We are quite proud of the fact that RewardStream is a pioneer and veteran in the referral marketing industry, designing referral marketing programs for our clients since 2003. While “word-of-mouth marketing” or referral marketing has always been a very natural and normal part of daily life, the rise of automated marketing solutions to generate leads and referrals is in its infancy. Following the tremendous success of products such as HubSpot, Marketo, Eloqua, Infusionsoft and others, “content marketing” has certainly earned buzzword status. As a result, companies that we work with often ask us how referral marketing and content marketing solutions compare and how they can be used together.
Before I dig into the numbers, let’s look at the definitions of these two marketing methods. Basic Wikipedia explanations tell us that:
Referral marketing is a method of promoting products or services to new customers through referrals, usually word of mouth.
Content marketing is any marketing that involves the creation and sharing of media and publishing content in order to acquire and retain customers.
Essentially, referral marketing is acquiring new customers through word-of-mouth while content marketing is sharing educational blogs, papers and emails to acquire customers. While there are definite similarities, both solutions can and should be used to generate leads and referrals as part of a successful marketing mix. To understand both solutions, let’s dive into some numbers.
Lead Nurturing via Content Marketing – The Numbers
Content is more widely used, but is it more profitable?
41% of marketers confirm content marketing has a positive ROI; however, 79% of marketing leads never convert into sales. Lack of effective lead nurturing is the common cause of this poor performance. So in order for content marketing to be successful, the leads that it brings must be nurtured.
Referral Marketing – The Numbers
It’s not surprising that 92% of people trust recommendations from the people they personally know and people are four times more likely to buy when referred by a friend. If you are a new business owner, you’ll be happy to know that one study reported that 65% of new business comes from referrals. Word of mouth or referral marketing is tried, tested and true, and in my opinion, the most effective form of marketing. I’m not alone, 88% of marketers believe that referral marketing is one of the best ways to acquire new customers.
But what is the ROI?
Another common question I get is in regards to the return on investment of each tactic. Referral marketing has the lowest cost per acquisition among digital marketing activities, making the ROI very attractive to many businesses. When comparing to content marketing, data suggests that content marketing will break even on its investment within nine months, based on the value of the organic traffic, and will see a 200% or more ROI from that same content over 36 months. The content will also increase the organic site traffic by 10 times.
What makes referral marketing so critical as a key tactic in a successful marketing mix is that if your program attracts one customer – it doesn’t stop there. Not only does a referred customer have a 16% higher lifetime value than that of a regular customer and 18% higher loyalty than a customer acquired through a different method, they will also spend 13.2% more than a non-referred customer. What makes referral marketing so powerful is that when an existing customer utilizes the program, there is a snowball effect that must be taken into consideration when measuring ROI; the number of additional referrals that will come from this one person.
How can Referral Marketing and Lead Nurturing via Content Marketing Work Together?
It’s simple really. Content marketing is utilizing content to attract people to your brand and turn them into your brand advocates. Referral marketing is using your customers as brand advocates to acquire more customers. 83% of satisfied customers are willing to refer products and services but 29% actually do. So the key is to encourage customers to tell their friends and family members about your business. How do you do this? By leveraging your referral marketing with content marketing tactics.
Best Practices For Growing Your Referral Program With Content Marketing
Keep these tips in mind when combining content and referral marketing strategies to help increase both leads and referrals:
Content marketing can help build trust with the public.
If you have a referral marketing program, the more existing customers who are aware of it, the better chance you have of it gaining traction. Content marketing is a powerful way of building trust with potential customers as you nurture them through the buying journey. When you send out an email communication, post a blog, or engage via social media, you are essentially building trust with your audience.
If potential customers receive regular communication from your company, you have already established trust with them. This trust can help increase your chances of potential customers remembering you when they are ready to make their purchases. Once they become customers, a referral rewards program is a nice way to keep them happy, and will encourage them to share their positive brand experiences with their friends and family members. Developing this relationship with potential and existing customers is important, as people trust the opinions of their friends, making it a very powerful marketing channel.
Content marketing can help promote a company’s referral program.
Rule of thumb – the more eyes the better. Make sure that you include information about your referral program on all public-facing communications and content at each stage of nurturing your leads and referrals. Make sure that you create a referral button in a key location on your website. If you accept online orders, put a referral button on your order confirmation page and/or post-purchase “thank you for purchasing” page. Don’t forget to also promote your referral program anywhere your existing customers will go, such as customer login or on high-traffic pages such as customer support or help desk pages. Keep in mind that all of the above should link back to the stand-alone referral page.
When distributing all content marketing, use this opportunity to promote your referral program. Ways to promote your program include:
- Email blast – Email your customer list and your ambassador list the “refer a friend” offer.
- Blog– Create a blog and link to the offer. Look around for guest blog opportunities and ability to promote program.
- Newsletters– Don’t forget to include program information in company newsletters and correspondence including receipts, invoices and support tickets.
- Call scripts– Integrate mention of the program into your call center scripts.
- Facebook, Twitter and LinkedIn – Announce program, share and link back to the referral program page.
- PR– Create a press release, issue and promote program in conjunction with a newsworthy item.
- Internally – Promote your referral program internally! Your employees should be your biggest advocates!
Content Marketing + Referral Marketing = Your Own Community
The great thing about referral marketing is that you start your own community without even really trying. Your leads and referrals become your brand ambassadors, and over time will grow into a community. You can also connect with your loyal online fans to promote your referral program and have them spread the word. By identifying key referrers and engaging with them, they will promote not only your referral marketing program, but your products and services, as well as your organization too.
Precision targeting increases your chances of a sale.
The precision targeting of referral marketing, combined with quality and educational content that is specifically focused for your leads is the perfect combination that will lead to a very successful marketing campaign. Referral marketing targets your brand advocates and by doing so, taps into the most lucrative salespeople for your organization – the trust of friends and family members.
What does a successful referral program look like?
Dropbox is a good example of a double-sided referral program that garnered some great results. After Dropbox became dissatisfied with their conventional marketing techniques, despite still doing relatively well, they decided to leverage their existing customers to refer friends via word of mouth.
How did they do this?
They launched a double-sided referral program that rewards both the referee and the referral with 500MB of additional free storage space (up to 16GB).
What was the result?
Dropbox went from 100,000 to 4,000,000 users in 15 months and increased their sign-ups by 60%.
Why was this referral program so successful?
Dropbox’s doubled-sided referral program provided incentive to the referrer to spread the word and the referee to sign up, by offering them each 500MB of space. Not only is this type of program enticing to both parties, but it is also extremely easy for the users to share and sign up. The combination of an attractive double-side incentive, plus the ease of use, led to Dropbox’s tremendous success with this program.
In my opinion, the best results are achieved when you use referral marketing and content marketing together to maximize leads and referrals. If you create an enticing referral marketing program that is simple and easy to navigate and use your content marketing to promote it, you can’t go wrong. To ensure the best possible results, make sure that the content you produce relates to the long-term strategy of your referral marketing plan. The single most important thing to remember is to make it easy for people to share your content and easy for people to refer your product and/or service.