As we enter a recession, there’s likely one big question repeatedly being asked at your company meetings: “how do we grow the business when our budgets are slashed and consumers are spending less?”.
The past five years have been a strange and unsettling period for marketing. There’s been hyperinflation in some of the biggest marketing channels; martech stacks piled so high they’re close to toppling; the death of third-party data; the pandemic. Now the recession has pushed marketing to a pivotal point. The status quo isn’t working. To survive in the times ahead, businesses must now rethink their approach and adapt.
That starts with turning to your most valuable (and often overlooked) asset: your customers.
Turn customers into brand advocates
In the current economic climate, your customers represent the greatest source of untapped growth potential.
Consumers trust referrals from friends or relatives more than any advertising. They’re much more likely to listen to – and act on – the glowing recommendation of a friend, than that of an influencer or targeted search ad.
If you’ve built a great brand that offers quality products and service, there’s a good chance customers are already talking about you. Effectively engaging with these brand fans will create a powerful community of advocates who market your business better than you ever could.
As well as increasing the quantity of your customers, this word-of-mouth marketing will also enhance their quality. Compared to the average customer, referred customers have double the lifetime value and are 5x more likely to refer onwards – creating a powerful cycle of sustainable growth.
Putting customers at the heart of your growth strategy isn’t just the right thing to do; it’s imperative to the long-term success of your business. Referral can fundamentally transform the economics of your business. It offers lower acquisition costs alongside high lifetime value customers, driving organic growth directly from your core.
That’s the holy grail of marketing – and the reason that thought leaders, including the creator of NPS Fred Reichheld, are now talking about how driving referrals and thinking advocacy-first is the secret to future-proofing growth.
A sustainable competitive advantage
As well as a high-performing acquisition channel in its own right, referral generates uniquely rich first-party data that gives you a sustainable competitive advantage.
Referral data tells you who your best customers are today. That’s not your biggest spenders. It’s your brand advocates – those customers actively introducing high-quality new customers to your business.
With this data, you can optimise performance across your marketing channels. Social media is a compelling example of this. Despite being one of the modern marketer’s most invested in channels, the death of third-party cookies has seen this channel deliver fluctuating returns that can be near-impossible to predict.
With first-party referral data, however, brands can target referrer lookalike audiences that are highly likely to convert and have high lifetime value – scaling their businesses whilst reducing their CPAs. Menswear trouser SPOKE is one example of a brand using this to great effect. By using referral data to build audiences on paid social, it’s driving 30% higher ROAS and 12% lower CPA.
You can even start to segment customers based on how likely they are to refer, and target them accordingly. By encouraging customers with a high propensity to refer to share the brand with friends, Moss Bros increased share rates in this segment by 6x. And by offering low propensity customers a discount on next order instead, it increased repeat purchase rates by 23%.
Become a winning business
In the tough times ahead, marketing teams cannot simply plough on with the same strategies and hope to survive. Maximising value from all your assets and channels is now mission critical. Referrals help you make this ambition a reality.
In the words of Fred Reichheld, referrals aren’t the icing on the cake; they’re an essential ingredient for sustainable growth. Harness referral and advocacy for your business, and you’ll optimise marketing performance, beat your competitors and win in the recession. All while earning trust that keeps customers coming back and bringing their friends, long after this challenging period is behind us.