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Referral Marketing

The Referral Marketing o Recommendation Marketing is a discipline of Online Marketing. In this marketing dynamic, "word of mouth" is deliberately produced by a company. In contrast to Word of Mouth Marketing, the viral advertising effect of referral marketing is supported by the benefits that multipliers, such as influencers, receive from distributing an offer.

Background and evolution

The common components of online marketing are SEO and SEA. While the former is concerned with making the most of the content so that it is better positioned in the SERPs, the SEA targets conversions or leads through paid commercial promotion. Referral marketing is also known as "the third channel of acquisition"[1], since it is intended to reach more customers and provide more conversions or leads. At the same time, it is characterized by the fact that potential buyers identify with the brand or product and receive a positive response. According to the Word of Mouth Marketing Association, more than 2.4 billion conversions involving a brand occur daily in the US.[2] In this context, more marketing measures are required to increase user engagement. Due to the fact that customers are more willing to buy something online if their friends have recommended the product, brand or service[3], referral marketing is an important tool for both branding and conversions.

Referral marketing has been established and expanded specifically in the United States. Many startups have greatly expanded their customer base with referral marketing in a very short period of time.

How does it work

A referral marketing campaign is typically based on five different components:

  • Analysis of potential clients.
  • Selecting the "reward" for the recommendation.
  • Development of image and text material.
  • Selection of online media and social media platforms.
  • Monitoring of campaigns.

Social media plays an important role in referral marketing, because content sharing creates the viral effect of such campaigns. In combination with an attractive reward model, the advertising effects can be reinforced once again. An example of a successful referral marketing campaign is the online storage service Dropbox, which became a multi-million dollar company in no time.[4]

Application areas

Referral marketing not limited to a particular type or size of business. Since these actions can be carried out with relatively little effort, budget limits do not pose a major obstacle.

Referral marketing for service companies or new companies, which are not yet well known and which until now only have some opinions from clients on the Internet. In extreme cases, referral marketing could also be developed as an emergency measure to avoid negative public relations in a company or brand.

Target groups

Referral marketing is not directed at a specific target group. The only requirement for online marketing measures is that the target group uses the Internet. The choice of the media is free and diverse. Before the start of the campaign, it is essential, as in any action, that advertisers are clear what kind of people do you want to target with the brand, the products or services they are going to share. People can be used specifically to run the referral marketing campaign.

However, referral marketing usually takes place in the area of social media. Successful campaigns are started, for example, through Facebook channels, computer programs or blogs. In this context, the so-called "influencers" are also important. They are people who have many followers on social networks or who are famous in a certain area. They can be used to start referral campaigns. However, influencers are often criticized for not labeling their contributions as commercial promotion, even though their "recommendation" on YouTube or other channels is actually commercial promotion. because they get something in return.

Benefits for online marketing

Referral marketing is a tool of the advertising industry, which can achieve many different effects at the same time. Disseminating offers through referrals increases the opportunity for new customers to convert to conversions. With an increase in recommendations, the trust factor of a company, a brand or a product will also increase. At the same time, referral marketing can also cause more traffic. This in turn has the effect that Google and other search engines have more data to examine the site. At the same time, referral marketing campaigns provide many social signals for a web portal focusing on social media.

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