marketing
Referral Marketing
Driving new customers through deliberate, incentivized referrals from existing ones.
Definition
Referral marketing is the deliberate practice of getting existing customers to refer new ones - through formal programs (incentives), informal asks (just asking), or product-led referrals (built into the product). Referred customers typically have 30%+ lower CAC, 25%+ higher retention, and 16%+ higher LTV than acquired-cold customers. Despite the math, most service businesses don't have a structured referral program - they hope referrals happen organically and are surprised when they don't.
In your business
- →Build a structured referral program - don't rely on organic referrals to happen
- →Make the ask specific - 'who else do you know that struggles with X?' beats 'know anyone?'
- →Reward both sides (referrer + new customer) - two-sided incentives drive more activity