existing customers to recommend your products or your store to their friends. Some of the most common incentives include free products, discounts, and special offers that are only accessible to referrers. 

3. Channel and implementation solutions

One of the most important things when implementing a referral campaign is to decide which channels and implementation solutions to choose. For brick and mortar stores it might be difficult to track and see which customers have been referred. You can use a solution like Pollen. It’s easy to set up and you get to monitor the campaign because customers send a link to the referred friend. 

4. Create a shareable experience

While it is important to find the right solution for your referral program, you should also focus on creating a customer experience that’s worth sharing with others. Focus on providing excellent customer service and communication. 

Also, if you want shoppers to share their experiences with others, look out for innovative in-store marketing solutions like Tokinomo. This robotic POSM can help you create a shareable experience. Why? Because it allows products to speak for themselves. Of course, shoppers will be amazed and they will be more eager to share this experience with their friends. 

5. Test and adapt

Last but not least, you need to test out your campaign and see how it performs. Adapt the strategy to the needs of your customers and collect feedback to know what you can improve in your future campaigns. 

Referral marketing is a great way to attract new customers to your store. It’s cheaper than ads and easier to implement than event marketing. Plus, it comes with many benefits such as increased customer loyalty.

Read some more
A pandemic, the rising inflation and cost-of-living, everchanging trends, demanding customers, and supply chain issues. ...
Campaign scoop Keeping it cool. Some things should never change, while others might need some refreshing from time to ti...
Campaign scoop The power of branding. When a brand manages to remain top of mind for shoppers, then the magic happens. H...
Getting new customers is challenging, especially in this competitive industry. The acquisition cost is rising for both e...

Any questions or suggestions? Let's talk!

Form_Right_Bg