Referral marketing is powerful. But you can only understand its power if you know the statistics that support it. Here are 15 interesting and surprising statistics that every marketer should know.
71% of consumers buy a product based on social media referrals.
How effective is referral marketing? This should answer your question. Your customers no longer make decisions by themselves. Instead, their choices are empowered through recommendations from their family and friends. This is the reason why referral marketing can help you get more customers. It is only through this method that most people buy certain products and services. They don’t do it if it is not promoted to them. And if they don’t get any promotions, they would also often go out of their way to ask for customer feedback from their inner circle. This is where they approach their family and friends and ask them if there are products or services that they could recommend to solve their problem.
82% of Americans ask for recommendations from their family and friends before they buy a product
This statistic shows you that you should fully integrate recommendations into your marketing plan. You should people are talking about your brand. This is because your potential customers will most likely search for your name before they proceed with the purchase. They will look for your past customers and look at their experience with you. When they do this, they will decide if they like to work with you. So referral marketing is not just for traffic and sales generation; it is also for increasing trust in the marketplace. It is about having your brand out there when someone searches for your name. It is about having reviews of your products when someone searches for them. This way, you’ll have content to back up your descriptions of your products. You’ll have people supporting you.
Referral leads convert 30% better than leads generated from other marketing channels (R&G Technologies)
Are you thinking about combining marketing methods for maximum traffic and sales? Before you do that, you may want to put the majority of your efforts into referral marketing. Why is that? That’s because referral marketing can give you 30% more conversions than any other method. While other marketing methods can help in driving leads or traffic to your website, it doesn’t work when it comes to creating conversions. Conversions translate into buyers. According to the study, this is what matters to most businesses, for it affects the bottom line. Referral marketing is a better method for generating these conversions, for it is a promotion that is based on trust. The recommendations will come from people who that customer personally trusts. Because of this, they can convince the customer to take the leap and buy.
Referred customers have a 16% higher lifetime value (Journal of Marketing)
There are two metrics for marketing success. First, there’s the number of sales that you get out of the promotion, and another is the number of sales you generate from the same customer. You see, customers tend to be loyal to brands that they like. If they want one of your products, they will likely try your other products as well as the customer buys from you and becomes a loyal customer for a long time; their lifetime value increases. It seems that referred customers are far more likely to become loyal customers. This may be because the foundation of their trust in the brand is based on the recommendation of their family and friends. This is strong and may pull them to buy from a brand over and over again in an extended period.
83% of consumers are willing to refer after a positive experience—yet only 29% do. (Texas Tech University)
This is where customer surveys can become misleading. When you ask them if they would like to recommend your brand to their family and friends, they will most likely say ‘yes.’ However, they may not do it. This statistic says it all. If you want to give them that push for them actually to promote your brand, you have to do more than ask. This is the reason why referral programs are so useful. They encourage customers to promote a brand by incentivizing it. This means that you reward them not when they say that they will do it, but when they took action. It is essential to focus more on the work and less on the willingness. But since they are already willing, they are most likely waiting for an incentive to give them that final push to take action.
Non-cash incentives are 24% more effective at boosting performance than cash incentives.(The University of Chicago)
When thinking about rewards for your referral program, you may be thinking that cash is the answer. However, that may not be the case. It still depends on your target market. According to a study at the University of Chicago, non-cash incentives are just as effective. The study found that customers are 24% more likely to get sales with non-cash incentives.
87% of frontlines sales reps, 82% of sales leaders, and 78% of marketers surveyed agree that referrals are the best leads your business can get.
Wondering about the best type of lead you can get out of your promotions? Many sales experts agree that referrals are the best. The reason for this is that references are already primed for a purchase. You no longer have to educate them with content and convince them with your ad copy. They are already ready to buy because they know and trust their family and friends who promoted the product to them. This is the reason why referrals have a higher customer lifetime value. They already trust the brand because they believe in the recommendations of their family and friends. So they are far more likely to buy from the brand again and become loyal customers.
Only 30% of companies have a formalized referral program.
Referral marketing has so many benefits to a business. Yet only 30% of companies have it. The reason may be asking their customers to promote them, but they are not giving them incentives to do it. This means that the referral program is there, but it is not formalized. No referral program is integrated into the company website that is designed to capture referrals. This is sad because businesses are losing money by not getting referrals – the best form of online lead generation.
