Businesses that have referral programs gain new customers from their (Very Happy) current customers. Often these programs are incentivised to encourage maximum referral reach (and give their current customers more to gain from their loyalty!) Referrals pay the current customer AFTER gaining a new customer. Referrals’ strategy is networking relevant products to relevant consumers.
Contrary to referrals, advertisements prepaid messages to reach desired a customer base (new or current). Advertisements are great ways of increasing awareness, however, conversion rates are typically low. Advertisements can have many different strategies or the strategy may be unclear further reducing effectiveness to relay a message to consumers.
3 Reasons Why Referrals Trumps Advertising
Consumer trust from referrals ranks among the top marketing strategies compared to traditional advertising.
Referrals hold 3 out 5 top positions of the top 20 leading marketing strategies.
Consumers trust Referrals 84% vs Advertising strategies 51.1% (Avg.)
Referral marketing targets your current customers whose networks share similar interests that align with your products/services. Also, current customers know who in their reach with most likely benefit, be interests, or is most receptive to your products and services.
Referrals can be networked through more paths than paid ads
Customer reviews and opinions posted online
Audience Reach + Growth
Traditional Advertising has no network effect and is becoming a saturated market as MORE companies find MORE ways to get in front of you. Referrals are increasing in relevancy as a way to cut through the clutter of advertisements. As technology use grows so do the opportunities to network referrals to more potential customers.