Why you should build referral into your 2021 marketing plans

In the current climate, marketers face the challenge of doing more with less.

UK marketing budgets are shrinking at the fastest rate since the 2008/9 financial crisis. To drive long-term value in 2021, marketers must work existing channels harder or discover new ones. 

But in a tough economic climate, getting stakeholder sign-off for a new marketing channel is no easy feat. 

Here are three reasons you should consider referral (and three ways to persuade your stakeholder that it deserves the budget).

So how can you convince the holder of the purse strings to give you the budget to launch a new marketing channel? If you don’t yet have referral marketing as part of your mix, here are three compelling insights that might help you bag that budget.

1. Referral marketing delivers measurable ROI

It's often difficult to pinpoint exactly how much revenue a marketing channel has generated. An expensive out-of-home campaign, for example, can come under scrutiny when it's impossible to say exactly how much return on investment it's generated for your business.

Meanwhile, the channels that do offer measurable ROI – such as pay-per-click (PPC) advertising – offer diminishing returns. 

A referral marketing programme, on the other hand, offers clear returns at a cost you can easily factor into your marketing plan. On average, our platform delivers 40x ROI. So you can tell your stakeholders you've hit your customer acquisition targets, without worrying about unexpected costs.   

That's not all. Referral programmes also capture metrics often missed by other marketing platforms, such as dark social, repeat purchases, and customer lifetime value. This means you can report not only on the immediate impact of a referral campaign – such as new customer acquisition – but on its longer term impacts, such as how much those customers have gone on to spend in subsequent months and years.

Dark social: a definition

Dark social refers to traffic generated via social sharing that web analytics platforms can’t measure. You can see, for example, that someone has landed directly on your website. But you can't see that it's because they clicked a link a friend direct messaged to them. Dark social can make it tricky to allocate budget, as you don't know which of your marketing campaigns and channels are most effective. 

You can also experiment with your programme to drive even higher ROI across your entire marketing strategy. A discovery, for example, that your customers are more likely to engage with product-led versus people-led imagery can be implemented across your marketing campaigns to drive even more revenue.

2. Referred customers spend more (and come back more often)

Before the pandemic, consumer trust was low. Now, it's even lower. 70% of consumers believe brand trust is more important now than in the past.

Rather than focus on long-term strategies to build this trust up, many brands employ short-term tactics that drive the next sale. This may mean hitting your targets this month, but it risks trapping you in an expensive cycle of acquiring customers who shop once, never to return.

Instead, you should focus on your existing customers. Motivate them to recommend your brand to others, and you can drive long-term, sustainable growth. Their recommendation holds more weight than an email blast, out-of-home ad campaign, or influencer's post. 51% trust their friend or partner’s recommendation more than any other advertising. 

Better yet, these recommendations will deliver people who fit your ideal customer profiles. On average, referred customers spend 25% more on their first purchase and are significantly more likely to return. They're also three times more likely to recommend your business to their friends, too. Creating a sustainable cycle of growth for your business.

And brand trust matters. It influences 53% of buying decisions. If consumers don't trust your business, it'll hurt your bottom line. 

In an era of heavy discounting and Black Friday flash sales, it’s a relief to know there's a channel which can actually increase LTV.

3. Referral can be scaled up

When you find a media option that works, you want to scale up.

With paid search, you’ll want to work on the long-tail keywords to drive those incremental orders at a lower cost. Traffic is limited on these long-tail keywords, but the flip side to this is that while high volume keywords drive more traffic, they also increase your cost per conversion will increase.

Optimising your website and implementing an SEO strategy can certainly drive more traffic, but this isn’t something that happens overnight.

Referral is different. It can be scaled up relatively quickly while staying cost-effective.

When first launching a referral programme, it makes sense to choose a few key customer touch points where you learn what works best for your customers. Typically, the best place to start is at the point of greatest customer delight - a happy customer is much more likely to recommend your product. The point of delight will vary by product. Often this is just after purchase or when the product is delivered. The trick is to find the sweet spot where your customer just has to share their purchase with a friend, either in person or online.

Learning what combination of referral offer, images and messaging works at different touchpoints means that when you expand to more points in your customer lifecycle you can increase your referral rate.

In addition, you could consider tiered rewards, offering higher incentives for every new friend a customer introduces. We've found to be a great way of driving additional volume.

Build referral into your marketing plan

Whether referral marketing is something you've only briefly considered, or a strategy that's been on your mind for a while, make sure your 2020 marketing plan is robust and features all marketing channels. Your loyal customers are your best asset, and leveraging their loyalty could pay significant dividends.