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Why Referral Programs are Critical to Your Business’s Success

We all love to share our experiences with our friends. Think about it. When you are out with our friends and family, what do you talk about?

For starters, you might bring up the cool restaurant that you visited a few weeks back. Sometimes you mention a unique product you saw from your newsfeed or the travel destinations a friend visited. Other times, you might recommend an app or game that piqued your interest.

This is what referrals are in a nutshell.

Referrals are made when friends recommend a specific product or service to another friend. The gist is simple, but the results are phenomenal.

Statistics from ReferralCandy found that 92% or customers trust recommendations from their network.  In addition, 83% of satisfied customers were eager to refer their friends to a product and service. Overall, the data proves that people both want to receive recommendations and give out recommendations as well.

However, a product is shared only by 23% of its customers.

In reality, most people often forget to mention a product or a service that they enjoyed. After all, there are so many topics to talk about.

So, how do you ensure that customers actually spread the word about your business?

The answer lies in referral marketing.

Why Referral Programs are Critical to Your Business’s Success

What Is Referral Marketing?

Referral marketing is how marketers influence the referral process. These marketers create a referral program where customers are rewarded when they successfully influence a family or a friend to make an actual purchase.

How Referral Programs Work

  1. Customers see an invite to a referral program via a social media post or a promotional email; or through the brand’s website.
  2. Customers signed-up to the referral program then receive a personal referral link.
  3. Customers share the referral link and information about the product with their friends and family.
  4. When the customer’s friend makes a purchase via the referral link, the customer receives rewards in the form of discounts and cash.
  5. The customer refers more friends and the cycle of purchase can begin again.

Referral marketing is basically when impressed customers successfully promote a product or service to the people within their network.

Let’s say, Lea loved her Airbnb experience in New York. Since she had a great experience, she wanted to let her friends and family know about how they can get a similar experience.

To spread the word, she could post about it on social media or she could join the tech giant’s referral program. If she chooses the latter, she’ll send a referral link to her friends and family. Since Lea’s recommendation is trusted by the people within her network, they would most likely try it out for themselves. In the end of the story, Lea’s happy, her network is happy and Airbnb made more customers.  It’s a win-win-win situation!

If you need a push in the right direction, then no problem. Here are some of the best referral programs in recent years.

5 Referral Programs with Impressive Results

#1. Tesla

The electric car company initially offered $1,000 for every successful referral. In recent years, they have upgraded their rewards system to give better deals to Tesla customers.

Often, Tesla customers who make successful referrals are rewarded with an exclusive Powerwall 2 batter, VIP treatment to exclusive parties and access to products not available to the public! But that’s not all. Tesla offered the first person to refer 20 friends in North America, Europe or Asia, a free Model S or Model X!

Now, that is definitely motivating!

At the time of this writing, Tesla added a private SpaceX tour to their referral program.

#2. Hubspot

Hubspot’s referral programs are not just made to get the best customers, but also to attract the best employees. The inbound marketing and sales’ platform asks customers to refer a developer to their company, in their ‘Refer a Dev‘ page. People who refer a friend that Hubspot hires, get a $ 10,000 reward!

No, this is not a joke!

In fact, last May 2013, Hubspot made this offer even better when they raised their rewards to an epic $30,000!!!

Now, that is how you attract the best employees.

#3. Trello

Trello is an easy to use project management application. It gives users who refer a friend free access to “Trello Gold” for a month, up to 12 months.

#4. PayPal

The online payment system launched a referral program that offered $20 to customers who created PayPal account and $20 for every successful referral they made. As a result, the company achieved 7% to 10% daily growth and 100 million users.

At the time of writing, PayPal offers $5 for every referred user.

#5. Amazon

Amazon recently launched their social media influencer referral program. It enables influencers with a sizable amount of numbers of followers, to earn money by advertising products from Amazon. It is currently exclusive and membership is by invitation only.

The rationale for the influencer-only program is to increase the quality of product reviews on the site. Since trust and loyalty is important to users, it is crucial for the tech giant to improve shopper feedback.

In fact, Power Reviews found that reviews are the second most important consideration when making a purchase. It is more influential than free shipping, brand and word-of-mouth recommendations.

Why are Referral Programs Crucial to Your Business?

Referral programs are an effective marketing tool

Promoting your brand is a big priority for most businesses. In today’s world, if businesses aren’t talked about on social media or word-of-mouth, then customers aren’t buying them.

The good news is that referral programs allow businesses to turn their customers into a promotional tool. According to research from Nielsen, people are 4 times more likely to buy when referred to by a friend.

Referral programs are a persuasive marketing tool because people won’t refer a products or services they don’t trust. They want to promote quality products since they naturally have an incentive to help their peers and improve their relationships.

Now, what are you waiting for?

Think about how you can jumpstart your own referral program today.


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Monique Danao is a freelance writer and contect creator with an expertise in marketing and SEO. When she's not creating her next big article, you'll find her enjoying funky food, listening to music and marketing startups. http://www.moniquedanao.com

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