Did you know that family and friends are some of the most influential people in our lives? Their opinions and suggestions play a significant role in our decision-making practices. This also includes our purchasing habits and behavior, such as the restaurant your mother suggested or the clothing brand your sibling showed you.

 

Referral marketing capitalizes on people’s social networks and influences to increase brand awareness, expand audience reach, and encourage sales. It is a cost-effective strategy that leverages existing customers to establish relationships with potential customers within their circle.

 

To give you a better idea, here is a quick overview of how referral marketing works and some strategies for your marketing campaign. 

 

What Is Referral Marketing

Referral marketing is a type of advertising strategy that utilizes customer recommendations to boost brand awareness, expand reach, and encourage sales. This word-of-mouth marketing tactic aims to create networks of repeat customers extending to potential customers, thus, treating them as brand ambassadors or advocates. 

 

How Referral Marketing Works for Ecommerce Businesses

Source: Pexels

 

The ecommerce industry is highly competitive. Considering this, it can sometimes be difficult, especially for small businesses and startups, to gain traction for their brand. 

 

Referral marketing is a cost-effective, reliable, and powerful tool that online businesses can use. But how does it exactly work?

 

According to recent reports, there is a positive correlation between customer behavior and brand referrals. Data shows that word-of-mouth impressions are able to generate 5x more sales than paid advertising campaigns. Furthermore, the majority of consumers state that they consider and prefer referrals when it comes to reliable sources of information regarding potential purchases.

 

In addition, reports show that customers acquired through referral marketing campaigns are more likely to spend more and make referrals to others themselves. They also have a higher 30% conversion rate and a higher 16% lifetime value than leads generated from other strategies.

 

The concept of referral marketing revolves around the six principles of the art of word-of-mouth and sharing. Also known as the STEPPS framework, these principles are believed to be critical factors that drive people to refer to and design something to be contagiously popular.

 

Social currency

The social currency element notes that people have the natural tendency to share ideas or content that help them stand out. Using content that makes customers feel like they are in the know of scarce information or hidden features or facts about the brand can make them feel smart, cool, and knowledgeable. 

 

In referral marketing, the social currency principle can be used by providing loyal customers with information that can add value to their social currency and encourage them to act as brand ambassadors. 

 

Triggers

The trigger element in the STEPPS framework refers to any type of environmental stimuli that prompts people to think of something else. The trigger concept in referral marketing aims to place the brand, product, or service on top of customers’ minds so that mentioning or referring them feels like an impulse.

 

Emotion

Feelings and emotions can also be used as a tool to bring customers to share. Referral marketing can use content that allows customers to connect, reflect, and relate. Strong emotions manifested through a brand’s content can urge customers to share them with others. 

 

Public

The STEPPS framework also believes in the power of making things seen and public. This factor in referral marketing emphasizes the need to make your brand, product, or service as visible as possible for people to see. But not just that, the public display should also be impactful enough to build some social influence for others to imitate. 

 

Practical Value

Value is a critical key when it comes to selling. For customers to start referring to others, it is essential that they see practical value in what you have to offer. To help with this, highlight your product’s remarkable and valuable features in a manner that is easy to share.

 

Stories

Stories can be a powerful marketing tool when it comes to referral marketing. Master the art of storytelling and create narratives that your customers and audience are likely to engage and interact with. The more impactful the story is, the more likely your brand will be remembered enough to tell others about.

 

Effective Referral Marketing Tactics For Ecommerce 

Make shareable content

Source: Pexels

 

One of the simplest referral marketing tactics takes advantage of the power of digital content and social networking. Social media platforms such as Facebook, Instagram, Twitter, and TikTok have built the largest online network where people worldwide can connect and interact with each other.

 

Design your online content to be engaging, interactive, or informative enough to encourage people to share them with others. Content such as an educational infographic, a video product review, or a detailed how-to guide can not only drive people to talk about you but can also help them decide about purchasing your digital products, goods, or services.

 

Most importantly, make it easy for people to share your content. Adding calls to action, such as sharing your post on their profiles or tagging friends in the comment section, is a great way to start conversations. In your email marketing campaign, you can add share buttons on other platforms and channels, such as your website and newsletters. 

 

Start a referral program

Sometimes, people don’t see enough value to start referring a brand, product, or service to others regardless of how much they like it. Considering this, incentivizing referrals might just be the push they need to start sharing your brand with people they know.

 

A referral program often comes in tiers or steps where a customer must accomplish different goals to receive a reward. It can be anything from a discount on their next purchase, a free shipping voucher, or even store credit. A referral program aims to offer your customers rewards as they actively work as brand ambassadors. 

 

Utilize social media influence

Source: Pexels

 

Social media is undoubtedly one of the most powerful sources of influence in today’s modern and digital world. One way online stores can use social media in referral marketing is to collaborate with influencers.

 

Social media influencers are powerful marketing tools to boost brand awareness and encourage sales. These social media celebrities have an expansive reach and large audience, and they also enjoy a certain level of power and influence that their followers easily trust and rely on. 

 

Therefore, having your beautiful product promoted or advertised by a social media influencer can also be considered a referral marketing tactic coming from an extremely powerful source. 

 

Encourage reviews and feedback

Aside from family and friends, people also trust what other people have to say about a product or service. Therefore, reviews from previous customers can help them see and decide how much value is there in what you have to offer. Considering this, encourage your customers to leave a review or offer feedback after a purchase.

 

There are different ways to show your audience other customers’ feedback. You can add this feature when you’re building your ecommerce website, or you can use it as content on your social media pages. Comments from previous customers can be a powerful and effective referral marketing tool to convert those right on the edge. 

 

Bottomline

Finding customers is considered one of the hardest parts of starting a business. While you can use a wide range of marketing tools and strategies, utilizing referral marketing can be one of the most cost-effective and powerful ways to draw customers in. 

 

However, it is also important to understand the nuances behind an effective referral marketing strategy. The STEPPS framework can help define the behavioral and environmental factors involved in customer referrals. At the same time, the different referral marketing tactics can help guide you on properly and effectively incorporating these strategies into your business plan and campaign. 

 

Want to know more about effective digital marketing strategies? Sidekicks is an on-demand virtual company, and we’re eager to help visionaries and entrepreneurs like you. Get a free ebook and learn more about how we can help you by signing up for our newsletter. We also offer a free 30-minute consultation if you prefer something more personal.

 

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