What is Referral Marketing?
Referral marketing, put simply, is a strategy of a variety of enterprises to promote their products and services operating through their existing customer base. The upcoming On Demand Apps which pair their customers with desired services particularly find this marketing strategy resourceful. Consequently, it ensures a steady growth rate in its user base with high return on investments.
Advantages of Referral Marketing
- Increase in Satisfied Customer- When a satisfied customer refers your products/ services to another person, it is most likely for the other person to try your business before any other. Thus, referral marketing is a means of aggregating the prospective customers. People generally prefer to use the services/ products that their family or friends recommend in comparison to entirely new ones. Through referral marketing, one set of satisfied customers sells your products and services for you. This adds an element of personal trust and belongingness. Invariably, which unleashes a cyclical addition of satisfied customers to your user base.
- Reduction in Sales Expenses- Referral marketing strategy aims at increasing sales by thriving on the trust factor of satisfied customers. The customer actually makes the sale for you. This subsequently leads to a significant fall in the sales expenses. Companies tend to save a fortune on cold calling and approaching disinterested customers with referrals. The time saved can be utilized to focus on satisfying the increasing clientele.
- Targeted Marketing- Existing customers generally use referrals to approach those friends or family who might be prospective clients as they tend to know their social groupings and peers well. As opposed to traditional marketing strategies which spread out to a wide stratum of the population, referral marketing ensures a precise target group ensuring potential leads.
- Benefits of Referral Codes- In the present day referral marketing takes the route of referral codes. This entail benefits for the referrer and the referred. The proposed benefits tend to accelerate the process of referral marketing exponentially. The benefits in the form of freebies are beneficial for the company as well increasing its organic transactions and usage.
Major Users of Referral Marketing
Referral marketing has widely been employed by On Demand Apps like Ola, Uber, Food Panda etc. They seek to provide services to their customers based on respective demands. These apps generate unique referral codes for each customer who derives benefits every time he/ she refer the code to a friend and the other person uses their services. For instance, Uber gives its customer a free ride worth Rs. 50 every time someone uses their referral code. This strategy of continued benefits ensures the loyalty of the clients to these apps. Referral codes for these apps can be shared via a number of platforms. These include e-mail, facebook, instant messaging, WhatsApp, twitter etc simplifying the process for its customers. These apps carry out an extensive course of Market Research. Thus, the objective is to identify the most lucrative incentives for its users to initiate the referral process.
Dropbox- A Referral Marketing Success Story
Referral marketing strategy has been a tool of Dropbox helping it reach a valuation of $10 billion. Dropbox adopted a Business Model giving priority to referral marketing. The idea was to offer extra storage space to its users for every time they referred it to a new user. This potential extra space encouraged the users to get new customers for the portal. In return, they got free extra storage space which is highly significant for students and professionals alike. Subsequently, Dropbox offered a double- sided benefits referral program where both the parties had the incentive to take action. Also, the wordplay of Dropbox which read ‘Get Free Space’ instead of ‘Invite Friends’ attracted a lot of users to refer. Finally, Dropbox’s ability to convert potential leads obtained through referral into satisfied clients assured its high success rate in the domain of cloud storage.
In a nutshell, referral marketing ensures Viral Growth especially for a startup (Viral Growth of Startups) by increasing sales with minimal investments. Thus, by ensuring a strong incentive program and choosing a precise target audience, referral marketing can amplify your customer base to levels beyond imagination.