Role of Referral Channel in Customer Acquisition
Rohit Singh VP of Customer Engagement Schedule Free Consultation
  • A Detailed Look at the Role of Referral Channel in Customer Acquisition

    Everyone is talking about referrals today and for a good reason. Referrals make up one of the best ways to increase your business through better customer acquisition. But what is a referral? And what does referral marketing mean? Furthermore, how can you implement a relevant referral program for your business?

    The crux of any successful business is its customers. That is why enterprises place great importance on acquiring customers. Customer acquisition can be understood as the process of obtaining new customers or turning existing prospects into customers.

    Customer acquisition can become both time and resource consuming. Hence, businesses are concerned about making the acquisition process less costly, less time consuming, more comfortable, more effective, farther-reaching, and more focused. To acquire a customer, a business needs to ensure that existing customers have a positive experience, as do prospective customers.

    Customers can be acquired through a host of print advertising, online advertising, television advertising, etc. However, one of the most effective customer acquisition methods has been referrals. 

    What does the research say?

    Research has shown that approximately 2.4 billion conversations take place daily in the United States on brands and the experiences customers have with them and recommendations. On average, 66% of consumers purchase a particular product or service because of positive advice given by someone they know.

    Referral marketing is a strategy implemented by businesses to increase these positive referrals and customer acquisition. Word of mouth has been a trusted method of customer acquisition for decades. Now, through digitization of marketing efforts, referrals are often made online. Hence, referral marketing has become digital to a great extent.

    While referrals are often organic and evoked due to positive customer experiences, businesses can actively plan to make referrals easier, faster, and more in number. What they need is a referral program.

    What is a Referral Program?

    A referral program is a strategized plan that aims to increase referrals by making them more accessible, more rewarding for the existing and new customers, and making them more straightforward. 

    It is a targeted plan that includes technological automation, social media channels, email, and other similar media. Simply put, a referral program is planned referral marketing in which customers are provided convenient means to share their experiences.

    A referral program provides a high volume of leads with minimal cost. It makes it easier and quicker for customers that have had a positive experience with your business to spread the word. It is a guiding word of mouth advertising that goes a long way in increasing customer acquisition. 

    The experience of known acquaintances influences the majority of purchases. It helps spread brand awareness and turn prospects into customers by providing channels for people to tell their friends and acquaintances about their positive experience.

    Referrals in the Digital Age

    Referrals usually spread through word of mouth advertising. However, in today’s day and age, being memorable in a conversation alone may mean little chance of being mentioned. A considerable part of the population spends a significant chunk of its time on laptops, PCs, phones, and tablets.

    These devices have even replaced traditional conversation in many cases, as people now converse through texts and messaging applications.

    Their ease of use has made technological devices an integral part of every individual’s life. Phones and laptops often become the tool through which customers make purchases and interact with brands. Hence, it is only expected that referrals would be made through such media.

    That is why today’s programs focus on social media sharing, email communication, and digital rewards instead of the simple word of mouth advertising.

    The experience that customers have with your brand is best to use for digital devices. Furthermore, various methods are used to ensure that customers can share any aspect of their experience, thereby making referrals that are truly meaningful and effective.

    Benefits of Referral Marketing

    Referral marketing is one of the best and most effective methods of customer acquisition. To further understand why this is the case, let’s look at the three most extensive referral programs’ three most considerable benefits:

    1. Targeted reach –

    Unlike Google Adwords and other similar tools, referrals are more targeted. The customer who is sharing his experience will do so with a relevant group that is likely to associate with your brand, product, and service.

    Therefore, the recipients are closer to target groups than what goes with paid advertising that reaches out to almost everyone, regardless of their preferences. As a result, the ratio of persons approached converted leads is much more excellent in referral marketing.

    2. More trust – 

    People are more likely to buy a product or service when they trust a person whose opinion led them to that product or service. Referral marketing allows prospective customers to receive trusted views and recommendations. These are more likely to convert into sales than highly impersonal advertising methods.

    3. Extended reach – 

    When referral marketing used to be offline, people could only share their recommendations and thoughts with others that they met personally. It automatically brought down the number of persons to whom referrals could be made.

    Today, a single tweet or Facebook or Instagram post allows a person to reach hundreds and thousands of prospective customers.

    In fact, the higher the number of followers a person has, the further his reach. Furthermore, people follow others because they find common interests or respect their opinion.

    It makes each post or mention a brand or product even more significant as the audience it reaches is more likely to take interest in a particular product or service. Hence, businesses gain a wider outlook to market their products in the marketplace.

    PACE Methodology

    By now, you have a clear understanding of what referral marketing is and how this can help your business grow. What this means is that just because you make it easier, people do not necessarily provide referrals.

    The criteria that lead to a program bringing many relevant leads are the customer’s satisfaction concerning the product or service and the relevance of the program itself.

    Keeping this in mind, NextBee developed a methodology that aims to improve referral programs. This application methodology ensures that the approach to every participant goes in a way that leads to better conversion of referrals and leads.

    Known as the PACE methodology, it covers the following aspects:

    1. Personal: Building personal relationships through the active collaboration for increased positivity in responses.

    2. Adaptive: Adaptive to the needs and expectations of individual customers and target groups.

    3. Controlled: Strategy and design that incorporates analyzed data to promote effective response.

    4. Exciting: Ensuring that the customers find your program thrilling and exciting, to reduce monotony and improve response.

    Now that you have a clear understanding of referral programs and how they can be instrumental in improving your business’ customer acquisition efforts in the current digital age, we will delve further into the PACE methodology.


    By now, you probably have a clear understanding of referral programs and how they can be instrumental in increased customer acquisition in the current digital age. In our next blog post, we will delve further into the PACE methodology and create a great referral program.

Align Your Company, Your Teams, And Your Individual Employees To Foster A Company Culture Rooted In Success.



Community Templates

Community Templates

NextBee Corporation
155 Bovet Rd Suite 700
San Mateo, CA 94402

Call us now


Download the Free Guide Now

    First Name*

    Last Name*

    Your Email*

    Your Phone*

    Let's Get Started

      First Name*

      Last Name*

      Your Email*

      Your Phone*

      How Can We Help You? (What specifically are you looking to accomplish?)