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Referral Marketing Strategies in 2020
marketing Fri, May 01, 2020
Repro APAC Written by Repro APAC

Referral Marketing Strategies in 2020

Table of Contents

What is Referral Marketing

A question, will you more likely to purchase something that is:

1. Recommended by an Ads on a random website

or

2. By one of your friends

The later is known after referral or “Word-of-Mouth,” which usually occurs organically or spontaneously. And the purpose of referral marketing is to increase this spontaneous referral. 

Referral marketing is sometimes referred to as the ideal marketing method as the chance of purchase after being recommended by a friend is far higher than seeing an Ads on some random websites. A study by Goethe University Frankfurt and the University of Pennsylvania has also shown that new customers that are acquired through referrals have a higher retention rate and are shown to be more profitable. 

Imagine if you have an amazing referral strategy in place to ensure a single customer to refer at least two new customers every month. The business you are in will grow at a rate of 100% every single month.

What are the types of referral strategies available

Different companies have different ways of encouraging customers to share about their products & services to their friends. Here are some usual strategies used by them. 

Packaging

Nothing urges people to share more about their purchase than a well-packaged item. With more than 1 million to 10 million searches per month for unboxing videos. You can be assured that creating a wonderful unboxing experience is definitely worth the investment. 

Viral Content

Viral content is one of the best ways to get word spread and spread fast. 

Although there are many marketing experts consider viral content an affordable way to do marketing, however, that can not be further than the truth. The truth is, there isn’t a price tag on it, and it can be either cheap or expensive. 

Viral content, while very attractive, can also be really difficult to pull off. If there is a “secret source” to it, we are quite sure by now that will be a lot more viral content out in the market. Unfortunately, that is not the case right now.

In addition, viral content is getting more and more challenging to make, given that now social media giants like Facebook, Twitter, and Youtube are constantly changing their algorithms, giving content far less reach than they use to be. The change in social media behavior have also made people more cautious about what they are sharing on the internet.

That said, if the content you created goes viral, give yourself cheers and pat at the back as the effort did not go down the drain. 

Referral program

A referral program is a program devised by businesses to encourage sharing. Companies like “Dollar Shave Club”, “Uber”, “Airbnb” and “Dropbox”, utilized a referral program to grow their businesses into a multimillion-dollar company. Unlike viral content, it’s more predictable and data-proven. And when compared to the packaging strategy, it can spread faster and brings better value. 

Types of Referral Program

Although there are many referral programs in the market, the program always revolves around the same few types:

Financial

The financial type is a referral program that rewards the referral when the referees make a purchase. The incentives usually come in:

  • Discount Coupon - This can be either a discount based on a percentage or a fixed value. 
  • Cash - This is when the referral is offered money when they successfully referred to a friend who made a purchase

Services 

Service incentive is often used by companies that are selling a service. This can be in the form of a longer free trial period or an upgrade to the current service. For example, Dropbox allows customers to receive 2GB extra on their dropbox account if they referred to a friend successfully. 

Products

Some companies give out their products as an incentive for referring their friends. Depending on which industry you are in, this might be more effective and affordable than the financial incentives. 

What makes a referral marketing successful

Not all referral marketing is made equal. More than often, referral marketing is intentional and requires considerable effort. Here are some points that differentiate between highly successful referral marketing campaigns and an unsuccessful one. 

Sharability

Do people want to share about your products or services? If so, how much do they want to share about it? If your products and services have low sharability, how can you increase the likelihood of it being shared?

Incentives

The question of, “what do I get out of sharing”. This can be financial, non-financial, or simply psychological. For example, when someone shares about a viral cat video, they are rewarded by the reaction of their friends - be it laughter or criticism. 

The incentives also have to make sense. Getting a 10% discount on a second TV after you just bought one will not sound attractive. While on the other hand, getting a $100 cashback if your friend made a purchase will found way more appealing. 

Sustainability

How sustainable is the referral program? Do you get a positive Revenue of Investment (ROI) out of it? How about the sharing rate, how many percentages of your customers or visitors are sharing about your products and services. If everyone 1 in 10 of your customers is sharing and only 10% of them bring you one new customer, your referral program will not be very sustainable. 

Example of referral marketing

Tomorrow Sleep

Tomorrow Sleep

Tomorrow Sleep is a company that sells mattresses, bedding, and accessories. They have a referral program that offers their referees a $100 off mattress purchase, and the referral, in return, gets a $75 VISA Giftcard. 

Why is this affiliate marketing effective: The reward for this referral program is quite attractive - $25 VISA gift card. For those who are not familiar with what is a VISA gift card, it’s a non-reloadable debit card. In other words, you can use it to purchase anything online or offline, as long they accept a credit card.

This campaign would not have been successful if they offered a $25 off their next purchase or even a $50 off their next purchase. The reason being the chances of a person who just bought a mattress is going to need another one really soon is extremely low. 

Alaska Airline

Alaska Airline

Alaska Airlines has a referral program that gives out 5,000 bonus miles if they refer a friend who signs up for their credit card. 

Why is this affiliate marketing effective: The incentives provided is something desired by the referral and not redundant - Airline Miles. And unlike a discount, it’s a cumulative-type incentive, hence encouraging the referral to refer more than one friend. 

Airtable

Airtable

Airtable is a modern excel tool that allows users to easily manage and transform their usual data in table format into visually appealing data. They offer users $10 credit for every person they invite to Airtable. 

Why is this affiliate marketing effective: Just like the case with Alaska Airlines, the point is cumulative and something desirable by the referral. If the users manage to invite more friends to Airtable, they are able to unlock more features without paying additional money. In addition, this referral program also seems easier to achieve as it need a lot less convincing, and almost anyone with a computer can sign-up for it.

Dropbox

Dropbox

Dropbox can is a household name that few who use the internet do not know about it. If this is the first time you heard about Dropbox, it’s a cloud storage system for users to store files on the internet that can be accessed from anywhere easily. 

For their referral program, they offer 500mb per referral - an addition to their free 2gb account. 

Why is this affiliate marketing effective: For users who are already using their products and saving files on the cloud, users will eventually reach a point where they ran out of space. The referral program will be an intrinsic way to get more storage without spending a dime - a win-win for both the users and Dropbox. 

Grab Food

grab food

Grab Food is one of the largest food delivery providers in the South East Asia Region. Their referral program is for existing drivers or users to introduce new delivery-partners to them. To gain the reward, the new drivers have a minimum number of trips within one week. 

Why is this affiliate marketing effective: The referral can get a big bonus - $300, which is a decent amount of money in Singapore. As they are looking for active delivery partners, having the requirements also ensure they are recruiting people who are more serious in becoming a long-term delivery partner. The minimum requirement also encourages the referral to introduce friends who are more likely to complete the required trips.  

 

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