We often come across examples of referral marketing in our everyday lives. It's about acquiring new customers through word of mouth.
Referral Marketing: Definition and Examples
You ate at a new restaurant and were impressed by the service, the prices and the quality of the food. The next day, you tell your best friend about the restaurant and leave a 5-star review on Google. As a thank you, the restaurant gives you a 10 percent voucher for your next visit. This is how referral marketing works.
- Referral marketing means that satisfied customers give recommendations and thereby gain new customers. This word of mouth can be used by companies as a targeted strategy to advertise themselves and reach even more people.
- Whether it's online shopping, using apps, visiting a local hairdresser, choosing a service provider or the aforementioned restaurant visit – recommendation marketing is popular in many different areas. This can work via online reviews, but also through personal conversations.
- Often, either the person doing the advertising or the person being advertised receives a benefit or reward when the customer signs up or makes a purchase. For example: If you are a customer of a cooking box and recommend it to friends who then also sign up, you will receive a discount on your next box.
- Recommendations from existing customers are considered particularly valuable because they are authentic, create trust and can help increase a company's sales at low cost.
This is what makes good referral marketing
Good recommendation marketing is based on customers being enthusiastic about a product and wanting to share their enthusiasm. If you have a company, you can use this satisfaction and actively encourage recommendations.
- Customer satisfaction: Your product must be so good that those who use it are really convinced by it and are happy to recommend it to others. Because recommendation marketing only works if it is authentic.
- Simple tools for recommendations: As a company, you should make it easy for your customers to recommend your products, for example by sending recommendation links or “Share with friends” buttons. If you have an online shop, actively encourage online reviews.
- Reward systems: Without an incentive, even an enthusiastic customer will not necessarily do something for you. Many companies therefore offer rewards such as discounts or bonuses when a customer successfully recommends someone. This provides additional motivation.
- Use social media: Social networks are full of recommendations. Find influencers who are a good fit for your product and let them advertise for you. This is a great way to reach lots of potential new customers.