Why Is Referral Marketing So Powerful? We know that word-of-mouth and referral marketing is powerful and is continually rated as one of the most powerful forms of marketing, but why?
Let’s take a look at three core reasons for this:
- Precision Targeting
Have you every tried using Google Adwords or Facebook Ads just to watch your money disappear, literally before your eyes? Many times this isn’t the fault of the platform, rather your targeting. A great marketing campaign involves two key components, a great message and laser targeting.
Referral and word-of-mouth marketing tend to be much more targeted because people tend to know their friends and social audiences pretty well. This allows your brand message to spread more effectively than with most other marketing channels.
- Trust Factor
Trust goes a long way when it comes to convincing someone to buy something. If we don’t trust someone, we aren’t going to listen to them. Consider the last time a salesperson you know is on commission tried to sell you something. You likely had doubts about his authenticity due to a lack of trust. With referral marketing though, the sales pitch is usually coming from someone that you either know well, like friends and family, or it’s coming from someone you have trust in, like a favorite blogger.
Time and time again, studies have shown that people almost always trust these people’s opinions over generic advertisements and sales pitches carefully crafted by the brand themselves.
Need proof? A recent Neilson Trust Study showed that referrals are the most trusted form of advertising by a large margin:
But wait… there’s more. If you looked at the graphic above and only looked at the first row (Recommendations from people I know), you may of missed something. Position three (Consumer opinions posted online) and position four (Editorial content such as newspaper articles) are all also forms of referral marketing.
Remember, referrals aren’t just limited to friends and family. They can come from a variety of sources, provided the receiver of the message trusts them. So what are the major types of referral channels?
- Friends/Family
- News Publications
- Customer Reviews and Opinions Posted Online
- Influencer Opinions (Bloggers, Social Media Influencers)
- Testimonials
- Reach and Acceleration
Not long ago, reach of the average reach of a typical consumer was limited. For the most part it was contained to the number of people they saw in person each day or talked to on the phone. In this day and age though, the average consumers’ reach is much larger and for many people with strong social followings, it can be enormous. Some consumers now have the power to make or break a business by what they say about it online.
With a simple Facebook post, Twitter tweet or Instagram selfie, the average consumer can now reach hundreds, if not thousands or friends (who again trust their opinions) in a matter of seconds. That kind of social reach is a critical reasons to why referral marketing has only gotten bigger over the last ten years.