Marketing can be expensive and time-consuming. Referral marketing is anything but this. In fact, referrals are the cheapest and most effective form of marketing and shouldn’t be ignored. In its simplest form, referral marketing doesn’t cost a dime. All you need to do is provide a good customer experience and tell your clients to spread the word. That’s it. But that would be leaving a lot of referral marketing’s potential on the table.

Referral marketing works because people are twice as likely to listen to product recommendations from friends over other sources. What’s more is that people trust these recommendations more than any other source of information regarding that product (Nielsen, 2009).

Referral marketing has been a go to for startups with limited marketing budget. Etsy a peer-to-peer e-commerce website estimates that 90% of its growth is from word of mouth.

All You Had to Do Was Ask

According to Texas Tech, 83% of satisfied customers are willing to refer a product or service but only 29% actually do. This problem has an easy solution: the please and thank you formula. Remember, most people that received a good product and service are willing to refer it, so don’t be afraid to ask them to!

If you’re not comfortable asking people to refer your product for nothing in return, how about sweetening the deal? Offer them a discount, some free product or a partial refund on their invoice. This is a referral program.

Finding Your Incentive

The first step is finding out what would be considered valuable to your clients. This can vary based on your clientele and the nature of what you’re offering. If your clients are part of an interactive online community you might consider something that differentiates them from their peers. For example, if you’re in the video game industry you could offer a character armor set as a referral incentive. If you feel like your clientele/fanbase is ravenous, you can offer referrers early access to your new products. Dropbox offered additional free storage to clients who convinced friends to sign up for the service.

If these options don’t seem to apply to you, there’s always the classic cold hard cash approach. This can either be in the form of a discount or an outright payout unrelated to a purchase.

If you’ve identified several possible incentives, it benefits you to offer your potential referrers some options. On top of having a better chance of offering something they’ll like, they might feel compelled to refer numerous times to collect the multiple rewards.

Open Your Horizons

Incentivized referral marketing doesn’t have to be limited to existing clients. If your company is offering a reward for referrers, chances are that people outside of your client base are also interested in getting rewarded for knowing someone interested in your services.

For example, Simple Story Videos offers referrers a 5% cut of a new clients contract. This means anyone can make over $500 just by knowing someone who could use their services.

Referrals Bring You Better Customers

Researchers from Goethe University Frankfurt and the University of Pennsylvania conducted a study of 5,000 of a German bank’s referred customers. The habits of the referred customers were compared to those obtained through other means.

The study found that the referred customers yielded a 25% higher profit margin. This was the case because clients referred friends they thought would be a good fit with this bank. What’s more is that the bank could assume certain similarities between the new clients and their friends. These parallels made it easier for them to identify which products would interest them. The study also found that referred customers were 18% less likely to leave the bank.

Referral Marketing With Social Media

Getting a client to personally recommend a product to their friends based on their first-hand experience is the ideal referral. But another new avenue for referrals has been opened thanks to social media. When someone retweets your brand or likes it’s Facebook post, that person is signaling to their hundreds of friends that they endorse your brand. A few of these friends might view that content and potentially endorse it to thousands more. This is how good content has the potential to become viral.

Want to know a secret?

People don’t actually have to have tried your product to have an enjoyable experience with your brand. If your brand creates useful or entertaining content, people might share that content based on its merit, regardless of whether or not they’ve tried any of your products.

The key to this is producing content that attracts attention and is worth sharing. Across all industries, video has shown to be the most shared type of content above photos, links, and statuses. This is because people are turning to YouTube for entertainment and information.

Jason Mesec

Jason Mesec


Jason Mesec is Head of Business Development at SimpleStoryVideos