If you’ve looked into effective referral systems, you’ve certainly come across many of the same examples—Uber, Tesla, and Airbnb—again and over again.
Even while their campaigns are incredibly motivating, what if you don’t have the luxury of a full team, including engineers and marketing specialists, who can concentrate just on designing and overseeing your referral process?
The quick response is: Don’t worry; you can still implement a successful referral program while continuing to work your regular job.
We have been gathering data from clients over the past year as they use our platform to investigate patterns across several industries. What type of outcomes did they notice? Are there any sectors where referral marketing software makes sense? The most crucial question is: Do referral schemes truly work?
Referral Programs by Sector
So let’s get started!
Services & B2B Software
Referral marketing is still often seen as a consumer-focused tactic. This might be as a result of the fact that, as was already noted, word-of-mouth success stories like Uber, Airbnb, and many eCommerce firms are more widely disseminated. Simply said, you don’t hear much about the referral programs big business names like SAP, HP, and other B2B software providers have created.
You might conclude from this that B2B referral programs are ineffective overall. However, the data from our platform shows a very different picture. In reality, it implies that presumption is wholly incorrect.
In fact, over the course of a year, our B2B customers generate an average of 3 times as much income as eCommerce businesses. Much if that’s amazing on its own, it’s much more so when you take into account the fact that those same eCommerce clients have an average ROI of more than 500%.
Obviously, it’s challenging to draw a clear apples-to-apples comparison between B2B companies and eCommerce brands due to the generally higher customer LTV of B2B companies. The case for B2B referral marketing, however, became much stronger when we looked at average ROI (total investment in Ambassador + client acquisition expenditures, divided by total revenue earned).
Time was the last trend that stood out. In particular, B2B businesses that play the long game and give their referral program time to develop and establish traction have far better outcomes. Given the lengthy average B2B sales cycle, that shouldn’t come as much of a surprise, but it does serve as confirmation of the need of persistence and patience in B2B referral programs.
We examined some of our B2B clients who have been with us for a longer period of time and plotted their revenue increase for the first year to demonstrate this. As shown in the graph below, growth starts out slowly, but there is a distinct inflection point. Revenue drastically increases three months after adoption. And three months later, revenue increases five times as much.
Home & Bedding Products
If you’ve ever purchased a mattress at a brick-and-mortar store, you know that it’s not the most pleasurable or affordable experience. Near you are salespeople. The appropriate mattress might be tough to pick due to variations in product stiffness and quality. Few vendors make the return process simple if you do purchase a mattress but wind up disliking it.
The success of internet mattress retailers can be attributed to this very reason. It’s not surprising that customers are swarming to these businesses and enthusiastically recommending the experience to their friends because the products meet or exceed the majority of customers’ quality expectations, and the distribution model (free shipping and returns, and 60+ day trial periods) makes purchasing a mattress delightfully simple.
The market opportunity is enormous, as is evident from just looking at how this business is expanding.
Each mattress brand is producing nearly 315,000 website visits with an average of 8,465 ambassadors, three link shares per ambassador, and 12.4 clicks per link share. And because referral incentives frequently depend on a purchase, they aren’t paying anything for those impressions until they result in sales.
Let’s speak about revenue now.
Impressions have a finite value, as the majority of marketers and growth strategists are aware. And only when they successfully and affordably translate into bottom-line income do they actually matter.
What about the performance of Ambassador’s online mattress and bedding customers? The figures will speak for themselves, I think.
Each of these businesses paid slightly more than $34,000 to create more than $496,000 in new sales, with an average incentive of $50 per referral. From a channel that is largely risk-free and easily scaleable, that is a 14.5x ROI.
eCommerce
Referred customers spend less to acquire, purchase more, and stay longer, according to studies. Additionally, according to a 2016 online poll conducted by Nielsen’s Harris Poll, 82% of Americans ask friends and family for recommendations when considering a purchase, and 67% say they’re more likely to buy something if a friend or family member posts about it online.
What does the study actually reveal about the efficacy of referral marketing as an eCommerce tactic? Our statistics reveal the following story:
Now let’s make a quick calculation. If you have 10,000 ambassadors and 40% of them only share their link once, your site will receive 46,000 more visitors. Additionally, if each visit is valued at $3.62, the total revenue comes to $166,520.
