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4 Powerful Referral Strategies for D2C Brands
We, humans, are social creatures. Whether good or bad, we love to share our experiences with our social groups. And that’s the foundational reason why referral marketing works.
With referral marketing, you turn your existing customers into brand advocates and take advantage of their connections. Instead of spending heaps of money on advertising, you get your customers to help you make more sales. Moreover, 92% of people trust recommendations from people they know, making referral marketing the most potent form of marketing.
But here’s the thing— most customers will forget to talk about your brand even after having a wonderful experience. And not giving them a reason to talk about your brand is equivalent to leaving money on the table.
Fortunately, a few referral strategies for your D2C brand can help you encourage your customers to talk about your brand and bring more customers. And in this article, we’ll be sharing four powerful referral strategies for D2C brands that you can use right away, but before diving in, let’s understand what referral marketing is and why D2C brands need it.
What is Referral Marketing?
Referral marketing is a method to promote your products to new customers through referrals. It’s a comprehensive strategy to encourage existing customers to refer your brand to their inner circle.
While referral marketing and word-of-mouth marketing seem similar, they are quite different. The main difference between the two is that referral marketing is more “intentional.” A business deliberately starts a referral marketing campaign to encourage its customers to tell their friends and family about its products.
On the other hand, word-of-mouth marketing is mostly voluntary. Happy customers share about your brand and the experience they had with their peers voluntarily rather than because of any deliberate attempt by the brand.
Why Does Your D2C Brand Need Referral Marketing?
Millennials and Gen Z are smarter than the previous generations when it comes to online shopping. Unlike older generations, they’re not obligated to take advertisers at their word. They like to compare products, do in-depth research, ask for opinions, check out review sites and forums or take the advice of social media influencers. Consequently, making it difficult for D2C brands to build credibility.
Recommended Read: 6 ways to get Amazon product review in 2022
Referrals from a credible source are far more trustworthy than any claims made by advertisers. And marketers understand this, and so they have improved their game accordingly. As the new generation of consumers trusts “real people” over ads, marketers have discovered a new way to amplify the views of real people with referral marketing.
Also, marketers understand that in order to succeed, they need to improve their targeting strategy. When you leverage influencer marketing, your message reaches a mass audience, but most of them won’t feel empathy— their life is too different from the influencer’s life.
On the contrary, referral marketing recognizes that most people have a similar taste to their peers, and because of this, it works better than other marketing strategies.
Benefits of Having Referral Programs for your D2C Brand
Acts as Social Proof
A whopping 87% of buying decisions begin with research conducted online before making the purchase. This is because most people look for social proof before investing their money in a particular brand.
A typical consumer will try any new brand with many uncertainties and doubts. That’s why they look for their trusted people’s opinions to better understand the brand and its products.
With referral marketing campaigns, you give your brand social proof and thus ensure potential customers have the confidence to give the brand a try.
Grows a Targeted Audience
Most of the time, a business’s name pops up only when someone’s having a conversation about a new brand or product they’ve found. This brings the brand in front of targeted and high-quality leads.
This is what happens in referral marketing. Your customers share about your brand and their experience after filtering the people they believe would benefit from your brand. And as these new potential customers know about your brand from a trusted source, their chances of buying from your brand increase.
Empowers Word of Mouth Marketing
With referral marketing, you encourage your biggest brand advocates to recommend your name to others. A referral campaign puts your brand in front of a mass audience you might not otherwise have access to.
With an automated referral and reward process in place, you’ll be able to turn your word-of-mouth marketing into a channel and improve your brand awareness.
Increases Customer Loyalty
According to stats, referred customers have 16% higher customer lifetime value (LTV) than other customers. This is because they get to know about you from a trusted source, and this places your brand in good light. And if you offer double-sided rewards— meaning even the new customer gets a reward — the odds of being a happy and satisfied customer continue to stack in your favor. All in all, referral marketing is a win-win for all parties involved, your existing customer, potential new customer, and brand.
Cost-Effective Marketing
Traditional marketing can be very expensive and time-consuming. On the contrary, referral marketing is an inexpensive way of marketing your brand and quickly getting the word out there. The reason is that you’re inviting your existing customers to promote your brand; you don’t need to make new relations here; instead, you’re leveraging just what you’ve got.
