It’s no secret that word-of-mouth marketing is probably the most cost-effective marketing strategy available.
Customers not only rely on word-of-mouth up to 10 times more than on traditional media, but those acquired by word-of-mouth spend 2x more and make 2x as many referrals themselves.
There are several different ways companies can increase their word-of-mouth sales and incentivize customers to promote their brand.
We are all familiar with some of the most successful referral programs in history, such as Uber’s or Dropbox’s.
In Dropbox’s case, relying on word-of-mouth marketing was a key strategy in building their $10 billion dollar company.
Dropbox created a two-sided referral program, giving away free storage to both the existing customer and the referred friend. Users with “Basic” accounts get an additional extension of 500MB per successful referral, with a maximum of 16GB of total storage. This referral program permanently increased signups by 60%.
Dropbox’s referral program allowed them to get over 4 million users in just 15 months, without spending a single dollar on advertising.
However, we believe that word-of-mouth marketing should be available for all e-Commerce stores, not only big brands like Uber or Dropbox.
Here are some of the best examples of referral marketing we have learned from online stores over the past few years:
Greats is a Brooklyn-based footwear brand.
Their founder knew that referral marketing was going to be an important source of traffic and revenue for their store, so they set up a referral program as soon as they could.
They designed a referral program where both the existing customer and the referred friend receive $25 in Greats credit. Depending on the model, $25 accounts for up to a 30% discount.
Greats’ referral program was a success. They were able to generate a 20X return on investment and referrals accounted for almost 5% of all orders in their online store.
Leesa is a Virginia (US)-based e-Commerce mattress brand.
Buying mattresses can be a challenge: It is usually a big purchase which is meant to last for many years. That’s why most people ask for referrals before they take on the task.
Leesa’s founders knew the importance of word-of-mouth marketing and created a referral program to encourage customers to talk about their brand.
They adjusted their referral program to their customers’ purchasing behavior – most people buy a mattress once every eight to ten years, so giving existing customers a discount on future purchases wouldn’t have made much sense.
Instead, they decided to give existing customers a $75 reward and a $75 discount to referred friends.
Leesa’s customers started sharing their links with their friends and on social media. This worked so well for them that they ended up with over 3,000 advocates (existing customers referring Leesa to their friends).
These referrals generated such a large number of sales that today, Leesa’s referral program drives more than 33% of their sales.
Critical Pass is a company that sells flashcards for students taking the bar exam.
Passing the bar exam is probably the most stressful time in a recent law school graduate’s life. Preparing for this exam takes months, and many students refer to online forums to ask questions, share feedback and request advice.
Nathan Kleiner, Critical Pass’ CEO, realized that word-of-mouth was one of the best ways his company could market their product. Many students were already sharing their experience using Critical Pass with their classmates and sites like r/LawSchool:
To boost this word-of-mouth momentum, Nathan set up a referral program where he would reward his customers for spreading the word about Critical Pass.
Critical Pass’ customers are not repeat customers and hopefully, they only need to buy flashcards once in their lifetime. For that reason, Nathan decided to set up a referral program where he would give $10 off to new customers and $10 cash rewards to advocates:
Now many bar students are sharing their referral links on forums like top-law-schools.com:
Critical Pass’ referral program currently accounts for over 10% of all orders received through their site, and has so far generated a 24X return on investment.
What do all these word-of-mouth marketing strategies have in common?
- They set up a referral program as a way to incentivize customers to talk about their brands
- The referral program rules were easy to understand: Give X – Get Y
- The rewards matched their customers’ purchasing behavior
YOU MIGHT ALSO BE INTERESTED IN: