What is referral marketing

Once, word-of-mouth was what generated trust in a brand and increased its users or customers. Now, the techniques for penetrating the market have evolved (especially regarding web domains).

Essentially, by referral marketing, we mean all those activities that promote a business or product through the aid of current customers.

Referral Marketing on the Web: A Valuable Resource for Websites and E-Commerce

Referral marketing on the web is particularly useful in e-commerce but not exclusively so.

When a website contains a link to an external site, useful for generating traffic to that web address, a referral relationship is created.

In this relationship, which often involves an economic return (referrer fee), the referrer is the site hosting the link that gets paid by the referral which gains the user's visit through the click on the link (the results of the referral are tracked and monitored). Often visually, these links take the form of banners that the referral creates to be placed on the referrer's site.

The referrer fee is proportional to the number of leads (contacts) or sales generated.

Referral Marketing in E-Commerce

In the digital realm, referral marketing can also be developed in another way: the referral program.

This program consists of a strategy that allows a company to acquire new customers through those already acquired or in the process of being acquired.

A classic example of a referral strategy often used in e-commerce is present at the time of purchase.

When an e-commerce portal customer is about to complete the purchase process, there appears on screen (via pop-up or other strategies) the possibility to lower the final price (eliminate shipping costs, have a discount, a coupon or similar incentives). How? By creating trust in the brand, by inviting a friend, a family member or an acquaintance to visit the client's site. Only this action can unlock the promised price reductions from the brand.

Essentially, we are talking about a word-of-mouth recommendation conveyed to others about the service or product being purchased (member get a member).

Successful examples of referral marketing

Roku: when referral email marketing is successful

Roku is a subscription-based streaming service. Through various surveys, the company's executives had already understood that 25% of customers using their service had heard about Roku through friends, family, and acquaintances, which is why they signed up.

Based on these facts, Roku's marketing team developed email marketing funnels (guided paths that turn a user into a customer). In this strategy, Roku incentivized both the referrer (who was already a customer) and new customers to purchase their services by offering free Netflix subscriptions for one month (which incidentally is actually a competitor), as well as providing a 10% discount for both.

The results are outstanding: 70% of new users come from emails specifically designed for existing customers.

Lomit Patel, Senior Director of Direct Marketing at Roku states: "Email marketing has been the best way to promote our products to both old and new customers."

Another example of successful outcomes through referral marketing is that of Cornestore CPA group.

The idea is as brilliant as it is simple: if an existing customer refers a new customer, they will receive a free cup of coffee, and the new customer (as well as the referring customer) will get a 20% discount on their tax return services. Each existing customer can refer up to five new people.

In conclusion, referral marketing is an extremely powerful marketing tool that, when used wisely, can increase your customers and market penetration.

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