And once your referral campaign is up and running, it becomes a performance marketing channel (you pay only when you get results). You just need to make some essential investment in the setup, and then you need only to pay out rewards when you get a new customer.
4 Powerful Referral Marketing Strategies for D2C Brands With Examples
Double-sided Instant Rewards
As the name suggests, double-sided reward programs reward both the referrer and the referred customer. While most companies offer dollars of credit, there are also some other incentives like discount coupons, gift cards, or points that can be later redeemed.
There are also single-sided reward programs, where the reward is given to either the referrer or the referred customer—but not both.
Example:
Spanx, a D2C brand that sells shapewear, offers $20 to their customers when someone they referred signs up and purchases their first product using their personal referral link. Also, the new customer gets an incentive: a 15% discount coupon for their first order.
Bonus: 6 Entrepreneurial Lessons D2C Businesses Can Learn From Spanx and Its Founder, Sara Blakely
Here is another example, Dollar Shave Club, a D2C that sells men’s grooming products. They have a single-sided instant reward program in which when you refer someone, and they join using your personal referral link, you get a $5 in DSC credit. You can use this credit as a discount coupon for your next purchase.
Bonus Read: The Dollar Shave Club: An Extraordinary Story of An Ordinary Product Brand
Goal-based Rewards or Milestone Rewards
Some brands use goal-based referral programs. They use milestone rewards and offer various kinds of incentives such as cash or promotional products to existing customers when they refer the brand to new customers.
Example:
MorningBrew is a free newsletter. It started a referral program in which the number of referrals you send determines your reward. The rewards included anything from stickers or t-shirts to a trip to their HQ (with flight tickets). This strategy helped them reach a whopping 2.5 million subscribers.
Waitlist Referral Systems
A waitlist referral system offers early access to products or services for all the people who refer their friends. This simple strategy has helped many brands build a vast customer base even before launching.
Example:
Birchbox is a DTC subscription-based platform that opted for a waitlist referral system, and the results were astounding. They started with a list of 40 friends who were asked to join the beta version and generated over 3000 subscribers on the waiting list. As a result, Birchbox launched with a customer base of 660.
Currently, they use multiple referral rewards systems, including the one mentioned above.
Referral Contests and Giveaways
Referral marketing strategies, including contests and giveaways, are very popular among D2C brands. They are primarily single-sided and reward only the people who participate.
For example, a brand could host an Instagram giveaway, where people could follow them, refer to others by tagging them, and comment on the post for a chance to win the giveaway.
Bonus Read: 5 Instagram Contest Ideas For D2C Businesses
Example:
Sleepy Owl Coffee, a coffee manufacturer, ran a giveaway on Instagram where a user had to tag three people in the comments and tell them why they should try Sleepy Owl Coffee with #SleepyOwlCoffee to get a chance to win.
Another example is Nykaa, an Indian Cosmetics brand that hosted a giveaway on Instagram in which the users had to follow, like, and comment to enter the contest and get a chance to win a set of lipsticks.
Bonus Read: Nykaa Success Story: 5 Lessons D2C Brands Can Learn
Another famous brand that has used giveaways to attract new customers is Samsung. Samsung organized a referral contest in which the reward was Galaxy Tab A8. This was a double-sided giveaway in which, along with the referral reward for the winn9ng customer, the company offered an 8% discount to the friends they referred.
Building a referral program that can help you boost your customer base and revenue isn’t a complicated process. However, the key here is to provide an excellent customer experience, improve the quality of your products, and give your customers a reason to recommend your brand. Once you have these, all you need is a referral reward program, and you’re set to go.
Stay tuned for more such insightful blogs with strategies to help you grow your D2C business to new heights.
About Velocity
Velocity is India’s largest revenue-based financier, and we offer growth capital of up to Rs 4 crores to D2C and e-commerce companies. Businesses with healthy revenue streams can apply for instant funds and pay it back as their revenue grows. For further insights into revenue-based finance and to explore the advantages of RBF for your company, simply follow this link. To get instant revenue based funding for your business, apply here.