In essence, referral marketing is a game of numbers.
You can improve shares, visits, and eventually income by adding additional ambassadors at the top of the referral funnel.
With consumer-facing referral schemes, it’s a frequent misconception that progress will eventually stop. According to the notion, activity will stall when ambassadors become tired of sharing (or run out of individuals with whom to share). Thankfully, the picture that our data presents is very different.
In fact, we discovered an intriguing pattern: eCommerce firms who allow their referral programs to develop experience compounding returns far after the first year. The first six months after a company’s start see a significant increase in revenue, but after that, growth remains steady over the next 18 months, expanding at a rate that is almost three times higher in years one and two.
Solar and energy
The total number of solar installations in the US has just surpassed 1 million for the first time, according to a report1 from the Solar Energy Industries Association. 64% of all new electric generating capacity added in the US during that time was powered by solar energy. Furthermore, over the following five years, solar installation numbers are predicted to nearly triple.
In other words, solar energy is about to become widely used. And, based on the word-of-mouth effects that Ambassador’s solar energy suppliers are experiencing, some of that momentum is attributable to the effectiveness of referral marketing automation.
One of the problems with the solar industry’s word-of-mouth is its drawn-out sales and installation processes. In any case, it can take 60 days to finalize a referral and much longer to actually install the new solar system. Therefore, it may take up to 90 days for a referral incentive to actually pay out.
That might make you initially believe that referral interest in and activity would be minimal. But the figures reveal a different picture:
These results are especially astounding when you take into account that the majority of the brands in the cohort we evaluated are mid-market companies. Bringing in more than $271,000 in new revenue for those companies is effective since it represents an average 10x ROI. A referral program’s ability to scale outcomes over time is also demonstrated by statistics from across our platform, which indicates that the longer one has been running.
Let’s now look at the growth trends in revenue for our solar clients. These income amounts reflect a 10x ROI after the first year based on the typical investment in referral marketing software. While revenue was initially modest, a sharp increase in the second and third quarters of the program shows the importance of giving a referral program, particularly one for solar or energy, time to develop.
Enterprise Organizations
We are aware that viral startups use referral programs to fuel scalable and long-lasting development, but how are big businesses adopting this marketing tool? Fortune 500 companies have partnered with us to launch new products fast and effectively, according to our customer base. What we found was as follows:
Our research found that enterprise firms produced a ROI of more than 40x over the course of a year, which equates to just under $1M in additional revenue from recommended clients. The best part is that word-of-mouth marketing involves relatively little risk.
However, none of this means that business referral programs can’t also produce outstanding results immediately. To demonstrate this, we looked at some of our more recent corporate clients, or companies who have only been utilizing Ambassador’s platform for a short while.
What did we discover ?
Over the course of those three months, the average new revenue was $695,039.01. That represents a ROI of more than 15 times when compared to the commissions paid for those referrals and the investments made by those companies in referral marketing technology (expenses totaling just over $46,000 per organization).
Online learning
One report2 projects that by 2022, the worldwide eLearning industry would have grown to $243.8 billion. Another study3 revealed that 5.5 million American students are enrolled in some form of online education, and that figure is expected to sharply increase in the upcoming years. A fascinating finding from the survey was that one-third of those who pursue online education do so with loyalty, dealing solely with one school or brand.
This demonstrates the value of word-of-mouth and recommendations in online learning and education. A potential student or eLearning user is more likely to engage with a company if they are introduced to it by a friend or work colleague who is already a « customer, » according to study.
That so, you wouldn’t exactly anticipate referral marketing to have immediate, significant effects in the school sector. Considering that it frequently takes time for new « customers » – students, instructors, school administrators, and corporate education departments — to completely appreciate the value of an eLearning product or an online education program.
The statistics, however, indicated otherwise. In reality, our customers in the education and eLearning industries saw the following effects on average within the first two months of launching a referral program:
The recognition, enrolment, and income of an education or eLearning brand aren’t the only things that referrals and word-of-mouth are useful for. Positive experiences with educational institutions or eLearning providers are eagerly shared by students and teachers.
