eMarketer recently posted an article citing a Q1 2014 report from Gallup and Wells Fargo—it found that attracting customers, targeting business opportunities and finding work or new business was the top challenge among U.S. small business owners (21%).
The solution to this challenge, according to March 2014 polling by Huzzah Media, is friend referrals. Over half of this survey’s respondents noted that friend referrals were the most successful marketing tool, with advertising ranking second.
Not only do referrals improve marketing performance, but they are also driving revenue. In the same study, 36% of small business owners noted that word of mouth is their best source of revenue, right behind returning customers (44%). Referrals are extremely valuable to your business—below you will find three marketing strategies you can use to encourage word of mouth advertising and as a result, referral traffic.
1. Invest in Online Video
People are watching and sharing online video content at an increasing rate. In February of this year, 182.4 million Americans watched 49.2 billion online content videos (comScore). According to a February 2013 study from NetBase, over half of respondents ages 18 to 54 reported sharing a video.
Simply put, providing Internet users with video content will allow them to organically share your branded messages across their networks. This is extremely important given the fact that over 50% of people ages 18 to 44 are at least somewhat likely to make a purchase after seeing a friend’s post (eMarketer).
One of the greatest advantages of online video is its shareability. If you create quality, entertaining content, people will want to share it with friends and family. This simple act of sharing becomes an indirect referral for your brand and/or product. Though SMBs may have misconceptions about online video marketing (e.g. price, effectiveness, its ability to drive sales), it really is an optimal solution for increasing referrals.
2. Create a Referral Rewards Program
According to The New York Times, 65% of new business comes from referrals and Nielsen reports that people are four times more likely to buy when referred by a friend. So why not reward your existing customer base for referring friends and family? They’ll pay it back in the long run.
An excellent example comes from DropBox, who saw great success with its 2-sided incentive program: anyone who invited a friend would get extra storage space and so would their friend. It permanently increased signups by 60%, 35% of daily signups come from the referral program and its user base grew from 100K to 4M in 15 month with zero ad spending.
A study from the American Marketing Association found that offering a reward increases referral likelihood, but that the size of the reward does not matter—so don’t think you have to give away too much to encourage customer referrals. A simple rewards program will not only encourage your loyal customers to engage in word of mouth advertising for your brand, but it will also keep referrers invested in your company.
3. Form Event & Content Partnerships
Form partnerships with other local businesses that serve your potential audience in a different way. Co-host an exciting event and encourage customers to bring plus ones. This allows you gain exposure among your partner’s customers and vice-versa—a definite win-win.
The same goes for content. If you create a great piece of content, like a Slideshare, think of companies that may be interested in co-branding. Place both company names on the presentation and agree to share it across your social networks. This will increase your reach and brand awareness, while hopefully inspiring potential customers to check out your company.
Referrals are extremely valuable to SMBs, as they often generate a high percentage of new business for a company. Implementing the aforementioned marketing strategies will help you increase referral traffic and ultimately boost overall visibility for your brand.
3 Marketing Strategies for Generating Valuable Referrals