We often get the question "What industries does Referral Marketing work for?". Since this type of marketing is based on word of mouth, it requires that your customers have a genuine commitment to your brand. In other words, it's about customer commitment rather than what industry you're in. With that said, this blog post is aimed toward answering which industries Referral Marketing works best for - and why!
Brands that create emotional commitment
In order for Referral Marketing to work, you have to be able to identify your best customers, which are in essence the customers that are prepared to become ambassadors and recommend your business to friends and family. Overall, Referral Marketing creates a greater emotional commitment than purchased media, such as influencer marketing or affiliate marketing. But does the method really work for all industries and companies? The answer to that is both yes and no. For certain, there are some cases where Referral Marketing works less well.
Products that can be considered a bit boring (no matter how necessary) such as office supplies, will probably not generate as much engagement as a pair of perfect white sneakers or a really nice dress. Your company has to offer something that is emotionally engaging to be able to create word of mouth. No one wants to spam or bother their friends with recommendations that they think won't be appreciated. But remember, there's an exception to every rule! In other words, if you can create emotional engagement around a normally mundane product or service - Referral Marketing will surely work well!
Word of mouth can have big impact for small companies
We see great results for most clients, but smaller companies can often benefit even more from referral marketing (percentually) than the giants. A company such as Amazon, for example, would not benefit from referral marketing as much, as it is not a brand that you need a recommendation to learn about (many consumers already have Amazon top-of-mind). Also, a well-established company will probably not create as much involvement, it's more exciting for a customer to tip their friends and family about a brand or product they haven't already heard about. A great reason why companies make use of Referral Marketing is, after all, to spread knowledge of their brand and become top of mind among potential customers.
Does Referral Marketing work for both B2B and B2C? The answer is yes, in most cases. The method has proven to be generally more effective for B2C, as the personal involvement is greater between consumers than between companies. Recommending a product as a company representative does not have the same effect of personal engagement. However, demand for Referral Marketing for B2B is increasing, so chances are that the odds will change in the coming years. Companies are increasingly motivated to digitize and find new ways to market themselves. A strong argument for Referral Marketing in B2B is also the automatic segmentation that takes place. A person who buys computer parts for his job and gets to make a referral is more likely to recommend a brand to a colleague or professional acquaintance that he thinks will be interested, than he is to send the same recommendation to a friend who has no interest in computers at all. It's better than Artificial Intelligence, it's Actual Intelligence!
Highly effective for niche brands
If you have a product that is within a specific niche or area of interest, you also have better opportunities to succeed with Referral Marketing. It works extra well for brands that are not necessarily market leaders - but where there is a personal interest that makes the products very attractive for a specific target group. This could, for example, be an e-commerce that only sells products in equestrian sports, outdoor activities or children's clothing. All of these are products that play an important role in a defining part of a customers life (such as becoming a parent) or a hobby that the customer is highly interested in (such as fishing). The likelihood that a customer will enjoy engaging with such brands is always higher than office supplies, for example. (To clarify, we don't hate office supplies. We actually quite enjoy them, but it's a good example of a product group that doesn't create a lot of passion in most consumers.)
So, lets be done with "hating" on boring products - it's actually quite possible to create engagement for these type of companies as well. No matter what line of business you are in, you can always differentiate your offering by offering things like extra fast deliveries, great customer service or competitive prices. Factors that drive high customer satisfaction are generally effective when it comes to generating personal recommendations, in other words.
Redeal develops referral marketing solutions for the future of digital retail
We have developed the digital solution that leverages one of the most important marketing phenomenons of all time - satisfied customers who recommend their favorite stores, products and services to their friends and family.
Jens Schill +46 (0)70-771 69 70, email@example.com, or firstname.lastname@example.org
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