Referral Marketing: What it is? Why is it So Important

Word of Mouth marketing accounts to 2.5% of all brand related conversations in the United States alone. People talk about the products and the services they enjoy and also about the companies that offer them, which becomes an indirect but highly effective marketing strategy for the brands.

Referral Marketing

About two-thirds of the people make purchases based on the recommendations they received from their acquaintances. A report from the New York Times states that 65% of the total conversions of business are directed from referrals and people are four times likely to buy a product when they are been referred.

What is Referral Marketing?

Referral marketing is explained in the simplest of terms as spreading the information about a brand through the existing customers of a business. This is not a traditional advertising format and is also referred to as word of mouth marketing (where people tell each other about a product or service).

Referral marketing has the same effect as that of any other marketing strategy and is been initiated by the marketing team of a business. Customers are generally rewarded for giving referrals in the form of discounts and cash backs.

Influencer marketing is considered a form of referral marketing because influencers share their recommendation on their favorite products along with their followers through sponsored posts or video content or by organic sharing. Their followers base their purchase decision based on these recommendations. Referral marketing need not be sourced from friends, but could also come from influencers, celebrities, and even online reviews, testimonials and editorial articles.

How to Implement Referral Marketing?

There are certain tactics to be followed in order to implement referral marketing and these are discussed below.

Customer Experience enhancement:

Providing exceptional buying experience and customer service is the core of any business that considers their customer as their kind. This is also the fundamental basis of a referral program, customers who are treated well are more likely to refer the business to their friends and relatives and thus the sales engine gets ignited.

Metrics to Analyze:

One important way to ascertain if the referral program is working or not is to employ metrics such as Google Analytics to measure success. The platform offers clear information on the quantum of referrals and their sources. Insight towards improving the referral program could be gained through such software tools.

Product experience should be sharable:

It’s not just the buying experience but also the product experience that needs to be worthy of sharing it. Small aspects such as packaging the product and the unboxing experience, the customer gain could be a wow factor that ignites referrals. Other factors such as delivering the product on time, making the labels attractive, customizing it all helps in its referral marketing.

Make referral easy:

Sharing the products and referring the brand should be made easy for customers so that they should not feel any extra burden in sharing them. A simple access button to social media badges to share them, rewards for sharing in the form of discounts etc., would help in quick and effective referrals.


There are a number of apps available for e-commerce online stores to implement a great referral program quickly. Some of them are Friend buy, Referral candy, Forewards, Referrigy etc. These are great apps for quick referral program implementation.

Concentrate on Influencers:

Influencers are those people who have a considerable amount of fan following in social media. By leveraging on them to promote the product, brands can be sure that it reaches all of their followers and they behave as a strong referral portal. Capitalizing on them is affordable and easy to reach a large audience base at a very short time frame.


Reviews are also referrals; most of the customers refer to the reviews of a product before making a purchase. What others have to say about a brand encourages buyers to make a purchase decision. Brands have to make sure that they have positive reviews predominantly on their product page.

Why is Referral Marketing Powerful?

Word of Mouth Marketing has been constantly rated as one of the most powerful forms of marketing. It is able to enhance the Return on Investment of a Business to many folds and the reasons behind this are,

Precise Targeting:

There are two core principles of a great marketing program; they are an excellent message and precise targeting as that of a Laser. Referral marketing is laser targeted because prospects already know the people who are referring the product and they strongly believe in their recommendations. The trust they hold with their friends and social audience helps in spreading the message about the brand very effectively compared with other marketing channels.


It is not possible to convince someone to buy something without building trust. People don’t generally listen to someone whom they don’t trust. This is perhaps the reason why people don’t believe the sales person and doubt his authenticity, but listen to their social media influencer.

The importance of referral marketing is that the sales pitch is generated from someone whom the people know very well such as friends and family members and from those whom they trust such as their blogger. People’s opinions take over advertisements and other sales channels generated from the brands. These opinions could also be consumer opinion posted in online forums and also editorial content from articles in the newspaper. Thus the major types of referral channels are considered to be

  • Opinions of friends and family members
  • Publications in news papers
  • Online customer reviews and opinions
  • Customer Testimonials
  • Opinions from social media Influencers

Quantum of Reach:

Before a few decades, the reach of a typical customer was limited. The number of hours they spend outside, the time they speak over the phone and the number of people they meet all decided their quantum of referring. But in recent times, the average reach of a consumer is large as people are more active in social media.

