The Wildly Profitable, Cost-Effective Marketing Channel You’re Probably Neglecting

The following is an excerpt from Ambassador’s most recent eBook, “Opening the Referral Floodgates: A Strategic Framework to Optimize Referral Marketing Results.” To read the full eBook — and access more than a dozen tips to dramatically improve referral program enrollment, engagement, and activity — download your copy here. 

Let’s say you woke up tomorrow, opened a marketing analytics dashboard, and saw that an Instagram advertising campaign had driven 20x ROI for your fashion eCommerce brand. Or maybe you’re the head of marketing for a B2B business and you found that a webinar had driven 1,000 qualified leads and 200 new customers with an average lifetime value of $5,000.

How would you react?

Most savvy marketers would double down. They’d invest time into figuring out why those campaigns were so successful. They’d diverge resources to figure out how their business could extract more value from those channels. And they’d find a way to ensure that channel — the one that drove such a high ROI — became a critical part of their overall marketing strategy.

Put another way: They’d optimize — building and deploying a framework that ensured they extracted as much value as possible from that Holy Grail of new customer acquisition.

The Missed Opportunity with Referral Marketing

Now, let’s focus the spotlight on referral marketing. 

Research has consistently shown that customers — in both B2B and B2C markets — are not only willing to refer businesses to their network, they’re looking for new ways to do it. Furthermore, our own research with Nielsen’s Harris Poll in early 2016 found that the vast majority of consumers (82%) seek recommendations from their network before making a purchase. As researchers from the Harvard Business Review put it: If you’re not proactively seeking ways to generate referrals, you’re likely ignoring opportunities to drive “stunning profits.”

So, why do so many companies — both B2B and B2C — treat referrals as a nice-to-have supplement to their many other marketing initiatives, instead of the revenue-driving behemoth it could be?

The answer, very simply, is that many marketers mistakenly assume that referrals just happen. They implement a referral program, enroll only their “best” customers, send a few emails, and expect the ensuing momentum of organic advocacy to take care of the rest.

Problem is: Like all other high-value marketing channels, referral marketing doesn’t work like that.

A Simple Framework to Optimize a Highly Profitable Channel

It’s time to change the way you think about referral marketing.

In our latest eBook, “Opening the Referral Floodgates: A Strategic Framework to Optimize Referral Marketing Results,” we lay out a strategic framework that’s designed to help you engineer your referral program in a way that will ensure you see the best possible results. This framework is built around the tips, tactics, and strategies that we’ve seen drive significant revenue results for more than 1,000 customers over the last five years.

You can download the full resource by clicking the link above (or the image at the end of this post), but here’s a sneak peek of how to grow and optimize your referral strategy.

1. Audience Size is a Critical Determinant of Success

Because the concept of referral marketing is still somewhat new to many companies, some marketers and growth strategists opt to start small — launching a referral program, but testing it with just a few dozen (smaller companies) or a few thousand (larger enterprise brands) customers before unveiling it to their full database of contacts.

While that “pilot” approach might make sense on the surface, it almost always fails.

Here’s why: Just like converting web traffic into actual customers (and converting those customers into repeat buyers) requires volume, referral marketing is also a numbers game. It’s a funnel that, frankly, requires a scientific blend of quantity (participants) and relevance (messaging and incentives). 

2. Program Relevancy and Ubiquity Drive Engagement

In its 2015 Technology Vision report, Accenture published findings from a massive survey that shed light on how modern consumers — in both B2B and B2C markets — want to be marketed to and engaged with. In the report, Accenture revealed that 56% of consumers would be more inclined to buy from a retailer or service provider if it provided a personalized experience across multiple channels. 

Of course, this shouldn’t come as a total surprise to marketing leaders. Just consider these stats from several other industry reports:

- 86% of people say personalization plays a role in their purchasing decisions (Infosys)

- 53% of marketers say ongoing, personalized communication with existing customers results in moderate to significant revenue impact (DemandMetric)

- 33% of consumers engage with a brand across multiple channels before making a purchase (Deloitte)

What do those numbers mean?

To be successful with referral marketing (or any marketing strategy, for that matter), you must use a mix of channels, platforms (e.g., mobile), and persona-specific messaging to ensure relevancy and awareness across multiple touchpoints. In other words, you have to view your referral program as a key piece of the entire customer journey, not just a bolt-on campaign to drive a few leads.

3. Incentive Structure Can Make or Break Your Program

As you optimize your referral program around the size of your network and the segmentation of it, there’s a third pillar of referral marketing strategy that you’ll want to keep an eye on, as well: Incentives.

More specifically, what rewards or offers are you presenting to each ambassador segment in order to incentivize a particular activity?

As you might expect, this aspect of referral optimization means customizing incentives for different types of Ambassadors (influencers, affiliates, customers, partners, etc.) and different types of conversions (website visit, email signup, purchase, etc.). At the end of the day, you’ll see far greater referral results when the incentives you offer perfectly align with the interests and motivations of each ambassador.

The Correlation Between Time, Referral Marketing Maturity, and ROI

At the end of the day, there are two fundamental principles that universally apply to all referral marketing programs: Timing and maturity.

More specifically, the longer you give your referral program to grow and evolve, the better the results will be. And, the sooner you implement a program — beating your competitors to market — the more likely it is that your program will be the one people remember.

To the first point, we’ve consistently seen referral marketing activity and revenue growthcompound over time. In fact, results for all types of companies are almost always substantially better in month 18 than month six. To illustrate this, here’s one of the charts we highlight in our eBook:

The takeaway here is simple: At the end of the day, referrals are like any other high-value channel. You wouldn’t start a blog, publish a few posts, and then immediately expect to see a flood of new leads. Likewise, you wouldn’t make a few tweaks to your website’s copy and suddenly expect to rank first for a highly competitive keyword.

Referral marketing is no different.

So, are you ready to get more from your referral marketing program? Download our full eBook by clicking the image below. It’s chalk full of tips, tactics, and strategies to help you optimize referral results, as well as simple takeaways that you can easily incorporate into your marketing strategy today.

When you’re done reading, give us a shout! We’d love to learn more about your business and how our platform can help it grow.

For more marketing insight, subscribe to our blog.