Referral marketing

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Not to be confused with multi-level marketing, which is also sometimes called referral marketing

Referral marketing is a method of promoting products or services to new customers through referrals, usually word of mouth. Such referrals often happen spontaneously but businesses can influence this through appropriate strategies.

Overview[edit]

Referral marketing is a process to increase word of mouth marketing by encouraging customers and contacts to talk as much as possible about a brand or product.

Online referral marketing, using digital marketing as a platform, is the internet based approach to traditional referral marketing. By tracking customer behavior online through the use of web browser cookies and similar technology, online referral marketing can potentially provide a higher degree of accountability than offline models.

Offline referral marketers sometimes use trackable business cards. Trackable business cards typically contain QR codes linking them to online content for sale while providing a way to track that sale back to the person whose card was scanned.

Benefits of referral programs[edit]

A study conducted by the Goethe University Frankfurt and the University of Pennsylvania, on referral programs and customer value which followed the customer referral program of a German bank that paid customers 25 euro for bringing in a new customer, was released in July 2010. [1] According to Professor Van den Bulte, this is the first ever study published on the financial evaluation of customer referral programs.[2] The study found that referred customers were both more profitable and loyal than normal customers. Referred customers had a higher contribution margin, a higher retention rate and were more valuable in both the short and long run.

On whether customer referral programs are worth the cost, the study says that it records "a positive value differential, both in the short term and long term, between customers acquired through a referral program and other customers. Importantly, this value differential is larger than the referral fee. Hence, referral programs can indeed pay off."[3]

References[edit]