Referral marketing: 4 strategies to apply immediately

With referral marketing, small and large companies can acquire new customers at very low costs. In some cases, the low acquisition costs can increase turnover by 1200% – as we will see in method number 3 -, or increase the value of the customer himself by giving him vouchers to use in future orders.

The “bring a friend” formula is powerful, because it is based on the persuasive principles proclaimed by Cialdini in his books: social proof and the principle of reciprocity.

The social proof is leveraged by the corporate customer, who talks to his friends about the potential of the company and the goodness of the products sold. In this case, friends are seduced by positive emotions. 

Referral marketing unleashes its full potential when it is at the service of quality products loved by the public. Furthermore, the reciprocity factor should not be underestimated. The rule of “I give you so that you can give me” is irresistible when a beloved service is placed at the center of the negotiation (such as a voucher or an economic incentive.)

Let’s discover 4 easy and intuitive methods to safely start the customer duplication machine even in your company.

The Topic Of This Post

  • 1 What does referral marketing mean?
  • 2 Idea 1 – Free product 
  • 3 Idea 2 – Offline campaigns
  • 4 Idea 3 – Economic incentive 
  • 5 Idea 4 – Gift outside the company
  • 6 Conclusion

What does referral marketing mean?

Referral marketing is an innovative strategy to duplicate customers. By integrating this tool into the company you will be able to attract new customers simply by retaining the new ones.

The mechanism that makes referral marketing work is persuasion. New customers interact with the company because they are introduced by people they trust. In this way, the “advertising” work is done by your current customers, not by your company.

For you to be able to attract quality leads while reducing acquisition costs, you must be sure that you are offering a product that your audience loves. Otherwise, none of your long-time customers will offer poor and mundane service.

Idea 1 – Free product 

The first method to implement customer duplication easily and intuitively is to offer a corporate product for free.

This technique is widely used online. The well-known company “Dropbox” to entice its historical customers to invite their friends has put on the plate something irresistible for the audience: 16 gigabytes of space.

Behind this marketing action, there is an obsessive study of one’s audience and the desires of one’s market. Dropbox knows that its customers, making extensive use of photographs, videos, and whatever else, need digital space to keep documents.

For this reason, offering a product for free that has a very low production cost for them is more profitable than acquiring customers through advertising. The main advantage of referral marketing is to bring in new customers while reducing acquisition costs.

The premise that prompts the customer to take action is ” Get up to 16GB of free Dropbox space!” From the customer’s point of view, 16 gigabytes represent a great opportunity. For the company, however, the offer represents a customer acquisition for 0.08 cents.

Idea 2 – Offline campaigns

Going up the level, the second method to apply referral marketing in the company is to create offline campaigns. This technique is very useful for professionals who sell products offline, such as the hairdresser, the butcher, the plumber, and so on.

Let’s take the example of beauty workers. The positive emotions of the client attract his friends and direct them into the arms of the professional.

I guess you happened to see your friend’s sparkling eyes as she sang the praises of her hairdresser. Or the skilled beautician who took care of her manicure to perfection.

The positive emotion of your friend could resonate within your circle and attract your friends who might want to make a change of look. The far-sighted professional could use this moment in his favor and turn it into an opportunity to attract referrals. 

Let’s go back to the example of your hypothetical friend. Let’s imagine for a moment that her trusted hairdresser gave her 5 coupons to win 3 free cuts.

To claim the delicious prize, your friend just needs to hand these cards to her friends who are enthusiastic about her cut. This way the hairdresser will have three new clients and your friend will win three free haircuts. Simply praising the hairdresser’s skills.

At first glance, the acquisition cost is € 30 (a price in line with the average rate of three haircuts.) In the long run, the hairdresser will earn 1200%, or € 360.  On average, a woman spends € 30 between haircuts and styling. Considering that he will go to the salon at least 4 times a year this will be his earnings on new referrals.

Idea 3 – Economic incentive 

A third method of acquiring new customers is to offer an economic incentive. There are two variants of the strategy:

  • The money can ONLY be used on the platform;
  • The money is loaded onto the customer’s card. 

In the first case, the money can be presented under the guise of a coupon to be used in a future order. By following this line, we increase the average cost of the customer, and also his habit of considering us a choice in the moments of purchase.

Velasca has embraced the coupon strategy and offered a coupon worth € 25 for each referral that enters the company. The Italian shoe company has created a mini landing in which it offers its customers how to get the voucher. 

Unlike the copy used by Dropbox in the first example, Velasca’s headline announces: “€ 25 for you and € 25 for your friends.”

It is a direct copy that clearly expresses the company’s intent: to obtain highly targeted people and lovers of handcrafted shoes. In this case, the company itself “facilitates” the customer’s task by indirectly eliminating the people with whom he is not interested in doing business.

Idea 4 – Gift outside the company

Gimme5 is an insurance brand that makes financial awareness its business goal. Unlike Dropbox, Gimme5 offers an incentive detached from its core products. It offers Amazon coupons to trigger referral activity. 

The Milanese company is a classic example of value for learning how easy it can be to acquire new customers. Entrepreneurs often believe that the most profitable way to acquire customers is to keep the capital in the company. 

But unless you have a well-positioned and recognized brand (like Velasca), giving away a product from a more famous (and desired) company can spark interest in the potential customer.

Conclusion

To trigger the referral marketing activity, the company can rely on 4 easy and intuitive customer duplication strategies.

  • The first strategy offers the customer, in exchange for a request, a company product completely free. This method has been used successfully by Dropbox – which operates exclusively online and has no physical and tangible products. Yet, the copy and the authority of the brand seduce the customer to obtain the product up for grabs at all costs.
  • The second method to do referral marketing correctly is to create an offline campaign. This strategy is ideal for local businesses that cannot sell products over the web. At this stage, the company will limit itself to creating coupons to offer the product for free to the loyal customer in exchange for the entry of his friends into the corporate circuit. To make this phase easier, the entrepreneur should also offer an incentive to the new customer… Maybe by giving an important discount on the first transaction.
  • The third mechanism offers an economic incentive – for the old and the new customer. In this case, the voucher can only be used in the company – by creating a voucher to use in a future order – or to be received on your credit card. In this case, there is no best formula. For the strategy to be effective, you need to know what the customer prefers.
  • The last method to do referral marketing like a real pro is to offer an external product to the company. In this case, we could give an irresistible service to our audience – as in the case of Amazon coupons offered by Gimme5.

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