What is referral marketing?

At it’s core, referral marketing is about enabling and incentivising your existing customer base to encourage their friends to come and try your product for the first time.

Word-of-mouth and Referral Marketing are often confused. Whilst word-of-mouth is the result of customers talking about your brand with their friends and convincing them to try it, this is done without marketing effort and is difficult for marketing teams to influence and measure. Referral marketing attempts to harness this customer advocacy and put in place the tools to encourage, reward and track customer recommendations.

Why is referral marketing so valuable?

Despite the proliferation of new media, marketers are increasingly finding it harder to reach the audience that matters to their brand. From a consumer's perspective, we are inundated with marketing messages which are completely irrelevant to us. Granted, progress has been made by media owners such as Facebook improving targeting of advertising, but it is still difficult to cut through the noise of competing brands.

A second huge challenge is the lack of trust in mainstream advertising. Recent reports from Nielsen suggest trust in marketing has fallen over the last 5 years.

Referral marketing scores highly on both relevance and trust

brand relevance

Relevance

When a friend shares a brand with you, they’re acting as the best possible filter for relevance. They know you and whether you’lll appreciate being introduced to the brand or not.

brand trust

Trust

They also will only share brands with you that they trust. They won’t risk their reputation with you by sharing an unreliable or poor quality brand.

From a marketing perspective then, refer-a-friend really is the holy grail of marketing

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