Referral Marketing is the New Loyalty Marketing

Capturing your customer’s loyalty can be a tricky task. Loyalty is largely earned based on giving your customer the experience, product, and service that they have come to expect. And in a digital, Amazon Prime world, customer expectation continues to increase. Even when you do all the right things, your customer won’t necessarily turn into a repeat customer or a brand advocate. This is why many companies seek out loyalty programs which reward customers for their repeat purchases as a way of enticing loyalty and giving more to their high frequency purchasers. This isn’t a bad approach especially because your best customers deserve a little love.

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Loyalty programs are often structured as a percentage of the dollars spent to encourage repeat purchases. This works well in a highly competitive market such as gas stations that also tend to operate on low margins. These environments have high frequency purchased products so offering small rewards on each purchase can make your customer feel better about driving a extra few blocks to your gas pump.

While loyalty programs remain effective, they have evolved into something bigger and largely more compelling. Enter Referral marketing. While referral marketing uses some of the same principles as loyalty programs by rewarding their customers, they have a different end game, and they appeal to a different type of consumer. Referral marketing works best for brands that already have a strong brand and customer affinity. They also aren’t limited to customers with high purchase frequency but still incentivize repeat purchases.

What referral marketing does that is pure genius, however, is that it encourages brand loyalists or advocates to refer friends to your business. Because who doesn’t want to share a brand that they adore with their friends? This is particularly true of brands that have some level of acclaim associated with them. The other beauty of referral marketing is that they have a high trust factor because your friends wouldn’t lead you astray, right? Think of it as automating word-of-mouth referral which is something that happens all the time on social media or even in casual conversation, but with a reward for doing what you already do. It is brilliant! Even better, there are some strong players in the market that offer affordable and user-friendly options such as ReferralCandy, LoyaltyLion and FriendBuy.

Referral marketing generally offers cash off of your purchase based on engaging in the actions that are most impactful to your business such as referring a friend, submitting a product review, signing up for enewsletters, and making repeat purchases. That means that it works best for brands with higher margins that can afford to shave a bit off of the profits. They can also be used to grow your followers on social media or drive traffic to your website. There really is no shortage of benefits.
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Unlike loyalty programs, referral marketing’s highest objective is not to retain customers. Instead, referral marketing seeks to bring new customers to their business without the advertising or marketing cost. Why run expensive advertisements when you could get your happiest customers to refer their friends to your business? The best part is that referral marketing works. It drives conversions and can have a significant impact on your businesses bottom line.
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Shahla Hebets

Shahla Hebets is the founder of Think Media Consulting, a digital marketing consultancy firm. Think Media creates smart, relevant, and authentic digital marketing, social media and ecommerce strategies that drive revenue for health and wellness brands.