Referral Marketing: Turn Your Loyal Customers into Brand Advocates

Customers trust your brand when the experience of purchasing product (or service) from your business is really positive and that product/service fulfils their purpose.

When you start getting more loyal customers, you can use them to bring in new customers, sales, and raise brand awareness for your business.

But how?

You can do it using referral marketing.

In this blog post, you will gain an understanding on using referral marketing to turn your existing customers into brand advocates of your business.

What is Referral Marketing?

As the name implies, referral marketing is the process of encouraging people (that include your existing customers) to refer your product or service to their family, friends, and colleagues.

It really works because customers trust the opinions of people they know and people who used your product/service than compared to marketing messages pushed out by your business.

Referral is one of the oldest forms of marketing and it is still highly effective in this era of digital.

Here are few stats that can support the fact that referral marketing is an effective marketing channel for businesses:

• According to Nielsen, 84% of people trust recommendations from people they know making them the most influential form of advertising.
• Brand advocates are 50% more likely to influence a purchase, based on BzzAgent findings.
• Deloitte says that customers referred by other customers have a 37% retention rate.
• 27% of marketers says that they get more than half of their new customers from referral marketing, according to a study by Gigaom Research.

One major advantage of using referral marketing is that it’s a very cost-effective way to acquire new customers.  

That because referrals generate high-quality leads and high customer retentions than compared to the ones generated through other marketing channels.

And that too at very low marketing cost.

Referral marketing is a great option if you are a business owner struggling in building brand awareness, getting new customers and sales.

If you are looking for other digital marketing channels to build brand awareness for your business then check out this article.

How Referral Marketing is Different from Word of Mouth?

Word of mouth happens when a customer naturally recommends a product/service (they have used) to their family and friends.

But referral marketing is intentional. Here, businesses encourage their existing customers to spread positive word-of-mouth about their product or service.

You have more control over your referral campaigns and word-of-mouth occurs naturally or spontaneously, so have no control over it. 

Referral marketing occurs wonderfully when there are incentives or rewards (in the form of discounts, cash rewards, loyalty points, etc.) to your existing customers when refer new customers.

There is no such thing for word of mouth.

Lastly, you can track and measure the effectiveness of your referral program.

There are tools available that help you identify which customers have referred new customers, how many conversions happened, and calculate the ROI of your referral marketing efforts.

For word of mouth, it is very difficult to track and measure. Yet, you can track positive word of mouth happened for your business by monitoring online conversations and brand mentions.

Speaking about brand mentions, you can check out this article on how you can leverage brand mentions to boost your website’s SEO. 

How Referral Marketing is Different from Affiliate Marketing?

Affiliate marketing involves collaborating with external partners (not necessary to be your existing customers) who already built their own online presence.

These external partners called affiliates can be bloggers, freelancers, consultants, social media influencers, or even businesses.

They earn a commission by recommending your product/service to their audience or followers. The commission is mostly a percentage of sales made through these affiliates.

When it comes to referral marketing, the incentive is not just limited to sales commission. You can offer different types of rewards such as coupons, discounts, cash rewards, loyalty points etc.

Referral marketing provides you more control since you create and own your referral campaigns. There is less direct control in affiliate marketing since you are creating affiliate programs in third-party platforms such as Impact, CJ, and PartnerSnack.

Since your customers are referring your business to their family and friends so the reach is limited. That is not the case with affiliate marketing because your affiliates have wider audience and that means wider reach.  

When you consider the quality of leads generated, referral marketing has the edge.

To identify successful conversions, referral marketing often relies on manual tracking and measurement. When the number of referral conversions increases the difficulty in tracking conversions and measuring ROI increases.

In affiliate marketing, tracking is more sophisticated and technology-driven.

Here, unique affiliate codes or links are used to track referrals, allowing you to attribute conversions to specific affiliates. This enables you to perform accurate commission calculations, ROI measurement, and performance analysis.

You can use both to increase the chances of getting more conversions and to grow your customer base.

