What Is Referral Marketing? 8 Types and How to Do It

A brand's value matters a great deal to a business. To earn high profits and keep raising the rate at which prospects become customers, every business needs an effective referral marketing strategy. So What is referral marketing? What forms does referral marketing take, and how do you run it? The article below from Mona Media will help you understand Referral marketing in full detail.

What is referral marketing?

Referral marketing is a strategy that lives on word of mouth: customers are happy with a business's product and recommend it to the friends around them. That is why, compared with other marketing strategy traditional approaches, referral marketing finds it easier to attract new customers . It can also raise the satisfaction and trust of existing customers.

Current forms of referral marketing

Since it is a strategy for promoting products through spoken and written recommendations, referral marketing comes in many forms. The 8 most popular and effective ones are:

Direct Referral

Direct referral has kept going, without pause, from the past to today. Even as science and technology have grown alongside it, direct referral remains just as effective as other forms.

This is the traditional and most common form from before technology existed. It works through staff introducing and advising customers directly. Customers then understand the benefits and trust the product. In turn, when they are satisfied with the product and it works well for them, they recommend it to the family and friends around them.

See also: How to build a professional customer service system

Tangible Referrals

For a product to become widely known, a business has to invest in giving customers useful gifts through tangible referrals. The key point of this form is that customers pass the gift on to their friends as a sign of how highly they rate it.

Example: When the online English course E-talk was launched, to get known it gave 10 free accounts to each of several schools in central Vietnam. Those schools had to give them to outstanding students, and in this way the course gradually became known to more people.

Community Referrals

A business succeeds when many people in the community know the quality of its products and services. The products a business builds should carry a strong human meaning and convey a message that is useful to the community. They should also bring real benefit to the group or organization involved.

Example: Eco Pharmaceutical Joint Stock Company contributed 30,000 VND to a program helping cancer patients for each share of a sunflower picture that spread widely on Facebook.

However, this form has to be built very carefully, because the campaign only works well when the community's views and interests are closely aligned.

Implied Referral

Implied referral is a very clever form of marketing that raises the importance of, and expresses, messages that deliver value to customers. In practice, a customer buys the business's product and receives a gift that carries the business's brand value. This makes it easy to create opportunities to reach potential customers.

Word of Mouth

This form is very common, but not every business understands it well enough to build complete Marketing word-of-mouth campaigns. More precisely, it is the exchange and review of products and services between two parties without the influence of advertising.

Consumers stay attached to a business when they feel listened to. That is why many businesses have sales representatives talk directly with customers or advise them by phone. This kind of interaction, like other promotional events, can spark conversations about the business's products.

Principles for a successful word-of-mouth marketing campaign

To succeed, a word-of-mouth marketing campaign needs these 3 principles:

• First, “be different,” because customers will never care about boring, unattractive products and services. A business has to stand out, and find some way to be different from its competitors in the industry.
• Second, “keep the message simple.”. By word of mouth, customers can't remember a product or service name that is too long or complicated. The name must be short, easy to say and easy to remember.
• And the last principle is “make sure of frequency of exposure.”. When a brand appears many times, customers form an impression and feel trust. When they need the product, they will pick the brand they know. So invest more time in showing up in front of customers.

Online Review

This form is common on social media today. Through it, positive reviews of a product or service from customers spread quickly to many people. Because the internet and technology keep growing, the reach within the community is very large, so online reviews work best when both the quality and the quantity of the products are ensured.

See also: How to write product reviews that attract readers and raise conversion

Social Recommendation & Sharing

This form happens when a business's product is shared and recommended on social media. Put simply, an existing customer who trusts and is happy with a product they've used wants to recommend it to friends, so they post the product's information on social media.

Email referral

Businesses use this form to announce and introduce products and services to customers quickly while still having time to prepare carefully and specifically. However, to reach customers, your emails sometimes end up in spam (that is the biggest drawback of email referral or email marketing).

Affiliate marketing vs. referral marketing

To go deeper into referral marketing strategy, you need to tell it apart from related strategies. Affiliate marketing is one you can't leave out.

Affiliate and referral marketing are two forms of marketing with the same goal: reaching and attracting new customers. In recent years, businesses have used both widely and effectively.

However, not everyone realizes that these are two completely different forms of marketing in many respects, as follows.

You may also be interested in: What is affiliate marketing? How to make money online with affiliate marketing

Who takes part

• Affiliate marketing: In affiliate marketing, the people who promote a business's products and services don't have to be existing customers. This means suppliers, influencers, or anyone at all can take part in promoting your products.
• Referral marketing: As noted above, the participants in referral marketing come from customers sharing with the friends around them. From there, the business reaches potential and long-term customers quickly.

Level of trust and loyalty

This is something every business needs to achieve. However, it differs greatly between affiliate marketing and referral marketing.

• Affiliate marketing: Trust is fairly low in affiliate marketing, because it is limited: no close relationship has been built between customers and the distributors or suppliers through the advertising and marketing.
• Referral marketing: This form saves the business money and sales time. That is why referral grows as customers become satisfied. It creates a self-sustaining cycle in which satisfied customers recommend the business to their friends, and so on.

A business earns higher profit from closing orders with referred customers, which is 6 times higher than with less promising customers.

See more: How do you build customer loyalty?

Rewards

Both forms exist partly because of rewards.

• Affiliate marketing: The most commonly used reward is cash or a commission percentage. The business checks and confirms the orders created when users visit the website through the affiliate's referral link, and pays commission as agreed.
• Referral marketing: Rewards in this form are distinctive and varied, and can include limited-edition product offers, promotions, discount cards or other perks.

Above is a summary of the basic information you need to know about referral marketing, and we hope this article gave you some useful knowledge.

How to run referral marketing successfully

To get the best results from the strategy, referral marketing has to be carried out in specific ways that avoid unexpected mistakes. This shows in the following practices

Promote the program you want referred

A program needs to be introduced widely to the public. This brings quick results by boosting advertising and product promotion. Alongside this, small rewards should go to customers who recommend you to the people around them.

Collect customer feedback

After customers try and use the product, a business needs their feedback. If the product is good, it builds strong trust with the public; if it still has flaws, the business can use the feedback to fix them. That is why customer reviews and comments are so useful.

See also: What is a testimonial? How to use testimonials

Invest more in customer care

Customers come first, so every business has to make sure they keep using its products. Improving and investing in customer care should be a top priority.

This is easy when a business pays more attention to customers and makes them feel more trust and interest in its products and services. It also means customers stay with you and become loyal customers.

See more:

• Ways to grow sales through Zalo marketing
• Applying a mass marketing strategy in practice