What is referral marketing?

Referral marketing is a cost-effective yet overlooked technique for acquiring leads. This article is an introduction to referral marketing. If you find it interesting, you should subscribe to The Onlinification Hub because I promise there will be more about this topic shortly. 

Referral marketing is a tactic used for turning your loyal customers into your brand ambassadors.

With expensive PPC and competitive long-tail search terms, it's becoming more challenging to cut through the noise than ever before. Thus, most marketers agree that referral marketing is the most cost-effective customer acquisition strategy. 

A study (old but still relevant) shows that 92% of people trust recommendations from friends and family above any other type of marketing. So if you can get your existing customers to recommend you, you'll get warm leads at a low cost. 

What is a referral program?

Back in the day, word-of-mouth occurred offline between friends, colleagues, and family. Behind closed doors, you, as a marketer, couldn't be present. Hence, nobody knew how many customers voluntarily recommended their brand. Moreover, you couldn't track or promote customers to spread the word. 

Nowadays, you can use software to set up your referral program, a program designed to give customers incentives to recommend your brand.

Referral marketing examples

Referral marketing is a familiar tactic. It's been along for a while and has been the growth hack of many successful companies. Here are some examples:

Dropbox: + 3900% growth

One of the most cited examples of referral marketing is the case of Dropbox. They managed to grow from 100.000 to 4.000.000 users in 15 months. So what caused the 3900% growth?

According to the founder, Drew Houston, they designed their referral program inspired by PayPal. They were using the product's primary value as a reward. In the Paypal case, that had been money. For Dropbox, it would be storage. 

The incentives sounded something like this;

You can invite your friend, and for each who installs the Dropbox app, you will get 500MB bonus storage.

It was a 2-sided referral program, where both the referrer and the referees were incentivised to join the program.

Airbnb: +300% per day

In this blog post, Jason Bosinoff, Director of Engineering at Airbnb, shares some tips on how they increased signups and booking by 300% per day. 

Similar to what dropbox did, Airbnb also rewarded the referrer and referees. They offered a $25 travel credit if the recipient completed their first trip.

As Jason highlighted, referral programs are highly measurable and scalable.

The Hustle: 300k subscribers in a few months

One of my favourite examples of referral programs right now is The Hustle Daily Newsletter. In a few months, they reached 300k subscribers. Besides making much good content, they also offer a milestone referral program. 

When you sign up, you get your referral link. If you share that link with friends and they subscribe through it, you'll get a credit. Then there are numerous milestones you can reach and redeem a reward. For example, if you have referred 25, you get a hoodie; at 75 referrals, you get a subscription to Trends.co; and at 1000 referrals, you get a getaway.

Today The hustle has over a million subscribers. 

By the way, if you want a 5-minute newsletter keeping 2M+ innovators in the loop, sign up with my referral link 😉

https://thehustle.co/join/?ref=b8ffb95cd0

Would you like to learn more about referral programs?

Subscribe to The Onlinification Hub; I've already started with the following article about referral programs!