Even if you’ve never heard of referral marketing, chances are you’ve experienced it.

Maybe your mom held Tupperware parties when you were a kid or your friend is a Mary Kay consultant. While these are examples of direct selling, they’re also good examples of referral marketing – where passionate customers make extra money by selling products to friends.

But Tupperware parties are just the beginning of referral marketing’s possibilities – especially as fewer and fewer Millennials are willing to open their doors for the hassle of a party. It’s not that they don’t like the products; they’d simply prefer to share them on social media rather than invite friends over to look at them.

It’s the perfect segue to referral marketing, and it’s probably something your business can capitalize on, too. At its core, referral marketing offers compensation for sharing links to products via social media or email. When friends act upon those links, users earn money or credit, and you make a sale.

Positive Effects

No matter what business you’re in, your customers are undoubtedly your best source of business. Creating a way to incentivize them to share your products with others is vital to capitalizing on social media and email marketing.

It makes sense: People trust other people more than they trust ads. But it’s more than that. Your users essentially become your sales force, and you only have to pay them when they make a sale. It’s almost impossibly efficient.

However, it’s certainly not an overnight transition if business owners want to shift from a more traditional marketing role to a referral marketing one.

How It’s Done

If you want to try referral marketing – go for it.

But first, it’s absolutely crucial you build software with easy shareability, a portal for users, and a strong cycle of engagement that gets others involved. Intuitive referral software will be your key to success – it’s how your clients will share your products via social media and email.

What’s more, users should be able to tell how much they’re making at any given time so they can see which of their posts are working and which aren’t. It’s important for users to see the exact results of their activity.

If you don’t have the budget to build your own engine from scratch, third-party software provided by Extole and Ambassador will help you get started quickly. These companies have also completed multiple case studies to determine the effectiveness of referral marketing.

A recent Gigaomreport via Extole surveyed 300 U.S. digital marketers and uncovered what tactics they use throughout the funnel, including awareness, acquisition, conversion, and retention. It found that spending is up, email is the go-to, and referral marketing shines for acquisition and conversion, driving at least 35 percent of new customers for almost half the marketers who use it.

Additionally, a referral from a friend increases a person’s chance of interacting with that brand by as much as three to five times, so each referral or social share is absolutely priceless.

Similarly, Ambassador partnered with SendGrid, an email delivery and management service, to perform a case study. In the study, SendGrid representatives said the software’s simplicity and available stats made it easy to see exactly where brand ambassadors represented SendGrid online.

And by leveraging the quick but customizable installation, SendGrid quickly started its referral program.

On the other hand, if your business isn’t a good fit for social media, referral marketing might not be a viable option. Look at it this way: If you wouldn’t share it with your grandma, it may not be right for you.

Smart marketers know that getting your customers to work for you is the easiest money you’ll ever make. Referral marketing does all that and more. It builds insatiable brand loyalty, trust, and a sharable, social product that everyone wants to get behind.

Photo credit: Athenamama / Flickr