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Referral Marketing definition

Referral Marketing (© /

Referral Marketing (© /

Referral marketing is a term that is used to describe a form of marketing that involves promoting the products and goods a brand offers via referrals, or word of mouth. These referrals often occur spontaneously, but marketers can use different strategies to encourage them. Referral marketing can take place on a variety of channels, such as social medial, websites, emails, etc.

In this article, we shed more light on referral marketing. When people are looking to purchase a particular product or they need a specific service but they aren’t sure which business will offer the best possible options, they often ask their friends, family members, co-workers or other people to give them referrals. For example, if you are looking for an accountant but have never worked with one before, you might ask someone you know to refer you to an accountant that they use.

Referrals can have a major influence on consumers purchasing decisions. For that reason, marketers have started developing tactics that can help to increase referrals and therefore, increase their business.

What Exactly is Referral Marketing?

So, what exactly does referral marketing mean? In the most basic terms, referral marketing involves spreading the word about the products or services that a business offers; it’s a form of word of mouth marketing. A company uses its existing customers to spread the word instead of traditional advertising tactics. In other words, it involves the deliberate acquisition of customers via referrals that a company has solicited.

It can be as simple as a business owner informally asking their existing customers to refer people they know to the business. “If you enjoy these products or services, let people know!” Customers can share a business page on Facebook, send out a tweet about the business, or simply verbally tell other people about the business. Any type of marketing that encourages customers to talk about a business to other customers is known as referral marketing.

Why Referrals are Important in Marketing

Referrals are important because consumers ask other consumers when they are seeking recommendations for products or services. And, not only do they ask, but they often act on the advice that the people they know have offered them.

A study conducted by Nielsen found that referrals are the most valuable form of marketing, and by a significant amount. That makes sense, too. Think about it: if your mother tells you how incredible a product or service is, you are probably going to try it out yourself.

Another reason why referrals are important: they are usually inexpensive, or even free! By ensuring your customers are happy, the word about your business can be spread by others! Referrals from other customers can increase profits at a low price.

Referral Program Explained

While the best way to get referrals is to provide outstanding products and services, as well as customer services, often, happy customers aren’t going to willing spread the word about your business. Unless someone asks about something your business offers, your satisfied customers might never spread the word about your business. You might need to give them a little push to tell others, and that’s where a referral program comes in.

A referral program provides customers with incentives for spreading the word about your business. For example, a online store might offer a discount of 20% on the next purchase when a customer shares the business’ page on social networks.

Why Referral Programs are Important

A well-designed referral program can help a business of any size attain new customers for a very low price. These types of programs encourage satisfied customers to share their positive experience with a business, and in exchange for doing so, the business offers a small token of appreciation.

A successful referral program can generate a significant and very tangible return on investment. Not only do they bring in new customers, but they bring in the right type of customers; people who are really interested in what you have to offer and are very likely to convert, and convert at a high rate.

To summarize, a referral program will encourage your satisfied shoppers to spread the word about your business, which will allow you to acquire more customers who will likely grow to love your brand and become loyal patrons.

How to Develop a Successful Referral Marketing Program

You might be thinking, “This all sounds great, but how do I actually go about building a successful referral program?” Here are some tips that will help you develop a highly effective referral program so that you can take full advantage of the benefits that a referral marketing strategy offers.

Offer Outstanding Products and Services

In order to build a referral program and really make this marketing strategy work for you, the first thing you need to do is ensure you are providing exceptional products and services. When you offer high-quality products and services that really meet peoples’ needs, you’re customers are instantly going to be happy. The happier and more satisfied your customers are, the more likely it is that they are going spread the word about your business.

Make It Simple

The most successful referral programs are those that make it easy for people to tell other people about your brand. If your customers have to run in circles or jump through hoops just so they can refer someone, the chances of them actually spreading the word are pretty slim.

You want to make your referral program as convenient as possible. Some examples of how you can make the process easy for your customers include:

  • Encouraging shoppers to share a post on Facebook, and in return, they’ll receive a discount.
  • Prompting customers to tweet about your business, and give them a free gift when they do.
  • Send out emails to your subscribers that encourage them to share your brand with people they know. Offer a discount in the email, which customers will receive when forward a link provided in the email.

