Welcome to our latest blog in which we look at the top referral marketing statistics in 2023.
Here, we explore how each of these statistics might shape the upcoming trends of 2024. We hope, from this, you’ll be ahead of the competition when it comes to creating or improving your own referral programme.
Contents:
Why is Referral Marketing Important?
1) Referral marketing has been responsible for improved acquisition
2) Referred customers stayed for longer
3) Referral marketing software increases in market share
4) Emotionally connected brands experienced higher levels of WoM marketing
5) Word-of-mouth marketing accounted for $6T dollars in spending and sales
6) Partnerships continue to generate referrals
7) Over half of B2B buyers look to WoM before making a purchase
8) User-generated content (UGC) has increased in popularity
9) Consumers have been talking
10) Influencers resonate more with younger audiences
11) Affiliate marketing saw an uptick in 2023
12) Partnerships continue to generate referrals
13) Referred customers are still worth more
Why is referral marketing important?
Consumer trust is at an all time low. Many people feel that businesses are only interested in serving their own agendas, instead of looking out for their customers. As a result, many have turned to online reviews. Which is why it comes as no surprise that....
49% of people read online reviews before making a purchase.
Many businesses have recognised a pattern in this consumer behaviour. People trust the word of other people more than the boasts, claims and promises of businesses. What’s more, they discovered that if you give customers an experience worth talking about, then they’re more likely to share it with friends and family.
Enter customer referrals. These take customer credibility up a notch. If people trust online reviews from strangers – albeit other customers – just think how much they trust recommendations from friends and family members.
In the same way businesses can set up ways for customers to leave reviews, you can create incentives for them to refer others to your business. That’s where a formal referral programme comes into play. How customers come to know about it and how it works, comes down to your referral marketing programme.
1) Referral marketing has been responsible for improved acquisition
Equally, referral marketing is an effective acquisition tool. Particularly when customers are incentivised to bring more people to the business. An article on Invespcro found that:
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Referrals increase customer acquisition as referred customers are 4x more likely to refer others.
This shows that customer referrals generate future brand advocacy. Essentially it becomes an ecosystem of self-generating brand advocates.
Prediction: Businesses will implement referral marketing in acquisition funnels
As the benefits of referrals become self-evident in terms of acquisition, more businesses will endeavour to leverage it as a tool to get more customers. Which is why we believe many more businesses will seek to implement a formal method of referrals into their sales process.
2) Referred customers stayed for longer
Year after year referral marketing has proven itself as a viable method of better retention. Referred customers tend to stay for longer than their counterparts.
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On average, referred customers have a 37% higher retention rate.
The reason why referred customers stay for longer goes back to the social links between the referee and the referred. Customers stay with brands that their family or friends referred them to because of shared characteristics and social enrichment.
Prediction: More brands will implement customer retention strategies
We suspect that businesses will want to leverage the statistically higher retention rates of their referred customers. Therefore, we will continue to see mass adoption of retention strategies in 2024.
The use of personalisation in communications will increase, as will their consistency and messaging will highlight shared values between brand and customers.
3) Referral marketing software increases in market share
More businesses than ever are now implementing referral marketing software. As businesses in competitive markets vie for the attention of customers, it should come as no surprise that many rely on a referral marketing programme.
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According to Fortune Business Insight, the global market share value of referral marketing software was 77.7 million USD in 2019.
It has steadily increased (a trend that continued in 2023) and is set to reach 713.3 million USD in 2027.
Mass adoption of referral marketing software coincides with businesses recognising that their hard work of building brands worth sharing, requires a tool to leverage brand advocacy.
Prediction: Automation will become key to predictive experiences
Any business that incorporates referral marketing into their strategies understands when to ask customers for referrals is almost an art. It’s crucial for a successful referral marketing strategy that customers are gently guided towards advocacy.
Nurturing customers along the customer journey therefore is a time-consuming and labour intensive task. Unless of course, some degree of automation is implemented to handle it.
Collecting user data, building predictive experiences, and sending relevant push notifications are more than useful features for consistent referrals. Which is why we predict we’ll see even more automation in referral strategies come 2024.
4) Emotionally connected brands experienced higher levels of WoM marketing
Emotionally charged and evocative messaging has proven to be a hit in terms of WoM marketing. Businesses that try to establish emotional bonds with their audiences experienced higher levels of word-of-mouth marketing.
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Brands that inspired their audiences with emotional messaging saw 3x more referrals.
