We are talking about how you can simplify the promotion of your business and gain audience loyalty.
What is referral marketing?
Referral marketing means a system for promoting a brand, service, product or service through recommendations from users or other interested parties.
The brand offers a person (he is called a referee or referrer) a bonus for attracting an audience, and he is looking for ways to bring new customers (referrals) to the site / company / entrepreneur.
The referee is interested in receiving bonuses, so he takes care of all the “advertising costs”: spends time looking for potential buyers or customers, talks about the advantages of the advertised product, creates a positive image for him, does everything to attract a client and not suffer losses.
Brands often use referral programs in conjunction with other promotion methods to increase traffic, because this is an effective method that is easy to adapt to the needs of the business and make it as attractive as possible for a large number of referrers and referrals.
How it works?
To begin with, a little more terminology, which I have already mentioned earlier, but did not understand in detail.
A referee (referrer) is a person inviting another person to use the services of a brand.
Referral – an invited client, for whom the referee will receive a bonus from the business.
It’s easier to understand the principle of referral marketing using examples.
You have an English learning app, for example. Pretty good, but with a small audience. To increase your audience, you decide to launch a referral program. Its essence lies in the fact that for each invited user, existing customers receive a month of premium account for free. You have earned a potential income and thanked the referee for it.
This is the main idea, but it can be developed. There are several types and models of referral marketing.
Why does it work?
Numerous studies confirm that most people trust the recommendations of their acquaintances more than other types of advertising. A friend’s advice is more important to them. For them, it is more valuable than any marketing campaign.
A friend’s opinion is more important than any persuasion from the seller. His motives are clear.
A friend rarely gives recommendations and does not spam “unique sales offers” in the mail.
The friend does not recommend it for his or her own benefit or for the benefit of him and you.
The same applies to online reviews. They are considered more truthful than the words from the advertisements, despite the prevalence of fake responses bought in batches on copyright exchanges.
People often inspire more trust in other people than business. This is the basic idea behind referral marketing. And the task of business is to find a referee.
Referral Marketing Models
The difference between referral marketing models is the reward and the recipients. Who receives the award (business bonus), to what extent, and whether or not it receives it at all.
This model is only beneficial for the business and the referee. The benefit of the referee is in receiving remuneration, and the business is in increasing the audience (new clients).
Let’s take an example. Let’s say you use the site to find a job and saw a referral program on it that allows you to use a Pro account for free if you bring another user who will register on the same site and pay for Pro services. At the same time, the referral is not entitled to any discounts specifically.
A less efficient model, although it saves resources for the business.
The two-sided model offers more benefits. All participants in the transaction receive some kind of remuneration at once. Both business and inviting (referee) and invited (referral).
True, the amount of the reward can vary for each of them. For the referee, it is often more weighty and profitable. Referrals receive a small bonus and motivation to become a referee.
Some companies offer identical bonuses to both referees and referrals. This makes the referee’s job easier, as it is easier to attract a client when both of you receive a substantial enough reward.
If we analyze this case using the example of the same job search site, then both the inviter and the invitee should receive a Pro account for the same period of use.
A more effective model, as it increases the motivation of the referee and the chances of increasing the audience.
Referral program without bonuses
This is what we call word of mouth. When word of mouth about a product spreads around the world, not because someone gets an ad award, but because the product itself is so good it can’t be shared.
If you use a job search site and always find suitable vacancies on it, then you will want to tell your friends about it without additional reward.
Surely you have heard more than once how friends advise each other of doctors, good cars, experienced computer repairmen, interesting restaurants with high-quality cuisine, and so on. This is the same referral marketing, but free, which works due to the high quality of the services / product sold.
Difference between referral and affiliate marketing
Referral marketing is often confused with affiliate marketing because they are similar in how they work, but differ in general idea, type of reward, and distribution of rewards.