Create a Referral Program that Works for Your Business

Every brand is different. A referral program that works wonders for a cosmetic store probably isn’t going to be as effective for a company that sells computer software.

How do you determine what type of referral program will work for your business? Think about what would benefit your customers the most. The clients of a cosmetic store might enjoy receiving a free sample or product when they make a referral. The customers of a software company might enjoy a credit to their account, or receiving access to a paid feature for free.

There are so many ways you can reward your customers and encourage them to refer people they know; just be certain that whatever it is that you choose, it works for your brand and your customers.

Remember to Offer Something for New Customers, Too

While you definitely want to offer a reward for existing customers who refer others, you also want to offer some sort of incentive for the customers that are referred. If you don’t, the referral will be less inclined to actually move forward and purchase a product or service from you; and after all, your goal is to attract new customers that will convert.

Use Analytics and Tracking

Once you create a referral program, you want to make sure that it is actually delivering the results that you want. How can you do that? – By using analytics and tracking. You can easily do this by using software that is specifically designed for use with referral marketing strategies. This type of software has analytics and tracking built right into it.

Be Flexible

As with so many aspects of business, you have to be willing to be flexible with your referral marketing program. Though your program might look great on paper, in reality, it may not deliver. If you find that you aren’t getting the results you want, be willing to make adjustments. You might need to offer other incentives or simplify your program even more.

Also, remember that while a referral program may be hugely successful at first, after a while, its success could wane. If that happens, be ready to reinvent it with fresh, new ideas that will catch the attention of your customers and your referrals.

The Benefits of a Referral Marketing Strategy

Referral marketing can offer business owners a myriad of benefits. If you’re on the fence about referral marketing, take a look at some of the advantages it can offer:

  • It’s inexpensive. Compared to other types of advertising, referral marketing is extremely affordable and can offer a significant return on investment.
  • It can attract a tremendous amount of new customers. Consumers are more inclined to do business with a company that was recommended by people they know.
  • It can build loyal, repeat customers. The customers that are the most beneficial for businesses are those that are loyal and return time and time again.
  • Referred customers are usually less sensitive to prices than other customers. That’s because someone they trust referred them to a business and they are willing to pay top dollar for the outstanding products or services they heard about.

Press releases

Referral Marketing Software Market Technological Breakthroughs by 2026
(United States, Portland): The report presents an in-depth assessment of the Referral Marketing Software Market including enabling technologies, key trends, market drivers, challenges, standardization, regulatory landscape, deployment models, operator case studies, opportunities, future roadmap, value chain, ecosystem player profiles and strategies. The report also presents forecasts for Referral Marketing Software from
Global Referral Marketing Software Market Growth 2019 - Influitive, Ambassador, ReferralCandy, Extole, Refersion, Amplifinity
A fresh market study Global Referral Marketing Software Market 2019 by Manufacturers, Countries, Type and Application, Forecast to 2024 presented by Fior Markets addresses forecast and growth patterns by company, regions and type, application from 2019 to 2024. This is a profitable study which has a quality to move Referral
Larosco takes BongoMagic and social relationship and referral marketing to the next level.
Relationship marketing software expert Larosco ramps up its growth strategy having announced the successful closure of its first round of funding. Par Equity, the venture capital firm which focuses on providing financial and intellectual capital to innovative small and medium sized companies with high growth potential, has invested in Larosco -
Referral Marketing Software Market Insights, Status, Latest Amendments and Outlook 2022 - 2028|nfluitive,Ambassador,ReferralCandy
Referral marketing is a marketing strategy to acquire new customers by offering rewards to the existing customers for advocating or referring the brand name to friends and family. It is typical word-of-mouth marketing using platforms such as social media, applications, referral codes, and emails, among others. This market concentrates on Referral Marketing
Referral Marketing Software Market Report- Top Manufacturers, Growing Demand and Supply | Genius Referral, Hello Referrals
The research report of the Referral Marketing Software Market provides a comprehensive overview of the market, size, and share. In addition, Referral Marketing Software Market provides the closest approximations of the revenue of the market and sub-segments across the different regions. The Referral Marketing Software Market research report is estimated