Of course, you thought about how to disseminate information most effectively. There are several ways marketers stand out in the modern world, but today we’ll talk about a referral marketing strategy. Before we do this, let’s think a little about the roots of the transmission of information in general.
As you know, the oldest word-of-mouth information dissemination model dates back to the time of Aristotle. According to a global Nielsen study, 84% of respondents in 58 countries report that recommendations from acquaintances, friends, or relatives are the channel they trust the most. This means that word of mouth still works and works well. And if so, then why not take advantage of it?
All this demonstrates that psychology, which was formed long before the appearance of the first means of mass communication, remained unchanged in the era of digital technology. Your task as an entrepreneur is to benefit from all that you can benefit from. But how to do that? Perhaps it’s time to talk about referral marketing strategy.
Today, the referral approach in the Western market is considered generally accepted for a SaaS company, but in order to understand its fundamental foundations, it’s worthwhile to turn to the ideas that arose at the very early stages of company development, when entrepreneurs urgently needed a development strategy, thanks to which they could at a minimum cost attract and stoop the user, as well as increase revenue per user.
The budgets for the support and development of such programs are much lower than in the case of the traditional model of market entry, so it is not surprising that today most SaaS companies use referral marketing as the main tool for business development.
Let’s talk about referral marketing strategies in detail.
The basic schemes of referral marketing
Now we will describe the basic schemes of referral marketing, the information about which is definitely useful to you.
Single-sided referral marketing strategy
What is included in this referral marketing scheme? You simply ask your customer to share product information. In response, encourage an additional option or a free period of use of the product. You can do this in the form of a promotion, giving those who shared information about your company some discounts or privileges.
This technique is used by those companies whose goal is to quickly gain popularity thanks to the referral program. It really works. With this scheme, a really large number of people can find out about your brand, but something else is important. If people learn about your company, but your company will not be attractive to them, then there will be no result. For this reason, it is important that a one-way referral scheme is supported by a good product or service. If this condition is met, then boldly count on success.
It is very important that a simple mechanism for transmitting recommendations from user to user is provided. If this is the case, consider that the scheme will work at full capacity and you will find a large flow of new customers.
Double-sided referral marketing strategy
Bonuses from inviting a new user get both sides. A great example is the Evernote cloud storage service. Its referral program is beneficial both for those who are actively inviting new users and for the invitees themselves. Invitees receive a free premium subscription for a month. Those who attract new customers earn bonus points for each referral marketing strategy. Such benefits for your customers are advertising fees. Nevertheless, it’s better to thank your own customers in order to achieve their loyalty than to pay Google and forget about it.
Try to implement this scheme. In many ways, this scheme depends on your niche, that is, the product or service with which you produce. Think carefully over each step of your campaign so as not to get debt in this way, instead of profit from new customers.
Referral marketing strategy with elements of gamification
You will also be curious to know that there are also referral programs where targeted actions of users are stimulated using elements of gamification. High-quality implementation of this model can often be found in mobile applications, but there are also successful examples in SaaS services.
How does it work? Often after registration, the user receives limited functionality that can be expanded by performing actions defined in the referral program, such as telling about a product on a social network, subscribing to a newsletter, inviting friends, etc.
Gamification in business is a powerful tool that will help to accelerate the pace of development of your company. Try it first hand and evaluate the effectiveness of this referral marketing strategy.
Third-party engagement referral marketing strategy
The point is to attract users who are not directly related to existing customers. The same Evernote developed a campaign in conjunction with Moleskin. On the back of diaries, promotional codes are published that allow you to get a month of free premium in Evernote. Thus, information about your company or product will become available to more people. Collaborate with companies that carry out related activities or whose clients are theoretically, but with a high probability can become yours. It can be useful for everyone in this collaboration. Users will receive a new product or service, third parties will receive money, and you are advertising. But be prepared for the fact that with an increase in the number of people who know about you, demand will increase too. However, you can read how to deal with this in our other articles. Now, let’s continue talking about referral marketing strategies.
Affiliate programs with material rewards
In the above examples, companies do not provide their referrals with direct financial compensation for attracting new users. They replace material benefits with psychological ones or offer a discount on the use of their own products. This works well with popular products, and it works even better with market leaders.
