By Adam Furness, MD APAC at impact.com
Growing up, one of the most memorable ads of the 80s was Victor Kiam’s iconic line, “I liked the shaver so much I bought the company,” for Remington Shavers.
Despite its low production values and corny charm, this advertisement became a global sensation, not least as Victor Kiam recorded each commercial in the native language of the audience.
One of the main reasons it resonated with its audience is because the line was not only memorable, it was also true: Kiam’s wife famously bought him an electric shaver, and he went on to buy the entire company.
This is an extreme example of the power of a personal recommendation, but Kiam’s genuine endorsement catapulted the brand into the spotlight. And it highlights the impact of authentic recommendations from satisfied customers; a strategy that marketers have long recognised as the ultimate marketing tool.
Today media, societal and technological shifts mean that customer-referral marketing is experiencing a renaissance.
Here’s why.
Changing consumer purchase journey
Today’s buyers aren’t as persuaded by conventional advertising techniques as they used to be. Declining levels of trust in companies, brands and the media; irritation at intrusive and clunky digital ads, and the fact that the proliferation of brands out there (technology has been a great enabler for anyone wanting to launch an online store) means it’s difficult for consumers to determine the reputable from the scam.
Consequently, people need reassurance that they are making the right choice and they do this by seeking out reviews and recommendations from people they can trust – as well as searching social media where they can see the product being used. IAB and Pureprofile’s recent Australian and New Zealand Ecommerce Report 2024 found that well over half (58%) of shoppers aged 18-29 said influencers and social media impact their research and shopping habits.
This means an increasing number are ‘doing their own research’ by seeking out social proof from existing networks and relationships, including trusted publications, trusted influencers and content creators, as well as product reviews and recommendations. And within their own network, friends and family are at the top of the trust tree. Indeed, according to new Australian research commissioned by impact.com, 84% of consumers make purchase decisions based on referrals and recommendations from people they know, with 58% trusting personal connections the most when gathering information for a purchase compared to just 3% trusting traditional advertising channels.
Untapped advocates
Whilst it’s long been acknowledged that happy customers are your best marketers, it’s historically been tricky to put this knowledge into practice.
In part, this is because it’s difficult to manage a customer referral program at scale for anything other than the largest of enterprises. It’s also because many customers can feel a bit “off” about recommending a product to just get a reward just for themselves. In fact, our recent research showed that the majority of consumers (61%) prefer when both parties receive the reward and the main reason (49%) cited by those who’ve never participated in a referral program is because they “don’t want to annoy people”.
The good news for marketers is that it’s now possible to automate bespoke referral programs that can engage customers with tailored offers that are easy to manage at scale – without requiring significant resources. And the good news for consumers is that technology now makes it incredibly straightforward for them to participate whether via mobile or laptop.
Customer referrals create long-term value
Rachel Gerson and Zhenling Jiang, both Assistant Professors at University of California, Berkeley and University of Pennsylvania Wharton School respectively, recently published a research paper “Referral Contagion: Downstream Benefits of Customer Referrals” which highlights the powerful phenomenon of “referral contagion.”
Analysing data from over 41 million customers of a cashback app, they found that referred customers make more purchases and also attract 30%-57% more new customers through referrals than those acquired through other methods.
According to the authors of the research, this trend, observed across various industries, is influenced by social factors including the appropriateness of referrals and the tendency to form social circles with similar individuals. They also conducted an experiment involving over 10 million customers that demonstrated that reminding referred customers of their referral origin increased successful referrals by 21%!
Given the considerable upside of customer referrals it isn’t surprising that we’re seeing more businesses begin to implement or reinvent their customer referral programs as they seek to benefit from the: built-in trust; extended customer retention (our research found that after referring a brand to someone, 37% of customers said their brand loyalty increased) and reduced customer acquisition expenses that such programs offer.
Perhaps the bigger surprise is that more businesses haven’t yet adopted authentic advocacy into their marketing efforts.
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Top image: Adam Furness