Referral Marketing
The Best Advertising Is Done by the Customer
The figures speak for themselves—according to a study, 65 % of customers inform themselves before buying a product, reading customer reviews, and using them as a decision-making aid. 34 % also give a rating. If the reviews are negative, companies can lose potential customers even before they get in touch. But there are also ways in which companies can take advantage of customer opinions.
Everyone‘s experienced it: for example, when you‘re looking for a new toaster, you click through the variety of offers or visit the specialist retail stores to find a suitable model. Often you are completely overwhelmed by the many articles and the large selection. The agony of choice—but what do you choose? Usually, the choice is made based on the market leader, the cheapest item, the best offer, or the product that has been recommended by friends or acquaintances.
Table of Contents
- What is Referral Marketing?
- Increase Reputation, Sales, and Success with Referral Marketing
- How Do You Generate Customer Recommendations?
- How Do You Drive Customer Recommendations?
- Influencer Marketing as Recommendation Marketing 2.0
- Determining Customer Satisfaction and Recommendation Readiness
- Customer Acquisition Today with Recommendation Marketing
What is Referral Marketing?
Definition of recommendation marketing (also known as referral marketing):
Referral marketing is often also called word-of-mouth marketing or referral marketing. It is not based on traditional marketing channels but instead, the personal recommendation of existing customers, influencing the formation of opinions and purchasing decisions of others. The prerequisite for this is usually that the customer is delighted with the company’s product or service. Although the focus is mainly on the customer, employees and other partners of the company can also play a role in recommendation marketing.
The well-known “word of mouth” forms the basis of the whole system. This means holding a brand-specific and opinion-forming consumer dialogue, with an exchange of experiences regarding services or products. This process also includes an evaluation. In short, acquaintances or friends make sustainable calls for action based on their own experiences. They recommend their “favorite” articles, services, and products out of conviction—sometimes, they are offered specific rewards and incentives for doing so. If companies succeed in supporting recommendations in a targeted manner, recommendation marketing is one of the most effective measures for attracting new customers.
Recommendation marketing ensures…
- increased existing customer turnover,
- increased customer loyalty and
- free new customer acquisition.
Increase Reputation, Sales, and Success with Referral Marketing
Recommendation marketing is much more than a simple “recommend us further” or a blunt and indiscriminate over-sharing of discount coupons. The main goal of companies, in the course of recommendation marketing, is to increase the proportion of customers gained based on the recommendations of others. The comparison portal Capterra showed that companies with product reviews generate 75 percent more leads than companies without customer reviews. This means that positive ratings can be used for up- and cross-selling campaigns. Product reviews also reduce the return rate, as customers can better assess which product suits them. In principle, many different areas can be defined in which recommendations are made.
- The private environment: friends, acquaintances, and family
- Existing and former customers
- Permanent employees, freelancers, and former employees
- Online-based networks such as Google, Facebook, or LinkedIn
- Extended environment: neighbors or colleagues
In most cases, captivating services that stand out from the norm are recommended to others. The recommender has to trust the company; after all, they stand for it with their good name when they recommend it. Companies often benefit from this trust bonus because enthusiastic customers are more credible than advertising promises, as even the most creative and appealing advertising campaigns are questioned as soon as acquaintances or friends report a negative experience. A study by the University of Frankfurt and the Wharton School of the University of Pennsylvania provides similar results: Buyers who became aware of a company through a customer recommendation bring significantly higher profits. The likelihood that these customers will turn away from the company at some point is 13 percent lower than with “normal” customers.
So we can assume:
- Recommendations have a high level of credibility
- Recommendations are effective advertising
- Recommendations sell successfully and cost-effectively
- Recommendations transport enthusiasm and emotions
The Basis for Recommendation Marketing: Satisfaction and Loyalty
For customer recommendations, customer satisfaction (or even better: customer enthusiasm) and customer loyalty are of the utmost importance. But many companies make the mistake that customers should only get attention as long as they are new—existing customers often do not receive nearly as much regard. However, those who neglect loyal customers will not receive referrals. And that’s not all: It is proven that customers feel even more connected to a company after making a recommendation. Your recommendation has a positive effect on your intention to repurchase. Therefore, it is all the more important to recognize this enormous sales potential and sustainably promote it with recommendation marketing.
How Do You Generate Customer Recommendations?
Although many users are ready to make a recommendation, only around 30 percent actually do so. After all, customers only recommend a product or service if they are satisfied to an increased extent. As a provider, you have to go the so-called extra mile to stand out from the competition in the market and to retain consumers. That means:
- The range of services must be exceptional
- Customers’ expectations are regularly exceeded
- The company should maintain personal contact with customers
- Employees are experts and can advise customers in the best possible way
However, it is not enough that customers are satisfied if they still do not make recommendations to friends and acquaintances. As mentioned earlier, the best way to generate referrals is to stand out from the competition. Factors that trigger enthusiasm usually stem not from what is done, but from how it is carried out.
Speed
Be Personal
Flexibility
Additional Service
Stories & Emotion
External Impact
How Do You Drive Customer Recommendations?