This just goes to show how using emotional triggers helps businesses build a wider referral marketing strategy.
Prediction: Brands will use more emotional messaging as part of their wider referral marketing strategies
In a recent study, experts identified ten motivators that significantly affected consumer behaviour. One of them being to feel a sense of belonging. This works perfectly in tandem with referral marketing.
Customers love to share great experiences with people in their social circles. Brands that use emotional language to connect with their customers will increase a sense of belonging. Couple that with a referral marketing strategy, and customers will feel more comfortable inviting their friends and family to the brand.
5) Word-of-mouth marketing accounted for $6T dollars in spending and sales
The benefits of word-of-mouth marketing (WoM) are widely known by businesses across all sectors. As low consumer trust continues to rise, the value of WoM marketing also increases.
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Word-of-mouth marketing drives $6T in annual consumer spending and 13% in sales.
Some businesses still need a method of encouraging their customers to spread the word about them. Typically these are smaller businesses that rely on more mouths in smaller, local areas.
Prediction: Smaller businesses will invest more in social media
Therefore, we expect to see a rise in smaller establishments implementing strategies that encourage WoM marketing. Namely, this will be increasing marketing budgets to boost online brand presence on social media platforms. As socials are one of the most trusted forms of advertising.
6) Partnerships continue to generate referrals
The power of referrals becomes even more evident in brand partnerships. Businesses that team up, exchanging audiences and co-creating unique value, see significant referrals. Which is to say that partnerships continue to be a crucial part of a wider referral marketing strategy. After all:
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60% of overall referrals come from partnerships.
Prediction: Partnerships will refine demographic targeting
This year saw mass adoption of brand alliances and partnerships. We predict in 2024 businesses with fresh partnerships will continue to develop the innovation. The direction of this innovation will undoubtedly head towards certain demographics.
The 60+ demographic still holds the most buying power. They tend to demonstrate more loyalty and often seek unique, highly relevant products for their needs.
Businesses will seek to leverage this by investing in consumer understanding. That way, they can refine the relevancy of their co-created unique offers. Enhance experiences with exceptional rewards and benefits. Lastly, all of which will encourage WoM marketing and brand advocacy as a result of a compelling point of difference.
7) Over half of B2B buyers look to WoM before making a purchase
B2B transactions often involve larger investments and longer commitments. Therefore it should come as no surprise that the majority of B2B buyers are naturally apprehensive.
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According to Earthweb, a report by Everyonesocial showed that 56% of B2B buyers seek out WoM recommendations offline.
As a result they rely on trust recommendations from their peers and professional networks. This stat increases to 88% of B2B businesses looking for WoM recommendations online.
Prediction: More B2B companies will adopt digital communities
Since an overwhelming majority of B2Bs rely on online WoM, they recognise the power of establishing trust and credibility. How effective established trust is in convincing potential customers to make positive purchase decisions.
Therefore, we expect more B2B marketing to leverage strategies that build trust and credibility. Most likely these will include building digital communities. These allow potential customers to reduce risk, assure quality themselves via social proof, and add a personal connection.
8) User-generated content (UGC) has increased in popularity
User-generated content (UGC) is crucial for establishing unprecedented levels of credibility on marketing channels. Brands remove themselves from the marketing effort and let users do the talking. This is incredibly effective as it shares firsthand experiences with potential customers.
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60% of consumers agree that user-generated content is the most trusted form of advertising.
UGC is considered even more trustworthy than influencers. As the person generating the content is just another customer with no monetary gain or affiliation with the brand.
Prediction: More businesses will encourage UGC
Consumers are growing wary of influencers. They understand that an influencer’s review might not truly align with their thoughts. This is because the influencer stands to gain whenever they onboard a new customer via their affiliate link.
Therefore, with 80% of marketers agreeing that UGC will help improve the authenticity of their messaging, it’s safe to say more businesses will encourage UGC.
9) Consumers have been talking
We’ve seen just how much word-of-mouth has earned businesses in the past year. That should come as no surprise considering consumers love to talk about their favourite product or service. With a small portion talking about their favourite brands every single day. In fact:
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According to SEMrush, 23% of people talk to family and friends about their favourite brand each day.
So, how do we think this stat will shape another 2024 trend?
Prediction: Mass adoption of customer-centric CX
As more and more brands aim to craft a compelling point of difference, increasingly competitive markets will drive innovation. We see this spanning across all sectors now that better tech is widespread.