Referral marketing means the product of the business as a reward. Affiliate marketing offers money instead of a product. These approaches target different audiences. The first one is aimed at a loyal audience interested in the services provided by the business. The second is for outsiders (even those unfamiliar with the business product) who are ready to start advertising the product among their acquaintances for a monetary reward.
Some people live only by this. They collect referral offers over the network, imposed on different brands as a referee, and earn money by inviting referrals.
Referral Marketing Examples
Next, let’s look at examples of affiliate programs. I will specially take a lot of different products and services to show how different the conditions and options for rewards can be. This will make it clear how you can vary this promotion methodology and adapt it to your needs.
This is a service application that gives you access to a bunch of useful applications on macOS and iOS by subscription. The referral program is similar to what we have already discussed above.
The referrer and inviter receive one month of free use. Having such a program is one of the key reasons why I use it at all and continue to pay money to the creators of Setapp. Only after four months of testing (free use), I realized how much I needed this service and that it would be impossible to continue without it. Or maybe it was the cunning scheme of Setapp marketers to lure me into the ranks of regular users with an annual subscription.
One of the most popular cloud services has become one due to the referral program. By default, Dropbox gives users only 1GB of storage, while for cloud storage it’s pretty modest. But for each invited registered person, the service gave the current client 500 MB from above.
People tried to invite as many friends as possible to increase their virtual drive. Therefore, an already excellent product due to the referral program was able to become noticeably more popular.
Timeweb also has an affiliate program. It makes it possible to earn money from invited users who have paid for the company’s services.
The eTXT copywriting exchange has a different approach to organizing a referral program.
First, it is one-sided. Only the referee will receive the reward.
Secondly, she brings money to the referee on an ongoing basis.
The referrer will receive a percentage of the commission that the service takes for each payment to customers and performers. The money is small, but if you increase the number of referrals, you can get a pleasant constant profit, for the sake of which you won’t even have to hit your finger in the future.
Tinkoff, like other banks, regularly runs referral programs for different products. For example, the one who advises credit solutions gets 1,500 rubles to the account, and the one who advertises debit cards gets 3 months of free service and 500 rubles to the account.
At Tinkoff, rewards are constantly changing and changing. In some banks, they remained fixed for a long period of time. For example, Rocketbank has always issued a fixed amount of cashback for each referral throughout the entire existence of the bank.
World of warcraft
In video games, referral programs are also common. Blizzard in particular. The company is offering bonus items, in-game vehicles and increased experience points to those who have been able to attract a new player who is willing to pay for at least a month of playing time.
All offered bonuses are purely game-based, but no less interesting from that.
Is there any referral marketing offline?
And how. Various organizations regularly offer bonuses to existing clients to increase their client base. Often, such promotion tactics are used by all kinds of fitness centers or repair shops.
Bonuses can vary considerably. Somewhere it is a small discount, somewhere free service.
For example, the yoga studio “Air” offers the invited guests a discount on the purchase of a subscription, and those invited – either discounts or a month of free classes (depending on their current subscription).
Burger King had a similar action. For five invited guests, the diner offered a free burger. True, it was necessary to invite to the application for registration, and not to buy food in the institution.
How to properly organize a referral program
There is a simple checklist that will help you create the most effective referral program.
Make your referral link as visible as possible. Some services and sites have an affiliate program, but it is difficult to find, therefore, its effectiveness decreases.
The reward should be received not only by the inviting party, but also by the invitee.
Let the referral bonus be directly related to the product, otherwise new users, having received a reward, may leave.
Create a convenient form for distributing referral links.
Programs that simplify the implementation of referral programs
Finally, I’ll tell you about a couple of services that help you set up affiliate programs.
Flocktory – through it you can fully automate the process of creating a referral campaign. It is enough to indicate the goal, select the bonus option, and the program will take over the rest.
Admify is a smart system that helps you find the most loyal customers and turn them into ambassadors who will constantly recommend the brand for the award.
That’s all. An affiliate program is a great way to promote your business, helping to quickly build a loyal audience while minimizing costs. This is a universal technique that can be safely recommended to almost any business.