February 15th 2017

Are Customer Referrals an Effective Form of Advertising?

Posted by Will Shadbolt

When it comes to your brand, not all forms of advertising are created equal. Your target audience might read a lot of magazines, watch certain channels or hang out on specific websites, and by focusing marketing efforts on those platforms, you can see sales rise. But there’s one form of marketing that trumps all others: word of mouth. The more referrals your business can get through previous customers, the better. And here are some statistics that will convince you just how powerful word of mouth can be.

1. 74% of customers say word of mouth referrals have a large effect on what they purchase, according to a survey conducted by Ogilvy, Google and TNS. But these can’t come from just anyone. Two studies performed by Nielsen suggest that people are four times as likely to purchase a product when referred by a friend, and that 77% of customers are influenced when learning about something new from friends or family.


So, while other forms of referrals can be a boon for business, such as testimonials and positive feedback on social media or reviewing websites, word-of-mouth recommendations from consumers who trust you matter even more.


2. 78% of people on social media are make purchasing decisions based on the posts of brands that they follow; 81% are influenced by their online connections, says Market Force. That might sound like a small difference, but remember that people generally only follow brands that they already like on social media. Friends and family on websites are more likely to expose consumers to new brands. 58% of respondents from an SDL survey talk about their experiences with companies on social media platforms or ask about brands on them.


3. 65% of new consumers are through referrals, says the New York Times. Yes, over half. So, more traditional forms of advertising are still important, but word of mouth is vital. And yet, few businesses actively cultivate opportunities for referrals. Simply waiting around for them isn’t ideal. Go after them.


For example, if you work at a dealership, asking questions helps. Ask specific questions, not just general ones about a referral. Ask ones that touch on why people buy cars.


“Do you know anyone who has car trouble?”


“Do you know anyone who recently had a baby?”


Rather than a generic “Do you know anyone looking for a new car?” a question that’s more tailored or particular. It can go a long way.


And that’s just one step. Create a referral program which adds incentives to your queries. Incentives will ensure customers refer your business in person or on social media.


Of course, any program needs the analytics and research to back it up. Keeping track of who recommends you and how they do it will help you both keep track of what that customer has earned and how to attract more referrals. At Giovatto, we can do the research and analytics for you. Plus, we can handle all incentives for your old customers so you can focus more on your business. Contact us today and see the effect real word-of-mouth referrals can do for you!

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