How to Acquire Customers with Referral Marketing


Referral marketing isn’t a new term in the world of marketing. It’s actually been around since man began. It was just called something else.

You’ve probably guessed it: it was called Word-of-Mouth.

What is referral marketing?

When was the last time you purchased a product simply because your best friend or your mother told you it was great?

This could be from tissues to laptops to a new fridge to a new brand of shoes.

How does the process work?

You may have asked about a handy laptop bag, your friend jumps in and recommends a brand they use and swears by them.

So what do you do? You go and check that brand and you are more likely to buy from them because they have been “recommended” to you or rather they have been “referred” to you by someone you know and trust.

If you had passed by that particular brand’s shop, without getting your best friend’s recommendation, chances are you would have gone window shopping and moved on.

But what your friend did was give you confidence that that brand is a good one.

That’s a referral.

Benefits of Referral Marketing

Referral marketing is also known as people marketing. It relies on people telling others to make purchase decisions.

That’s why a referral program is a great and unique marketing opportunity compared to other forms of marketing.

“Referral sales require almost no financial investment, but they bring in very valuable warm leads,” explains Steli Efti, CEO and cofounder of Close, in a Forbes article.

A referral marketing program will help your business:

  • Engage and incentivize customers
  • Grow your customer base
  • Build a connection between you and your customers
  • Create brand loyalty

But these aren’t the only benefits. According to Social Media Today, there are three more reasons, from a business perspective, that make referral marketing the go-to source of marketing for your business.

  • Higher lead quality
  • Increased lead quality
  • Lower cost per lead

Still don’t take it from me, follow the data.

Always follow the data *wink*

Referral marketing statistics and data

Referral marketing programs aren’t a “new thing.” They have been around for years.

Back in 2010, a McKinsey report showed that 20% to 50% of buying decisions relied on word-of-mouth marketing (aka referrals).

The report expected this type of marketing will grow.

“The digital revolution has amplified and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-on-one communication,” it said.

Moreover and depending on what marketing channel you use, some channels will perform better than others. However, having a referral marketing channel is likely to guarantee you high quality leads.

Around 78% of B2B marketers report that having referral program has helped them generate “leads of good or excellent quality,” says Social Media Today in a report.

In addition, 60% of marketers cite referral marketing as a major source of generating a high volume of leads, while 54% of B2B marketers view referrals offer a lower cost-per-lead.

“Referral marketing is one of the lowest cost-per lead growth channels available to you today,” Social Media Today notes.

Last but certainly not least, 88% of marketers report combining a referral program with a loyalty marketing program for their marketing mix.

In e-commerce that is a great combination. At Gameball, we have already seen many of our customers reap the benefits of having a referral program and loyalty program.

Read: 10 Strategies to Grow Customer Engagement and Loyalty in E-Commerce

How Can I Drive Business with Referral Marketing?

Excellent question. You can go around and ask friends to refer you, but in today’s age of social media and online marketing, word-of-mouth can easily slip through the cracks.

In addition, there are easier ways to do it.

In fact, many of us, (I know I do this quite often), prefer to ask people and friends online about their experiences. Few of us will pick up the phone to ask for or get a referral.

That’s why word-of-mouth has evolved into what people now call a referral marketing program.

What Is a Referral Marketing Program?

It’s a program where you reward users and customers for referring friends, family, and basically other customers to your business.

You can set rewards when your current customers reach certain milestones.

Let’s take an example: Let’s say your customer Andrew has referred five of his friends to your e-commerce store.

As a business owner you can decide when Andrew gets a reward for bringing you new customers. This can be when one customer makes their first purchase, or when they spend $20 in your store, or when they register with e-mail.

It depends on what you want to generate from the referrals.

Advice from the Experts

Referral marketing can generate great leads, but it’s important to remember that some customers might refer tons of people (if they are satisfied with your service) to enjoy the benefits of referring others.

This means that you will need to weed out some of the spam or low-quality leads they bring in. 

Read: Referral Marketing Best Practices: All You Need to Know

“Make sure you can monitor for abuse, low-quality referrals and spam so you don’t hurt your reputation or waste time following up with low-quality prospects,” says Kit Merker from JFrog.

Moreover, Wayne Elsey from Elsey Enterprises tells Forbes that “every referral is value,” which means that businesses need to bear value in mind.

In other words, “When your business gets a referral, why did it happen? Does the referrer want anything? What is the relationship between referral parties? It’s also important to know the goal for the referral and what a successful referral means to the prospect, your business and even the referrer.”

Rewards for Referrals

Once you create a referral program, don’t forget to reward your loyal customers who have referred your business to their friends, family, work colleagues, and other acquaintances.

The rewards you offer can vary. Here are some ideas that you can use as rewards:

  • Discounts
  • Vouchers and coupons
  • Cashback rewards 
  • Points as part of a loyalty program

Read: Best Loyalty Programs: A List for Inspiration

Top Referral Programs Worldwide

Whether your company is just starting out or it’s been around for some time, making use of a referral marketing program is never too late.

Here are some of the world’s most well-known companies using referral programs.

  1. PayPal was among the first to offer referral rewards early on. They pretty much gave people money.
  2. Airbnb reported that one user in China referred friends, which in turn results in over a thousand signups and hundreds of bookings in just one month!
  3. Dropbox’s program was a major success when it was launched, garnering nearly 4 million users in 15 months.
  4. Amazon Prime offers one of the most-widely used referral programs in the world.
  5. Uber is known to have multiple referral programs in different countries.

These are just a few of the top names out there to get you started.

I Want to Start My Referral Program!

Now that you know the benefits of having a referral program, are you ready to create one for your business?

The Gameball team has you covered. We offer referral programs that you can easily integrate into your e-commerce store.

Remember when we mentioned how referrals work great with loyalty programs? The Gameball app integration allows you to do both at the same time. Get in touch with the Gameball team and learn how you can leverage the benefits of referral marketing for your business.

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