Referral Marketing programs allow companies to get new customers without huge financial cost, capture email addresses, initiate a relationship, and start a conversation. New customer acquisition is the top priority and biggest challenge for businesses today.
Primary Referral Marketing Goals
Although, referral marketing can help with brand awareness, social engagement, and revenue most marketers running referral programs have two primary goals:
- Collect Email Addresses
- Acquire New Customers
Marketers still use email marketing as a channel to convert leads and keep their brand top of mind. Email marketing generates a high ROI. In fact, for every one dollar spent email marketing drives $44. In addition, drip email campaigns help leads become sales ready. Ultimately, marketers want to collect email addresses because this provides the opportunity to nurture new leads into potential customers. By acquiring new customers, marketers are able to generate revenue.
However, there’s another goal that most marketers are unaware exists: Capitalizing on Network Connections. Let’s take a deeper dive into what this mean.
Capitalizing Network Connections
Who are your customers referring? Do you really know? Imagine you could get insight into the social networks of your existing, purchasing customers. What if you were able to tap into the social web of your current customers? Just picture being able to target your referral program in a more personalized way. At Talkable, we have identified a methodology for capitalizing on this network effect, by using referral as the next best thing to reading your customer’s minds.
Example: How A Company Can Use Network Connections
Let’s look at an example. You are a New York-based online sunglasses company. You are using a referral platform to convert new customers into advocates. Your customer base is primarily located near NYC, so you naturally spend in paid channels in the same geography.
Although, after taking a closer look at your customers’ orders, you notice that new Los Angeles-based customers, referred by NYC-based advocates, have an average order value 3x larger than NYC based customers. Until now, you never thought to pay for online ads for those located in LA. The power of network effect shows that a new audience, living in Los Angeles, is a new source for you to focus your marketing efforts.
Best-in-class referral platforms allow companies to leverage Facebook as a platform to share during the referral process. According to Digital Marketing Ramblings, the average Facebook user has 245 friends. As your advocates share your brand’s products and experience with their social network, you’re able to review transactions to uncover hidden segments- allowing you to spend against segments that already resonate with your brand and may have not been previously considered.
Even if you’re already receiving a steady stream of referrals, improving your referral conversion rate by 5 or 10% could dramatically impact your bottom line. How is your business harnessing the power of referral to reveal hidden segments, capturing these customers, and building scalable, sophisticated marketing programs to drive more sales? Share your stories with us in the comments.