How referral marketing is streamlining the customer’s decision journey

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If we think about everything we, as customers, go through before making a decision, we find a very complex, long and time-consuming journey. And for the companies it gets even more complicated, considering they have to see what is not so obvious, they have to read between the lines, anticipate behaviors and develop the ability to adapt to changes in the market at the speed of light.

We can name a few stages in this journey: problem/need identification, doing research on all the market players (looking for reviews and information), evaluating the benefits, costs, and risks of each brand, and finally making the final decision. After all that, the journey is still not over, there is a final stage that involves client-company interaction in the post-purchase moment. That is when the client will judge if the experience with the product was worth it, and then decide whether to buy it again or to go through the classic journey all over.

If the answer to this question is yes, the customer is then likely to enter the next journey inside the loyalty loop, skipping the majority of the steps before their next purchase because he or she already established a bond with the company.

But what if there was a way to bring new customers directly to the loyalty loop? Well, there is, and it is called referral marketing.

Referral marketing is when the companies get their customers and other referral sources to tell their network about them. Like any marketing, word-of-mouth usually happens organically, but since it is one of the best drivers for sales and conversion, marketers should map all user-related agents so that they can offer direct incentives to them as well, who will promote the product to the buyer. Leads that come from referral sources have been shown to convert sales 30 percent higher than leads generated from other standard marketing channels and, in addition to that, they have a 16 percent higher lifetime value for the companies than their counterparts (they present higher loyalty and bring higher profit margins – as high as 25 percent!).

In fact, Nielsen says that people are four times more likely to buy a product or service when it’s referred by a friend, because the recommendation comes from a trusted source and not from a regular tabloid or the company’s website. The problem is, while 83 percent of consumers are willing to refer the product, service or company after a positive experience, only 29 percent actually do. So it’s important to give your happy and satisfied customers an incentive to refer their friends to your business.

These incentives can range from discounts to cash incentives to store credits. It all depends on your product and what your customer is looking for, although cash is often the favorite type of reward. The important thing is that your incentive should be appealing enough to make your customers want to share it with their friends. For example, ridesharing companies like Uber, Bolt, and Kapten are big in the referral scenario: offering discounts for new users, but also free rides for whoever gets their referral code used by friends.

Nielsen also states that 92 percent of the consumers trust reviews and opinions from people they know, so the likelihood of the customer going directly to your brand without any further market research, just because a friend recommended, is high – to be more precise, McKinsey affirms referrals influence up to 50% of all purchasing decisions. That being said, if the referral campaign is well done, using different techniques and with a scalable potential, companies can get their new customers to enter their loyalty loop right away instead of entering the classic journey, having to battle with all the other players in the market.

Luciana Faria


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