Referral Marketing: Definition & Examples

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Have you ever passed an email on from your favorite brand? You may have been part of a referral marketing program! In this lesson, you'll learn more about referral marketing and some of the brands doing it right.

Refer a Friend

You've probably encountered the following scenario more than once or twice. You're standing around at work discussing the weekend with colleagues or hanging out with friends at a nice restaurant on the weekend.

Referral marketing relies on word of mouth from a customer to a potential customer.
referral marketing, word of mouth

Suddenly, talk turns to the latest and greatest product you've been considering buying. Luckily, one of your friends has already tried the product and is not only able to give you the positives and negatives of the item, but can share a coupon for 50 percent off for you as a new customer. It's a win-win situation because after you make your purchase, your friend will also get a credit in their account. This, in a nutshell, is referral marketing.

What is Referral Marketing?

Referral marketing is, essentially, that word-of-mouth recommendation (or referral) from an existing customer to a potential one. The crazy thing about referral marketing is that it's happening day in and day out - good and bad - whether a brand is involved in it or not. In fact, referral marketing or word-of-mouth marketing is the engine behind the act of something going viral, that is when something is shared numerous times through the general population.

Where marketers can pick up the referral marketing torch and run is by making referrals a conscious part of a comprehensive marketing program. How? A couple of ways:

  • Ensure that customers have the tools to share your brand, such as easy ways to post to social media.
  • Offer incentives for customers who give referrals and recruit new consumers.
  • Provide great customer service. Patrons are more likely to recommend a brand that stands behind its products.
  • Encourage reviews of your products and services on your website. Those are a type of referral too!

The best referral marketing programs include all of these traits and come from brands that have adopted the idea of referral marketing as a great way to meet - and keep - new customers. Afterall, a newbie is more likely to buy into your brand based on the recommendation of a friend or family member. Why? Because there's already a level of trust there - if Aunt Taylor says she's had great success with something, you want to try it also.

Let's take a look at a few brands doing referral marketing right.

Referral Program Examples

Now that we know what referral marketing is, who are the frontrunners out there taking word-of-mouth marketing by storm? Here are a few.

1. Dropbox: Dropbox is a cloud storage system for dropping in your files, photos and other important papers to be accessible across various devices. Dropbox rewards customers by giving them more storage space for their own goodies when they refer friends to the cloud service. This referral marketing strategy was so successful that it netted Dropbox four million new users in a little over a year.

2. Airbnb: If you're looking for a rental for vacation or a business trip, you may have snooped around Airbnb's website because that's what they provide: a community of regular people who offer lodging rentals in communities all over the world. Airbnb got into the referral game by offering a travel credit for existing members when the person they referred booked their first trip. This has helped Airbnb nearly double their users every year from 2012-2017.

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