What Is Referral Marketing?

Also published in invitation blog

Referral marketing is a great way to grow your business. It's easy, and it's free. In fact, you can get started right now by referring 3 people to this article.

This guide will teach you everything you need to know about referral marketing for startups. You'll learn how referrals work, why they're so effective, and how to get started. Let's get started!

What is referral marketing?

Referral marketing is a simple concept, you recommend your product or service to someone else, and they do the same for their friends. The two of you split the profits from any sales that come as a result. The concept is simple, but the results can be astounding. Here's a quick example:

Let's say you run an online store that sells widgets. You've spent $1,000 on ads to get your business off the ground and have sold 3 widgets so far for a total of $300.

I recommend your store to my friend, and he buys a widget for $100. You’ll get $70 (70% of the sale), and I’ll get $30 (30% of the sale).

Now, you've sold 4 widgets at a total cost of $1,400. If you keep spending money on ads, you'll eventually run out of money. But, if I continue to refer my friends to your store, you can keep growing without spending any more money on ads.

Why is referral marketing so effective?

It's much easier for people to trust a friend than an ad. When someone tells me about a product or service, I can tell whether they're telling the truth. But if I see an ad, it's harder to know whether it's trustworthy. It's easier for people to share information about their friends than a company. When someone tells me about a friend of theirs, I'm much more likely to take the time to check out their friend's business. It's easier for people to make a purchase when someone they know is already using the product. If I'm already familiar with a friend's business, I'll be more likely to trust them and buy from them than if I had just stumbled across their website. If you want to get started with referral marketing, the following sections discuss things that you should consider.

How do I know if my product is a good fit for referral marketing?

Lots of products aren't a good fit for referral marketing. If your product requires a lot of explanation, or it's not something that people would be comfortable recommending to their friends, it's probably not a good fit.

If you're unsure whether your product is a good fit for referral marketing, here are some questions that can help you decide:

Is your product something that people would recommend to their friends?

How much do you know about your customers?

How many of your customers are already doing business with you?

Do you have a way to reach out to your customers and ask them for referrals?

If you answered "yes" to all four questions, then referral marketing is probably a good fit for your business.

How do I get started with referral marketing?

The first step to getting started with referral marketing is deciding what your goals are.

Here are some great places to start:

Define your goal: Do you want to sell more products, grow your customer base, or increase brand awareness? It's important to know what you're trying to accomplish before you get started.

Identify your target audience: Who are the people that will buy from you? If your product is expensive, then it's probably best to focus on a narrow audience. But if it's cheap or free, then you can probably cast a wider net.

Identify your referral sources: Who are the people that will refer their friends to you? If your audience is small, then it's probably best to focus on a few key influencers instead of trying to get referrals from everyone in your target audience.

Choose a strategy: Do you want to focus on one-on-one conversations, online reviews, or social media? The more strategies you try, the more referrals you'll get.

Choose a platform: Do you want to use email newsletters, Facebook ads, or YouTube videos? There are tons of platforms that can help you get the word out about your business.

it's important to know that referral marketing isn't an overnight success. It takes time, effort, and consistency to get results. Jumpstart your referral marketing strategy by using Invitation. You would want a platform that gives a neat portfolio for all your referral codes and links. A page where you can share with friends and family. A collection of the products and services you use and what people could get from taking advantage of your referral.