For people with strong social followers, this quantum of reach could be tremendous. These people indirectly gain the power to uplift or break a business by what they post online about it.

Marketing Strategies to improve Referrals:

Referral marketing program depends on what people have to say and talk about a business and it is completely in the scope of the person wanting to define a brand. But businesses could also take some extra steps in enhancing their marketing strategies.

Concentrate on subscribers and Customers:

Businesses have to make sure that customers have a good experience with their buying experience. When they receive exceptional and personal buying experience people do take notice and are most likely to refer the product to their acquaintances. This is called a referral or word of mouth marketing.

If the businesses are able to fulfill the needs of a client and prove to be exceptional compared with that of their competitors then they attract many loyal customers who would spread the news about the business owing to their brand loyalty.

Some instances on how brands could give a little extra for their customers and subscribers is by offering them some extras, offering discounts, providing personalized customer services, sending friendly reminders wishes on their special days, or simply just being nice to them.

Building a strong customer support team:

Customer service is a pillar of any business. People want to have someone to talk to when they have a problem with their newly purchased product. Top- notch customer service is an ideal way to encourage referrals.

  • The customer support team has to be responsive; it has to ensure that customers stay on top of all other things. Customer’s questions and support should not be left unanswered for a long time. All customers’ related queries are to be recorded and responded at the earliest with empathy and flexibility.
  • The customer support representative has to be sincere in all his customer handling efforts. Greater the sincerity, greater is the satisfaction level of the customer. The tone of the language, body mannerisms and the choice of words all have a great impact on how the customer value the business.
  • Consistency in approach is needed to ensure that all the customers are gaining equal approach from the business. Standards are to be set for customer interactions, and software could help here to get things easy and smooth.

Building Relationships:

Businesses have to go above and beyond in their approach so as to build a relationship with their customers. For example, a customer ordering a birthday present for her mother could be approached by sending the gift along with a customized birthday message or flowers for her mother.

Building relationships are important as people refer to real people and not the business. This is essential for brands dealing with customers on a one to one basis. The representative has to listen to the customer and make the atmosphere absolutely comfortable for them. Personalized emails, sending reminders, sending wishes are also examples of building relationships.

Personalizing interactions:

Happy customers are those who have experienced personalized care from the brands they trust. Sending them a timed promotion, sending them vouchers when they are about to make a purchase, remembering some information about them are all instances of personalization that shows the people that the business cares.

For example, if a customer purchases a snow board from a website that specializes in sporting goods, it would be a great idea to send them recommendations of additional gear for snowboarding, snow conditions in the particular region, promo codes for discounts on other accessories etc.

Personalization helps in creating an engaged customer base that would be happy to share their experiences with their close friends and family members.

Ask for referring:

Referrals are meant to happen naturally and people share news about a business depending on what they think about it. But this is not always that easy as it sounds. Sometimes it could be difficult to make people think about business after they have left the shop. Thus it is important to ask for referrals right away when they are still the customers in the shop or the site.

Generally, people stay in an elated mood after purchase and that is the best time to ask them for referrals. Form for referral contacts can be offered along with payment receipts. For online sites this could be attached with their Thank You pages and with automated software, the entire process becomes simple. To make referring interesting and simpler, incentives could also be offered.

Appreciating referrals:

It is important to show appreciation towards those who refer the business to others. By spreading the news about the business, these people are actually helping the business and giving a compliment for the services they acquired. Some ways of showing appreciation are by thanking them, acknowledging their gesture, offering discounts with subsequent purchases etc. Appreciating people who are bringing in business would help in further enhancement of the referral base.

Enhancing the existing referral program:

All businesses have to hold a standard referral program incorporated with their website so as to make referring simpler and easier. There are a number of solutions available for present-day businesses to manage their referral program and also to track it.

Having such strong solutions would also help in sending rewards to the most prospective referrers. It has to be formalized with the help of automated software tools to make the best advantage of word of mouth marketing


Referral marketing is thus the most powerful marketing tactics that have proven to enhance sales and conversion of a business. Referral marketing is the process in which one person refers to the product to others and influence their buying decision based on their recommendations.

The binding force behind word of mouth marketing is that consumers trust the opinions of these real people more than advertisements and sales agents. As these referrers are generally friends and other close acquaintances people trust the brand and the recommendations without cross-checking the information said by their referrers.

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