5 Well Known Referral Marketing Case Studies to Learn From

If you are still doubtful whether really referral marketing works for your business then check out these 5 referral campaigns.

These campaigns were implemented by famous brands to grow their loyal customer base and to spread the word out about their product/service.

1. Tesla Referral Program

As you know, Tesla is currently one of the most valuable automotive brands in the world and a major disruptor in the electric vehicle manufacturing space.

Unlike other automobile manufacturers, Tesla spend virtually zero dollar on advertising and marketing. Instead, they build brand awareness through their CEO Elon Musk’s massive Twitter presence and referral programs.

Tesla’s most recent referral program gave new customers thousand dollars credit towards the sale price of a car when using referral code.

The Tesla’s existing customer who sent the referral code then earns rewards on how many qualifying referrals had. The more referrals a Tesla customer sent, the more rewards they would receive. It ranges from new rims to a new Tesla car.

According to Inc, Tesla’s referral program generates more than 40x return on investment (ROI) and the credit goes to Tesla’s amazing product and the company’s band of loyal customers.

2. Airbnb Referral Program

Airbnb is one of the preferred booking platforms for people who are looking for rental vacation homes.

Airbnb used to conduct a referral program where you invite a friend, when they travel you receive a travel credit. You get a bigger credit when that friend invites a friend to use Airbnb.

Airbnb witnessed increased bookings by over 25% in some markets, through referrals.

The newer version of their referral program generated 300% more bookings and signups than before.

3. Uber Referral Program

Online taxi booking platform Uber used to conduct referral programs in the past both drivers and riders benefited from their programs.

Uber drivers can earn cash rewards between their drives by referring new drivers and riders. Additionally, riders can earn free Uber credits for sharing with their friends or colleagues.

According to Viral Loops, one Uber referral program was able to generate 12x returns on investment (ROI) for the company.

4. Gold’s Gym Referral Program

Gold’s Gym is a well-known fitness brand with gym centers spread across the world. Most of them are operating in a franchise model.

That’s one reason why Gold’s Gym runs different referral programs for different locations.

For instance, Gold’s Gym in the British Colombia region runs a referral program in which for every referral who joins Gold’s Gym, their customers get to spin the wheel to win great prizes. Also, more referrals mean more spins.

In another Gold’s Gym located in Calgary, when you refer your friends, family or co-workers and they signup, you will receive complimentary time added to your membership.

That is, when you refer one friend then you will get one year free or when you refer 3 friends then you will get 3 months free.

Also, Gold’s Gym run a referral program for their franchise owners as well.

5. Dropbox Referral Program

Dropbox is a file hosting service provider and they leveraged referral marketing to grow their customer base in short time, during their initial days as a startup.

The main objective of Dropbox is to provide their users with a space to put digital files, and they have created a program that will give users extra (free) storage space by inviting their friends to try Dropbox.

Dropbox has two reward structures based on different account options. For those who opt higher storage plans, they have the potential to gain even more (free) space when bring referrals.

Also, Dropbox customers can use one click access so that they can refer without having to sign up for the referral program.

According to one article, Dropbox managed to generate a 3900% growth in 15 months and all of this achieved through a simple referral program.

10 Referral Marketing Ideas to Convert Your Existing Customers into Brand Advocates

Here are 10 referral marketing ideas that can help in converting your existing customers into brand advocates so that they spread positive word of mouth and bring in new sales.

1. Referral Program Landing Page on Your Website

You can create a customer referral program on your website as it is the first place where your target audience visits to know more about your business.

If you already have a loyal audience built through your website blogs and in that audience, there are people who already became your customers.

Since they know more about your brand (other than being your customer) then it will be easy for to encourage them to join your referral program.

You can display banners linking to your referral landing page in your popular, traffic generating blogs. Also, you can display the same in your service or product pages as well.

You can share referral page link on social media, email, SMS, and messaging groups to encourage your loyal customers to join your program.

You can use a referral marketing software tool like ReferralCandy, Referral Rock, Genius Referrals, Affise, or Referral Factory to create a referral program landing page.