Our research demonstrates that an investment in referral marketing technology may yield consistent returns over extended periods of time. We broadened the scope of our investigation to incorporate information over a six-month period to demonstrate this.
What did we discover?
Referral activity increased steadily after the first surge that occurred after a program’s introduction. The average number of referrals for education and eLearning over a six-month period is depicted in the graph below.
A powerful branding and acquisition channel that grows over time is produced when an education or eLearning firm can successfully pair a top-notch product or service offering with a well-managed referral marketing campaign. There is an organic flywheel effect that increases program enrollment, engagement, and eventually income as more students, instructors, or educators take advantage of your programs and referral program.
Services – Financial
A common misconception is that referral marketing automation isn’t a good match for financial services organizations. Transactions are frequently simple and « unsexy. » And discussing a financial experience is not as simple as gushing about a new clothing line or consumer good.
Can banks, tax software, or money transfer services experience the same level of viral success that referral marketing has brought to many eCommerce businesses?
Take a look at this:
Our research also demonstrated that it is incorrect to believe that clients of financial services companies won’t be as enthusiastic about or interested in joining a referral program, outside of a pure ROI calculation. Our client data shows that companies providing financial services typically see:
These figures show that clients of financial services are more than eager to recommend a friend or advertise a business after having a great experience since they are higher than those produced by the majority of prosperous consumer enterprises.
Referral marketing is a perfect match for financial services businesses due to a number of qualitative aspects in addition to quantifiable statistics. They comprise:
Long-term Customer Value
It’s simple to defend larger referral benefits when each new client is worth several hundred (or thousand) dollars. Rich referral incentives also virtually always result in increased referral activity.
Opportunity to Provide Disruptive Customer Experiences
Technology improvements have given financial services organizations more opportunities than ever to disrupt (read: simplify) the conventional banking experience. This is something that a lot of our clients undertake, and the success of their referral marketing campaigns attests to the worth of those efforts. Referrals pour in from all directions when your company reduces friction from an encounter that has traditionally been fraught with it.
Health & Fitness
Health and fitness companies stand out from other consumer businesses due to their abnormally high feeling of community, enthusiasm, and devotion.
Yoga, barre, crossfit, golf, bodybuilding, or nutrition are all things that people who truly love them prefer to do. With their buddies, they discuss it. They surround themselves with those who share their interests in such pursuits. Influencers that share their passion are followed and interacted with. Additionally, they’re always looking for the newest, most inventive products.
Word-of-mouth may be a huge growth engine for health and fitness businesses that cater to those sorts of clientele.
What does the data represent?
The sharing rate for health and fitness businesses is more than twice when compared to all of the other consumer industries using the Ambassador platform! This illustrates the zeal with which the client base embraces the companies they adore and their eagerness to spread the word about them.
Like most other consumer brands, seasonality in sales and the variety of channels that may (and, in many cases, should) be utilized to raise awareness are two issues that certain health and fitness businesses encounter.
Simply put, balancing priorities is a must for many health and fitness companies, and it becomes especially challenging to manage during busy times of year or when new products are introduced.
The case for referral marketing strengthens at this point. Here is a graph that illustrates how quickly our health and fitness customers adopted referral marketing initiatives while also demonstrating their steady development over time.
There aren’t the extreme peaks and falls that accompany seasonal operations or the introduction of new products. Instead, referral activity spikes abruptly soon after a program is introduced and then gradually increases over time.
Investment in referral marketing is one of the finest things you can do for your health and fitness business if you want to generate a steady flow of new customer money, and this is not just my perspective.
Conclusion
Our research demonstrates that referral marketing fits naturally in a sector where your largest supporters, clients, partners, and influencers are already talking about your company (or your rivals). There is one crucial lesson to be learned across all industries: Effective referral systems create a natural network effect. An excessively high percentage of your recommended customers will become brand-new ambassadors as you get more of them. The cycle will then begin over as those ambassadors bring in fresh clients.
The bottom lesson is that discussions will happen whether or not you participate in them, and our data demonstrates that firms may increase sales growth consistency by proactively enabling such interactions.