Attentive customer dealings are the key to efficient recommendation marketing. Therefore, to generate as many recommendations as possible, it should be made as easy as possible for the customer to produce them. For this purpose, the consumer can be offered various options:
- Your website—customer voices with picture and name
- Facebook—to gather feedback from customers, you need a company page. In addition, a “tab” must be added to make rating possible
- LinkedIn—if you are directly connected to the customers here, you can also ask them for a recommendation
1. Creating motivation for customers
Generating written recommendations translate to work for the customer. Therefore, it is advisable to find incentives for consumers to give feedback quickly and easily. Sweepstakes or discount promotions for the next booking/purchase have proven themselves especially successful in a social media context. Possible motivational incentives are, for example, 2-for-1 campaigns or goodies for recommendations.
2. Choosing the right time chevron
Of course, the customer must first try out the product before they can submit a review. However, it is crucial to choose a healthy distance between the purchase and the recommendation, as not too much time should pass.
3. Make recommendations easy
It should be as easy as possible for customers to make a recommendation. Companies should, therefore, ensure that communication also takes a certain incentive. If you convey an exclusivity to the consumer with sentences like “Be the first!” or “Discover our new product before everybody else!” they will be particularly happy to recommend a product to others.
4. Recommendations can also be negative
Negative references spread remarkably quickly. Should this happen, it is essential to acknowledge the criticism and feedback kindly and to make it clear in your reply that the problem will be fixed. The aim is to convey to the customer that their feedback is valued and taken to heart. Also, negative reviews give the company a chance to improve their products according to customer expectations.
5. Honesty lasts the longest
With the current focus on fake news, it is not advisable to manipulate testimonials, even if the temptation may be great. Most of the time, this is noticeable to customers and discourages purchase.
Influencer Marketing as Recommendation Marketing 2.0
The influence of Instagram influencers and the like is arguably the most popular variant of recommendations of our time. In recent years, so-called influencer-marketing has firmly established itself in the advertising and marketing landscape. Bloggers and Instagrammers enjoy a high level of trust from their followers and thus influence purchasing decisions on a daily basis. These “opinion makers” distinguish themselves in different ways:
Mega-Influencer
Macro-Influencer
Micro-Influencer
Due to their popularity and huge influence on their followers, mega- and macro-influencers are particularly popular with companies. The mention of a brand by these opinion makers can have a significant impact on the sales and image of a product. But of course, the cooperation between bloggers and companies is not free. Start-ups, in particular, often cannot afford to work with large influencers. Here it is worth taking a look at “creators” with fewer subscribers. If their target group fits perfectly with your own, this usually has a lot more value for the brand—as the recommendation reaches the right people, and wastage is prevented.
It is essential that the recommendation is authentic and not promotional, as otherwise, credibility is lost. Blatant and inept product placement can have negative consequences for the company and the influencers. The users lose trust in the blogger, which means that he is no longer an option as a multiplier and the company is now also negatively connoted.
Determining Customer Satisfaction and Recommendation Readiness
To implement all of this, it is first important to determine the willingness of customers to recommend. At zenloop, we use the Net Promoter Score® to examine this point. The Net Promoter System® measures the customer experience along the entire customer journey. In this way, companies can understand the customer experience of their customers at an early stage and identify drivers of churn in good time. With these insights, positive product reviews can be generated in a targeted manner. The system divides customers into three groups: Promoters, Detractors, and Passives. In this way, it is possible to capture the status quo and to see how strong the willingness of a recommendation would be. This analysis helps to develop effective referral marketing.
The Importance of Promoters
Satisfied customers who would recommend a company or product to others are referred to as promoters in the Net Promoter System and can act as multipliers for the company. Most of the time, however, they recommend the products and services to their friends and family on their own and are therefore important helpers when it comes to winning new customers.
If You Don‘t Ask, You‘ll Never Know!
Sometimes it’s so simple: The most effective way to get recommendations is to simply ask customers for them. This is by no means a sign of desperation; it is more a sign of how convinced you are of your own products and services. Whether in your order confirmation, newsletter, or the personal sales interview, experienced marketing experts always find a discreet way to accommodate a question about recommendations.
Social Media for Building Relationships
If you are present on many social media platforms, there is now a chance to actively ask for recommendations. Whether via Facebook, LinkedIn, or the newsletter—customers are usually most willing to give feedback immediately after purchase. An optimal start to this process is to obtain reviews under Google’s “My Business”
Google My Business Profile Checklist
- Address
- Opening hours
- Contact
- Brief description of the company profile
- Authentic photos
Customer Acquisition Today with Recommendation Marketing
Positive feedback warms the entrepreneur’s heart. It is even better if customers pass this on to other potential customers and make a recommendation. Recommendations are usually much more valuable than advertising promises, as customers place great trust in the words of friends, family, and bloggers. Companies that recognize this enormous potential and develop appropriate measures for this type of marketing can increase their reputation and revenue — without much effort or a large marketing budget. After all, the best advertising comes from your customers.
Generate recommendations with zenloop
