It’s well-known that recommendations from friends are among the top influencers of purchases.  And with various online and social networking applications, there are more ways than ever to encourage word-of-mouth marketing.  Marketers need to avoid the pitfalls, though. In our conversations with consumers, we’ve found they’re open to programs that reward referrals, as long as they don’t look like bribes.  Programs that offer a benefit to both the person making the referral and the person being referred tend to be regarded positively.

For example, Abe’s Market, a Chicago-based online retailer of various natural products, added a Share It feature to its website. The feature offers shoppers 10% off their orders if they agree to tell three friends about the products in their online shopping carts. After a customer enters three e-mail addresses, her buddies get a message that she is “shopping for natural products on AbesMarket.com, and wants to share some great finds.” The e-mail includes a coupon code that lets the friends save 10 percent on any order, too.  So far, the strategy is paying off. About half of Abe’s Market customers use Share It, and those who use it spend about 30 percent more than those who don’t.

Another company that launched a successful refer-a-friend marketing campaign is Roku, maker of devices that stream online media content.  Through market research, the company learned that about a quarter of its one million customers had encouraged friends to buy one. Roku now sends an e-mail to customers 45 days after a purchase, offering them one free month of Netflix service if someone they refer purchases a Roku player. In the first three months, 15,000 customers recommended Roku to their friends and 1,500 customers bought Roku players as a result.  The refer-a-friend marketing campaign has already proved to be more effective than online banner ads or paid search ads. People who were referred by friends were three times more likely to purchase than visitors who clicked on online ads.

To learn how to encourage word-of-mouth referrals among your customers, talk to them!  Give us a call at (818) 752-7210.

Sources: “Tell Your Friends About Us,” Inc., July/August, 2011; Bureau West research