Referrals are just plain effective for businesses, whether they sell crocheted plants or industrial equipment. Make the right person happy and deeply connect with your brand, and you’ll unlock a handful or two of curious customers who’ve heard some great things about you from someone they trust.
Long before we had all these advanced marketing tools and platforms, rotating ads, and targeted advertising tactics, the only marketing medium available was word of mouth – which is what business referrals rely on. And the research from PwC shows that this still remains the most important form because it has everything to do with trust – a fundamental foundation for businesses and customers.
But how did we get from casual recommendations to formalised business referral programs?
Word of Mouth in the Early Marketplace
If we think back to the days of an ancient market, we’d probably think of a gathering of stalls, similar to a farmers’ market. But without the internet, billboards, and potentially even flyers, you might wonder how these early businesses made any sales. Back then, they thrived on word-of-mouth advertising. If Edgar’s Vegetable Stall sold its stock at reasonable prices or the quality was superior, buyers would likely bring that experience up in daily conversation. That’s essentially what word of mouth really is – when consumers have a stellar experience with a brand or product and plant the seeds for others to become interested too.
Marketing Scales Up
Eventually, we became a lot less rudimentary when it came to barter and trade. We developed standardised currency, the Industrial Revolution brought about mass production and urbanisation, and people could find everything they needed at shopping malls and supermarkets rather than having to travel far and wide for each service or good.
With this came the inherent need and possibility for other marketing and advertising tactics. Businesses strived to attract potential customers outside their local communities, so they turned chance word-of-mouth recommendations into a more calculated scheme. Although we aren’t at the stamp-card and reward-system stage of referrals just yet, we did see a lot of formalisation in the early 20th century. Perhaps it was through a discount or a tangible reward – either way, companies scaled and took advantage of new opportunities for expansion.
Advertising didn’t get its big break until the post-WWII economic boom. With significant prosperity that no one knew what to do about, consumer culture was born – and those consumers wanted to spend their disposable income wherever they could. Marketing and advertising became a lot more sophisticated in response, taking stock of all the technological advancements and the growing consumer desire.
Ads were starting to capitalise on what they could do with a proper brand identity, and those catchy and memorable slogans could help amplify that appeal and trigger emotions. Lucky Strike cigarettes marketed to women by targeting weight loss with the slogan “Reach for a Lucky instead of a sweet,” and Johnson & Johnson’s famous “No more tears” slogan became their bread and butter.
The Birth of Formal Referral Strategies
At this point in time, there were so many possibilities for communication – flyers, pamphlets, TV advertisements, magazines and newspapers, billboards, and other forms of mass media – that referral programs simply became an extension of it all. Customer loyalty programs and other similar referral strategies were the best way to grow, diversify, and capitalise on their existing faithful customers. Businesses weren’t only focused on making a sale but fostering long-term relationships as well.
And we see this strategy implemented practically everywhere today. Services like subscription boxes and meal kits provide credit towards future deliveries, and apps incentivise referrals in exchange for in-app rewards. Many online casinos nowadays that offer 50 pay lines slots with high multipliers attract customers by offering referral programs too. Like many other markets, the online gambling market is becoming extremely saturated, so referrals are an easy way for a company to get more and more people using their app or site over others.
How the Internet Changed Referrals
When the internet started taking over our daily lives, how businesses operated changed too. Many businesses now have the world as their oyster, with a global audience at their fingertips and e-commerce platforms allowing for online shopping and marketing strategy implementation. Online software became rampant, which meant brands could now set up and manage all sorts of automated systems, including referral programs. The existence of social media also meant word of mouth was now done through a metaphorical megaphone.
Rather than accumulate punch cards and keep track of everything manually, they could now conduct everything virtually and even track useful metrics to optimise future strategies. In return, customers could enjoy immediate access to discount codes, digital gifts, and all sorts of attractive incentives right away. With the level of instant gratification and convenience shoppers are spoiled with today, conducting the referral process this way is much more dynamic and responsive.
The Future of Business Referrals
The top priority on the minds of businesses everywhere is how they can improve their customer experience. Customers crave personalisation and convenience and are naturally drawn to brands that cater to these desires. The concept of word of mouth will never go away, so we can expect business referrals to only get more nuanced and complex.
Predictive analytics might become more advanced, we might see gamification elements more frequently, influencers may become more widespread, and we’re already seeing social proof and personal recommendations make a big comeback. The innovations we’re predicted to see will only serve to bolster transparency, digital security, and personalisation, but one thing’s for sure – the goal will always be to reinforce trust.