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Using Psychology to Drive Referral Marketing

When you’re looking for a new dentist, where is the first place that you look? Do you ask around among your friends and family, or do you head straight to Google?

Sure, you might do both. But which dentist are you going to choose? The one that your friend recommended because she had a good experience with the dentist or the one that popped up first on Google?

Probably the one that your friend recommended. Why? Because there’s more trust when you’re getting a direct referral from a friend (that you trust) compared to what the algorithm told you. 

Trust is the power of referral marketing.

It draws on the psychology of persuasion to motivate customers to pick your brand. Integrating these psychological principles into your marketing strategy will help you increase conversions, boost sales, and grow your business faster.

We’ll dive into how to use psychology to get the most out of referral marketing. But before we do that, let’s talk about why referral marketing is so valuable in the first place.

Why referrals are among the most valuable leads you can get

There are two main types of referrals, and both of them are significantly valuable to your business.

The first is when a customer refers you to one of their contacts in the same field. This type of referral results in a precious prospect because they’re in the same industry and likely have the same problems. So there’s a good chance that your product or service will be a good fit for them.

The second referral is when a customer refers you to a friend. While they may be in a different industry, the referral comes with a lot of trust. And trust is invaluable.

Both of these types of referrals drive some of the highest conversion rates among all marketing channels. Marketers have gone as far as rating referrals as the second-highest source of quality leads.

Besides, Nielson’s research found 22% of consumers won’t buy a product after reading a negative review. And that goes up to 59% when consumers see as few as three negative reviews.

Again, these statistics show the power of word-of-mouth and how important it is to focus on getting positive reviews and referrals from your customers. 

Here’s how to harness marketing psychology to increase your referrals.

How to use the six principles of persuasion in your referral marketing

Robert Cialdini, a world-renowned psychologist, wrote Influence: The Psychology of Persuasion, explaining the psychology of why people say ‘yes’ and how to apply these understandings.

The book outlines six universal principles of persuasion. Here’s how to use each of them in your referral marketing strategy.

Reciprocity: It’s a two-way street

The principle of reciprocity works on the idea that if you give something, you’ll get something back. Similarly to when someone gives you something, and you feel obliged to offer something in return.

The idea of reciprocity is why, when your friend pays for your coffee, you instinctively say, ‘I’ll get the next one. There’s an unsaid ‘obligation’ to reciprocate in these types of situations. According to Cialdini, reciprocity is why we are more willing to offer something without fear of loss.

An example of how you can use reciprocity in your referral program is by offering double-sided rewards that give both your customer and the person they refer a bonus (for example, a 10% off voucher). Doing so creates a reciprocal relationship between your brand, your customers, and their friends. Everybody wins, and nobody feels like they ‘owe’ anyone anything.

Commitment and Consistency: We walk the talk

The need for consistency is a central motivating factor in many aspects of human life. The same goes for commitment. Once a person has committed, their desire for consistency will make them more likely to follow through with the obligation.

You can use the commitment and consistency principle in your marketing by getting your customers to commit to making a referral. 

You can get them to commit by simply adding a popup on your website that asks, ‘Are you likely to refer us to a friend. While initially, you’re just asking for a ‘yes’ or ‘no,’ you’re priming them for when you later send an email asking for a referral. If they previously said ‘yes, they’ll feel more committed to aligning their words with their actions.

Social Proof: It’s more than just FOMO

Human beings are inherently social; we have a craving for social connection. The emotional reward of feeling part of something is irresistible, and we thrive off of what others are doing.

Simply put: people are more inclined to do something if others are doing the same thing. We often talk about FOMO (fear of missing out), but it goes deeper than that. When we see others doing something, it reassures us that we’re making the right decision by doing the same thing also, that we’ll be more socially connected by doing or buying the same things.

If we see photographs of our friends visiting a new restaurant (and they’re sharing positive reviews), then we’re more likely to stay at that restaurant because we now know that it’s good.

Providing social proof to your customers is a crucial marketing strategy. You can build more social proof by featuring customer reviews, testimonials, and case studies. It’s important to consistently remind your customers that other people have happily used your product or service.

When promoting your referral program, use social proof to emphasize the popularity of the program. Include messaging like ‘Over 2,000 other customers have referred friends, earning $5,000 worth of free merchandise! Join them!’.

Liking: It’s your foot in the door

When we like someone, we’re more reluctant to say no to them. The same goes for business. If your customers genuinely enjoy working with you, they’ll be more likely to recommend you or give you the details of a friend who could use your help.

By befriending a client, you open up the door to a range of new business opportunities. However, your relationship needs to be about more than just making a sale for this type of referral to work. Talk to them and pay attention to what is going on in their life (personal and professional). By creating a more intimate relationship with each other, they’ll be buying from and referring a friend instead of an unnamed salesperson.

Authority: More than just a uniform

We listen to people in authority – officials, professors, doctors, and other experts in a field. Their opinion tends to weigh higher than that of others.

Authority is similar to social proof but a proof based on perceived expertise, status, or power rather than numbers. An example is toothpaste brands using dentists on their adverts and using statements like ‘Recommended by two in three dentists.’ 

When someone (relevant) in authority says something is good, we’re more likely to trust it.

Referral marketing from industry leaders or your largest customers is a great way to leverage authority. Reassure your prospects by showing them that established, successful individuals or businesses use your product or service.

Another way to make use of authority in your marketing strategy is by using influencer marketing. Associating your brand with a famous social media celebrity or blogger can quickly boost your credibility.

Scarcity: We don’t want to miss out

Scarcity gives you the illusion of a limited product, urging your customers to jump on it while they have the chance. Creating a sense of urgency is highly successful in sales.

Who hasn’t looked at an Amazon product when there is only one item left in stock and bought it right away? The illusion of scarcity gets people to buy because it’s human nature for us to want to avoid missing out. And, in many cases, we’ll happily take on more risks in the process.

Marketers can jump on the psychological principle of scarcity with messaging like “offer expires soon,” “limited stock available,” and “only five left” – these all highlight the scarcity of an offer. Or, when asking customers to make a referral, offer a referral-specific reward and give them a limited amount of time to earn it.

Ultimately, referral marketing is all about trust (which comes from solid marketing foundations)

Knowing how and when to use the six principles of persuasion will depend on your business. But, none of them will work without trust. Building trust with your customers should be at the center of your marketing strategy. If it’s not, then you need to go back to your marketing foundations.

Why?

Because, if you get your marketing foundations right, everything else will fall into place, including your referral marketing.

Let us help you lay down the foundations of a strong marketing strategy. From there, the referrals will start flying in.

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