Consumers have always valued the recommendations from their social circles. Marketers may spend millions of dollars on different advertising campaigns, but often a simple and free word of mouth recommendation from a trusted source, can bring better results. According to research conducted by global management consultancy firm McKinsey & Company, WOM is the primary factor behind 20 to 50% of all purchasing decisions. The digital revolution further proved online referral marketing programs to be a lucrative and cost-effective option for marketers using different automated tools.

What makes an online referral marketing campaign so effective? The following are the three important reasons to be noted:

Accurately targeted campaigns

A great marketing campaign involves two key components, a great message and an accurate targeting. Referral marketing helps to send the message to a highly targeted audience. People tend to know the preferences of their friends and social circles very well. As a result, referral marketing strategy allows your brand message to spread more effectively to the right audience.

Moreover, a referred traffic typically converts at up to 3X the normal conversion rate. This makes referral campaigns more effective compared to most other marketing channels.

Increased Trustworthiness

With an ever-increasing noise of advertising in all walks of our lives today, it is becoming difficult for customers to trust every marketing message they receive. However, today's world is also an ever-connected world, where customers have innumerable options to get influenced by their friends and family for their purchase decisions. The Global Trust in Advertising report by Nielsen reflects that consumers trust recommendations from friends and family more than they trust advertising. 84% of global respondents to the Nielsen online survey said word-of-mouth recommendations from friends and family was the most trustworthy source.

Recommendations from friends and family through online referrals remains one of the most valuable and trusted sources for most consumers – even more so than the best of advertisements.

Quicker Sales Cycle

A referral to the friend and family of the customer, carries a built-in credibility that reduces the risk new consumers might feel while doing business for the first time with your brand. Referrals come with a high propensity to transact with you and are often half-sold on doing business with you. This means sales are much easier to obtain. Any sales guy will vouch that a referred lead is one of the easiest to convert and can naturally shorten the sales cycle.

So how to strategize a referral marketing program for your online business?
Creating a powerful referral program isn't about just putting a “tell-a-friend” link on your website. Following are 5 simple but intelligent referral strategies that can help you leverage the brute power of word-of-mouth marketing:

1. Offer attractive referral rewards

2. Email your database monthly to request referrals

3. Encourage referrals just after someone has made a purchase

4. Solicit a referral by email 2-7 days after the customer experiences the purchase

5. Show existing customers a referral banner on your website