Here’s a video by ReferralCandy on how to create a referral campaign for your business.

Since we mentioned traffic generating blogs, you can check out this article on how to use SEO to build brand awareness for your business.

2. Personalized Referral Codes

You can provide each of your existing customers with a unique referral code they can share with friends, colleagues, and family.

This allows you to track referrals and reward customers for successful conversions.

Leverage referral marketing software tools mentioned in the previous section (#1) to create personalized codes and track the performance of referral campaigns.

You can use messaging apps like WhatsApp to direct interact with existing customers and share them personalized referral codes.

3. VIP Experience for Existing Customers

You can organize special events or provide VIP access to exclusive (celebrity or high-profile) events for existing customers who refer a certain number of new customers.

Encourage customers to share their experience of participating in these events on their social media accounts, perhaps through short videos. Ask them to tag your brand account and add your branded hashtags as well.

You can reshare/repost these videos on your page to maximize their reach. These actions will motivate others in your existing customer base to help you get new referrals.

If you have an active Instagram page then leverage Reels to reach out to your existing customers for your referral marketing campaign.

4. Collaborate with Influencers

Collaborate with influencers or industry experts who align with your brand values.

Offer them freebies or special discounts with their followers and encourage referrals.

Also, you may find people in your existing customer base who may have considerable social media following and you can partner with them as well.

You can leverage the online presence of these small influencers not only for bringing new referrals but also for brand awareness campaigns as well.

5. Your Employees Can Help You

Include your employees as well in your referral marketing campaign. They can bring you new referrals as well as converting existing customers into brand advocates.

You can also do partnership or collaboration with those employees who have considerable social media following.

Use employee advocacy to motivate your employees to take part in your referral marketing campaigns.

6. Shoutout through Social Media

For example, appreciate and thank your loyal customers on your social media channels for referring new customers and spreading positive word of mouth about your homestay business.

Openly appreciating their efforts will not only make them feel recognized and this encourages other existing customers to participate in your referral programs and brand advocacy.

7. Showcase Customer Testimonials

Customer testimonials and feedbacks can help in increasing your target audience’s trust in your brand.

You can request satisfied customers to provide or feedbacks showcasing their experience in using your product/service.

You can request testimonials in the form of short videos or text format so that you can share them on your website, Google Business Profile page, and social media channels.

This enables in building trust and encourage referrals by your existing customers.

8. Share Informative and Helpful Content

To turn your customers into brand advocates for your business, the best way is to create and distribute content.

The content you share with your audience (including existing customers) needs to informative and helpful.

For instance, you can share blog posts on trending topics in your industry or tips associated with your products/services.

You can repurpose the same content from the existing blogs to create infographics, social media carousels, short videos, downloadable ebooks, etc.

If your customers find your content valuable, they will definitely start sharing your content with their personal networks and become advocates for your brand.

9. Conduct Referral Contests

If you are struggling with low customer participation in your referral program then one way to overcome this issue is by conducting referral contests.

Run contests where your existing customers can win big prizes for referring the most new customers within a specified timeframe.

This creates a sense of competition and excitement among existing customers and take part in your referral campaigns.

10. Keep a Dedicate Group for Existing/Loyal Customers

You can create a dedicated group (on Whatsapp, Discord, Facebook or as personalized emails) for your existing customers.

You can invite those existing customers who are interested in participating in your referral programs.

You can use this group to provide them updates or keep them informed about the progress of their referrals.

You can request your loyal customers to create content (reviews, testimonials, photos, videos, etc.) for your brand and you can use that content in your referral marketing campaigns. Learn more about user-generated content in this article.

Conclusion

Hope you got clear insights on how to use referral marketing to turn your existing customers into advocates for your brand.

Instead of implementing the same tips mentioned in this post, you can try out different variations based on your product/service offerings, your niche, competition, target audience and location.

Please note that your get more referrals or get positive word-of-mouth about your brand only when the product/service you offer is of high-quality and stands out from the competition.

Let me know your thoughts about using referral marketing in the comments.