Word of mouth is probably the oldest marketing technique in the world, practiced long before we had internet and e-commerce. With the rise of emails and social media, word of mouth became global – you can recommend products and services to your friends and family, even if they are miles away from you, and you can order products from any store you want. Referring programs are one of the most often used marketing tools, which are based on word of mouth, but how effective a referral program really is?

The Effectiveness of Referral Programs

Researchers have studied the effectiveness of referral programs for a long time and the results prove that word of mouth is one of the most effective marketing techniques. Shoppers, when referred by a friend, are 4 times more likely to buy products and it is estimated that even 65% of new customers were brought through word of mouth recommendations. Moreover, a referral program has 5 times higher conversion rates than any other marketing strategies. Word of mouth wins also if we consider the trust factor: 85% of buyers trust the opinions of their friends and these referrals always lead to action! We have no doubt that social media are powerful platforms for word of mouth marketing: 85% of Facebook fans recommend the brand or company then follow to their friends. When it comes to referral programs, you should never ask if this solution is right for you, but you should think about how to make the best use of the program?

Pick the Rewards

Spontaneous word of mouth is not an uncommon thing. If your customers like your products or your customer service, they will probably tell their friends a few nice things about your company and generate new potential customers. But you can also induce referring behavior, if you reward your customers for every successful recommendation. You are free to choose the best rewards for your type of business: it can be a discount, a free gift added to the next order, bonus points redeemed for products – the available options are limitless.

Explain the Program in Details

Make sure that your customers know how to take part in your referring program. Provide them with clear and simple instructions or infographics. Explain what the customer has to do to redeem his reward or when he will be provided with a free gift. Remind your customers about the referral program by mentioning it in your newsletters, posting about it on your blog and providing links to the program on your home page.

Use Magento Extensions  

To manage referrals look for useful Magento extensions or ask your Magento web developer for the best solutions to run a referral marketing campaign. You need an extension that will allow you to create a referral program, set rules for the program, send personalized messages to customers, etc. Once you start a referral campaign, make sure that you know just how effective it really is. Look for software that will allow you to track the number of successful referrals and conversion rates