But this referral marketing strategy does not work in the case of new, little-known products and services. Therefore, if you are a novice player in the market, then you can use the model, which was called Revenue Share.
The principle of its work is very simple. You give part of the purchase price to your partners as a reward for the users you bring. This can be a fixed rate or a percentage of the amount.
This is a fairly effective scheme, but if you choose this, then you need to understand that you will have to allocate a certain amount from the budget. If you are not ready for this, then consider the previous strategy options. The main thing is to try. Only those who do not try are not mistaken.
There is a list of cool ideas for your effective referral program.
- Bring two friends and get a month of free use.
- Invite your friends and get free space on the cloud.
- Register with the promo code and get a 50% discount.
- Get for each friend a unique ability or additional life in the game.
- Invite your friends, get points in return and pay with them a PRO-account.
There can be as many options as you like. Use the above example as a starting point. Arrange for yourself and your team members a real brainstorm.
Important points of material motivation
Referral MarketingIt is important for you to understand that absolutely all referrals should have a clear goal. It should also be carefully monitored and modified as your business grows. You always need to keep this in mind in order to avoid at first glance unobvious troubles.
You also need to understand that success begins with simple tools for exchanging information, such as unique referral links, automatically generated messages for email, advertising messages for reposting on social media and more.
Provide your users with the ability to track the results of their referral activities. And build a long-term strategy to stimulate the most active users. All this you need to remember and put into practice in order for referrals to be as effective as possible.
What should you think about in advance?
All the nuances that will necessarily arise in practice, you do not predict. But you can significantly reduce risks by studying the existing experience in implementing affiliate programs in the market. When starting to model a referral or affiliate program, pay attention to the following points (there is much more value in these points than you could think):
- Each affiliate program should contain clearly defined stages and intermediate goals, achieving which you can adjust and optimize the program. Has this item been completed?
- A good referral marketing is a simple referral program. If it causes difficulties, and not every user can formulate your idea, then you better refuse it or modify it.
- In addition to the in-depth study of the program itself, you must also ensure its visibility to potential participants.
- Analytics and reporting should be available to the user around the clock.
- Post templates, posts, referral links, this is the standard set that users expect from you. Pay particular attention to message templates and visual content, otherwise, the result may surprise you unpleasantly.
- And most importantly, the success of any strategy is measured by its ability to demonstrate a positive ROI.
Crisis management plan is important
This article examined the main referral marketing strategy that exist on the market today. It is important to understand that when developing your own affiliate program, you must consider not only your desire to attract the attention of potential customers at all costs but also consider costs that can significantly exceed the planned ones when scaling up the program. Unfortunately, this is a common problem. You need to know in advance how you will solve this problem. It is good to have a crisis action plan. If you spend time in advance on this, then you will get a big advantage over other companies.
By offering overly attractive conditions, you will, of course, achieve such an effect that, together with the influx of new users, you risk getting a substantial bonus to operating expenses. Think about it in advance. Only you yourself can do so to prevent this.
On the other hand, in order to run the program, you must reach a certain critical mass, when the doubts of new users can be dispelled with the help of the existing positive experience. Work on it now to succeed tomorrow.
Was it learned?
One of the most effective tools that attract a new audience is a referral program. This has gone beyond the attention of most new entrepreneurs. Therefore, our goal was to tell you about this. We hope we have done well with this task. But let’s check it out. Such news should not go unnoticed. However, the sooner you learn about it and try to put it into practice, the better results you can count on.
Instead of the conclusion, let’s refresh our knowledge and analyze once again how to create an effective referral marketing?
- Create a good product. It is unlikely that people will want to advertise you if you make crooked tables and a tasteless cake.
- Tell us about the referral program. It should be visible to all users. Motivate them to talk about referrals on social media. Use several strategies at the same time. Do not be afraid to combine them and experiment.
- Give bonuses to both parties. So, they will want to recommend your product and try it.
- The program description should be clear and simple. If you yourself have difficulties in formulating an idea, then you should definitely work on the idea a little more.
- Whatever referral marketing strategy you choose, it’s all better than nothing.
This type of marketing works in almost any type of business, whether it’s a hairdresser or selling glass partitions. The main thing is to choose a good program and consider the interests of users. It all depends on you. This information is enough for a confident start. The rest is only a matter of time and effort.