Referral Program Incentivize Word of Mouth
All of us are consumers of various products. Have you ever considered what makes us buy a certain product? In our modern day, consumers are not easily persuaded by advertisements to buy a certain product or service. These days, it is word of mouth (WOM) that holds so much power in our purchasing decision. 82% of consumers proactively seek referrals from friends before deciding whether to purchase a product.
Casual social interactions where consumers share information about and recommend their friends to a product, service or organization due to their liking towards it.
No matter how good an advertisement can be, it is mostly featured from the point of view of the business. Hence, consumers may think that information on advertisements are biased and not credible. However, if it is our friends or family who recommended us a good product/service, we are more receptive and likely to believe and try it out for ourselves. We trust that our family and friends will not mislead us, and their reviews and recommendations are genuine. Over 90% of consumers from various markets trust recommendations from people in their network.
That being said, many of us often use a good product or engaged in a service that we like and just keep it to ourselves (guilty as charged). Not that we are selfish, but we are just too busy with other stuff or just simply too lazy to spread the word.
This leads me to my point that word of mouth marketing may be one of the best forms of marketing as it is very organic, but to encourage more people to willingly spread the word, businesses need to incentivize them. Referral programs are one of the greatest ways to incentivize consumers to willingly spread the word upon satisfaction of a product, service or business.
Referral programs:
Work based on a foundation of brand loyalty and affinity. Referral programs give customers a reason to share a product, service or brand that they like with their family and friends. Referral incentives comes in many forms, such as discounts, cash, credits or free products.
We often come across ‘refer-a-friend-program’ when doing our online shopping. Referrals made by satisfied customers through their unique referral codes or links are tracked using a software. Basically, when a customer refers a friend, he/she will provide the friend with his/her unique referral code. When the friend is either signing up an account with the business or checking out his/her shopping cart, he/she will then key-in the referral code provided by the friend. After the successful set up of a new account or purchase made by the friend, rewards will then be credited into the introducer's account.
We have established above that people are willing to refer their family and friends when they are given an incentive to do so. The same is true for those accepting the referral. Therefore, most businesses reward both the sender and the receiver of the referral code. This will motivate not just the satisfied customer to spread the word, but also the new potential customer to try out the business’s products or services. This referral process creates a natural word-of-mouth marketing for businesses, which ultimately increases both customer retention rate and revenue.
Famous Examples of Successful Referral Program:
1. Airbnb
2. Uber
3. Evernote
Now that you understand the power of word of mouth and how referral works, you could start picking up the habit of sharing and recommending good products, services and brands to your family and friends. This can help the business to gain new customers, while rewarding yourself and your friend with referral rewards. The next time when you are doing your online shopping, do look out if the merchant has a referral program. If there is, good for you! Share the good word with your family and friends and there goes rewards, rewards and more rewards!
Cheers,
Dayna.T