We’re expecting to see CX that drives customer engagement. Virtual and augmented reality, hyper-personalisation and voice recognition features.
10) Influencers resonate more with younger audiences
A larger portion of younger demographics make commercially desirable purchase decisions compared to older generations. The amount of Gen Zers purchasing from brands as a result of watching influencers continue to rise steadily.
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Almost half in fact (44%) in 2020 which has now risen to 54% in 2023.
This steady rise however, may begin to lose steam, as the perception of influencers begins to sour.
Prediction: Rise of the micro-influencers
As Gen-Zers advance towards working age, they may find the bigger influencers less attractive. More cash-strapped Gen Zers in the workforce with perhaps more responsibilities, will instead of looking to larger influencers, consider more authentic micro-influencers.
11) Affiliate marketing saw an uptick in 2023
Affiliate marketing, a form of referral marketing, brings in a substantial amount of referrals from other businesses and content creators. Affiliates work well as part of a wider referral marketing strategy. Advertisers get access to fresh audiences and publishers generate revenue in return. As they charge advertisers CPA or a tenancy for advertising to their audiences.
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Affiliate marketing continues on an upward rise and by the end of 2023 is predicted to reach $14.3 billion. This positive trend is set to increase to $15.7 billion next year.
Although there are differences between affiliate and customer referrals, it certainly plays a part in boosting referrals and your customer acquisition strategy.
Naturally, if your business gives these fresh audiences unforgettable experiences, they will spread the news about your brand to their social circles.
Prediction: AI will change affiliate marketing and therefore customer referrals
As affiliates grow in popularity and technologists continue to refine AI, streamlining outreach and reducing labour intensive management will grow more important.
AI will pair affiliate partners more effectively and that will increase resonance amongst audiences. In the end, this will result in more customer referrals down the line.
AI algorithms can analyse vast amounts of data related to customer behaviour, demographics, and purchasing patterns. This analysis helps identify potential affiliate partners whose audience aligns well with the brand's target demographic.
12) Partnerships continue to generate referrals
The power of referrals becomes even more evident in brand partnerships. Businesses that team up, exchanging audiences and co-creating unique value, see significant referrals. Which is to say that partnerships continue to be a crucial part of a wider referral marketing strategy. After all:
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60% of overall referrals come from partnerships.
Prediction: Partnerships will refine demographic targeting
This year saw mass adoption of brand alliances and partnerships. We predict in 2024 businesses with fresh partnerships will continue to develop the innovation. The direction of this innovation will undoubtedly head towards certain demographics.
Businesses will seek to leverage this by investing in consumer understanding. That way, they can refine the relevancy of their co-created unique offers. Enhance experiences with exceptional rewards and benefits. Lastly, all of which will encourage WoM marketing and brand advocacy as a result of a compelling point of difference.
13) Referred customers are still worth more
Referred customers often possess a higher lifetime value due to pre-existing trust and loyalty, both of which stem from recommendations. This initial positive perception leads to increased engagement, loyalty, and likelihood of further referral.
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On average, referred customers have 16% higher lifetime value.
The end result is extended relationships and higher long-term revenue potential for businesses.
Prediction: Rise in experiential rewards and gamification
The higher lifetime value of referred customers will likely steer 2024 referral marketing trends towards experiential rewards and gamification. Brands with healthier bottom lines will want to maintain positive commercial outcomes.
They will implement methods that continue to delight customers towards advocacy. And to keep the business top of mind, businesses will need to constantly engage their customers. Which is why gamified features will appear often in referral marketing programmes.
14) Increased conversions
Referral marketing is one of the most effective conversion channels. Recent statistics show that it continues to outperform other lead generation channels. Of course, the main reason for this is due to the increased trust and credibility of brand advocacy.
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Referral marketing has 3 - 5 x higher conversion rates than any other marketing channel.
Prediction: Brands will continue to leverage emerging technologies to ensure referral marketing is the best performing channel when it comes to new customer conversion.
In 2024, emerging technologies such as AI and blockchain will be implemented in referral programmes which will help ensure that referral marketing is still the best performing channel when it comes to converting new customers.
For example, implementing sophisticated incentive structures to personalise rewards. By analysing past behaviours, AI can suggest the right incentives that motivate referrals and drive conversions.
Conclusion
That’s a wrap! Now you’ve seen how referral marketing has shaped up over the course of 2023 and the trends we expect to see emerge in 2024. You should be in a much better position to implement or refine a truly effective referral loyalty programme.
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