If we are satisfied with a product or service, we will gladly share that with our dear ones. In turn, our advice will probably be more valuable to them than any TV commercial. That is precisely what referral marketing is based upon.
It was always one of the most effective forms of advertising out there. However, this importance especially grew in post-pandemic times. For example, in times of general turmoil, people tend to ignore ads and would rather act on a friend’s recommendation.
This article takes you on a brief walkthrough of a couple of recent trendsetting examples, revealing what makes an effective referral strategy in 2021.
Examples of most efficient strategies
Referral marketing is particularly suitable for businesses operating in the digital realm. Online companies such as Airbnb or Instagram are very well aware of the vast potentials of referral marketing. Very often, it is one of the main tools of their brand strategies.
Actually, these companies take word of mouth to a whole new level and make it an essential part of their brand strategies. This is how it is done.
Tesla: generosity and adaptability
Tesla referral strategy changed over time. Namely, they started with a program famous for its generosity. In cases where recommendations lead to a purchase, both of the parties (the referer and referred) would get six months of supercharging for free.
And there was more. As one could refer several times, one could get various gifts for the service, such as new wheels, solar Powerwall batteries or even witnessing the rocket launch from SpaceX or get a brand new Tesla Roadster for free.
As one could imagine, it was a bit too much, so Tesla recently decided this kind of referral program was unsustainable and changed the strategy.
The new referral program is still as effective, however, there are some limitations. The prospective buyer is obliged to purchase certain models, and is awarded a thousand miles of free Supercharging.
At the same time, the referrer gets the same amount of Supercharging, as well as a chance to win some models of Tesla cars monthly and quarterly.
It is clear that smaller enterprises can’t afford a program as generous as this one. Everywhere in the world, be it UK, USA or Australia, SMEs have special treatment due to limited resources.
This goes for marketing as it goes for taxation or investment.
However, speaking about referral marketing strategies, the same principle applied by Tesla can actually be suitable for smaller budgets as well.
This is a form of good old “everybody wins” referral strategy. When deciding to engage in it, companies simply give discounts for further purchases to both referees and referred. This is an old strategy, applied by Oriflame and Airbnb as well.
Additionally, upon a closer look, it is clear that this advertising strategy actually saves money.
Tesla boasts of low marketing expenses, as their referral program is so effective that other means of promotion are not as necessary.
It is worth mentioning that starting a paid social ads campaign to launch this novelty can result in an even greater ROI.
Any Instagram user knows how very often brands engage their followers by using giveaways.
A giveaway is sort of a social media game. It is a limited-time competition in which entrants involve by liking and sharing posts, or following a page. The page managers finally choose one or several lucky participants to get a special gift.
It’s a referral strategy because the participants are usually also asked to tag their friends, which is how the brands get more attention and raise awareness on Instagram.
This way, people don’t only get gifts, but also have fun. In such a way, they are probably more willing to recommend you to a friend in the future.
It is their exclusive referral marketing strategy that enabled the impressive growth of Clubhouse popularity among the users in 2021.
Namely, this app which enables people to involve in conversations by listening or recording audios, began by allowing people to join only if invited. The early adopters were celebrities, so their invitations especially encouraged people to try the app.
The fact that it started with celebrities, made people want to join while having to wait for an invitation. This approach created a sense that using the app is something special, which is a great way to spark interest in people.
As you might very well know, FOMO stands for Fear Of Missing Out. This strategy is promising a great reward, but only to a limited number of people.
With FOMO, it is crucial to know what are your customers’ real desires.
One of the most common errors companies make is to offer the least selling product. If people weren’t particularly interested in that product when they could easily get it, why would they engage and recommend you to a friend now?
In order to know what would actually stimulate your customers, there are many analytics tools you can find online, such as Google search analytics. These can be really helpful for starting a FOMO strategy plan.
If announced in an excited and inspiring manner, giving away great gifts to only a few will significantly raise interest in your products. It will happen among those who got them, as well as among those who still didn’t, but hope for it.
TikTok: challenge and creativity
Video material is a very influential online medium, and its importance in advertising will only continue to grow.
TikTok’s popularity grew rapidly in the previous years, and it is no longer popular only among the younger ones. That’s why companies start using the potentials of this video sharing app for the promotion of their products and services.
On TikTok, people want to have fun and express themselves. Therefore, many companies introduce a branded hashtag challenge that inspires users to make videos.
The author of the best video might get a reward – in form of a gift, or it can simply be sharing the content on the company’s official page. In that case, it is a kind of promotion in exchange for promotion. Again, a win-win combination.
TikTok challenges can easily become viral as everyone wants to participate in what inspires plenty of people. It is also a very useful tool for building a community around your product. And as we could see, a large and engaging community means good word of mouth.
An effective referral strategy checklist
As we all already know well, marketing is as creative as it is a craft. That means there are no magical recipes or one-size-fits-all solutions. However, there are some recommended guidelines you can have in mind while tailoring the perfect strategy for your particular case.
The list goes like this…
Offer a good value
This is a major precondition for a successful referral program. In order to recommend you to someone else, the customers have to be fully satisfied with your product and/or service.
A customer-oriented business approach is a good idea if you wish your referral marketing strategy to work properly.
Make sure customers trust you
Once people are really satisfied with a product, they get curious and tend to explore the company. What they want is the company’s values and vision to align with their own.
Therefore, it is desirable to be transparent and allow people to interact with you and with each other. In one word, build a community, gathered around the same values. Communities enable news to spread fast and efficiently.
The power of saying thanks is great, in business as in life. It is a good idea to thank a happy customer for joining or recommending your product to others. This is not only about being polite but also about building mutual respect between you and your customers.
Be short, stay to the point
People don’t have much time these days. There is a lot of information to digest daily and people need to be approached in a clear and concise manner. Therefore, make sure that the way you award your users is as simple as possible.
Once you have a comprehensive plan, you should also communicate clearly about it. It should be well explained and visible on your website. Also, the process of claiming the gift should be easy.
Word of mouth has always been crucial in business. For example, it doesn’t only sell products but also brings new employees to the company.
The keyword here is relevance. Your potential employees put forward relevant experience that might benefit your company, hoping that HR will recommend them for the post.
In referral marketing, in a way, you are the one applying for new customers. So, it’s a good idea to know your customers’ profiles very well. Given a chance and if satisfied, your current customers will be more than glad to share the good news with their peers.
Offer services and experiences that are relevant and attractive for your clients. In turn, watch the good word about your product spread far and wide.
Author: Nina Petrov is a content marketing specialist, passionate about graphic design, content marketing, and the new generation of green and social businesses. She starts the day scrolling her digest on new digital trends while sipping a cup of coffee with milk and sugar. Her white little bunny tends to reply to your emails when she is on vacation.