22% of companies use tools to create and scale their referral program
While only 30% of businesses have a referral program on their website, only 22% of that use tools. This means that most business owners are still taking the long and hard route of running a referral program from scratch. They are not using tools in creating and automating their referral program. But this makes their life complicated. There is now so many referral marketing software that you can use to create your referral program. It works on a variety of platforms such as WordPress and Shopify. It can also be used in other eCommerce platforms. These tools are readily available, so you might as well use them.
28% of millennials say they won’t try a product if their friends don’t approve of it.
Most online shoppers are millennials. They comprise over 50% of the online consumer population. However, their shopping behavior and communication style is quite peculiar. Instead of just visiting a website, adding a product to a cart, and clicking check-out, the millennial will most likely use Google or their social media channel to search for reviews about the product that they are eyeing. They will not proceed with the order right away. Instead, they will survey the marketplace to see where they can get the best deal. Now, when their family and friends talk about a brand, they listen. Because of this, they will most likely avoid a brand if their family and friends have something terrible to say about it. It is something that you should keep in mind if you want to have millennials buy from you.
NOTE: Having a referral program can solve this. Through a referral program, you can have the millennial’s family and friends to talk positively about the brand. This will lead to you and may even convince them to buy from you.
People are four times more likely to buy when referred by a friend. (Nielsen)
The power of recommendations from friends is reliable, for example a recommendation for a logo maker services. This is the reason why promotions from people who are close to you are far more likely to convince you to take action. Think about it. You saw a product that you like to buy. You hear the marketer talk about it. He has tons of positive things to say about the product. Will you believe him? Then, you have a friend who has already tried the product before. He told you that the product is impressive, and it worked for her. This is a person who you know for a long time and is close to you. Because you saw that it changed her life, you will probably be interested in the same experience. This is the reason why recommendations from family and friends are powerful, and it is four times more likely to convince you to buy. It is this prior relationship that makes the promotion more authentic. This authenticity then convinces you to purchase the product.
Social media drove 31% of overall traffic to sites. (Shareaholic)
Social media is powerful. This is the reason why brands are now flocking to social media channels instead of search engines when it comes to paid promotions. Social media users are more engaged than search engines. They are often scrolling through the feed and are receptive to ads that are shown. This is better than having a word-based ad that doesn’t get any attention. Also, the audience has now evolved to be more visually oriented. They favor images and animations over others. This is the reason why image-based ads work better. And this is the reason why social media fares better when it comes to driving traffic than other platforms.
Only 14% of customers who visit a referral program take action. (Referral SaaSquatch Data Science)
While you may like to imagine that all customers who visit your page will take action, that may not happen. You see, only 14% of your customers will take effect on your referral page. That number is low, and it can get smaller if you don’t promote your referral program. While your customers may love your products and services, they may not be as motivated to encourage their family and friends. This is the reason why you need a referral program. You need to convince them by giving them an incentive. It does not need to be a complicated reward. You can have a straightforward referral campaign, such as what Best Hunting Bow Labs did. And it will be enough to get your customers to take action on your referral page.
Every referrer can usually invite three people (Referral SaaSquatch Data Science)
The power of your referrer has its limits. While they may have an extensive network of family and friends, they are only able to convince as much as two people at most. The reason for this is a person can only be close to at least 2 to 3 people at a time. These are the people who will take action for that person if he makes a recommendation. You must consider this statistic when you launch your referral program. Don’t get your expectations too high. Expect that each referrer can only invite up to 3 people at most.
69% of companies with referral programs say that it takes less time to close a sale with referrals
Have you tried closing deals with potential customers with other marketing methods? If you did, you might have found that you have to do a lot of things to convince them to buy from you. Usually, it begins with giving them information about your product and showing them its benefits. You also need to counter any barrier that may be stopping them from buying. But you have to get them through the marketing funnel to convince them to buy and use traditional marketing techniques.
Referrals are different. As I have mentioned, they are already primed to buy. So you don’t have to go through the entire funnel to convince them to buy. So it takes less time to close the sale.
Referral marketing is a great way to get traffic and sales to your website. I hope these statistics have convinced you to set one up for your website. Don’t be part of the 30% who don’t have a program. Create one now.