Business Case for Referral Marketing

Why should CEO’s, employees and shareholders care about Referral Marketing?

The intention of this short piece is to communicate the key facts which demonstrate unequivocally that Referral Marketing is a subject corporations should know more about.

We have three objectives:
1. To ensure our Top Referrers have this information readily available first
2. To allow internal champions a simple way of learning about the key issues fast
3. To provide the key facts for Senior Management and place Referral Marketing firmly on the agenda.

It is quite deliberately punchy, fact based and dry – we want to allow the reader to feel the rigour of the business case. We will be providing a full white paper on the subject forthwith where the content will be provided in a more ‘leisurely’ vs ‘soundbite’ style.

Click here to read the full study in PDF format

“Women don’t buy brands, they join them.” Tom Peters

Summary

1. Trust in ‘The Corporate’ is in crisis – corporations are spending more than ever in history saying ‘trust us’ but we don’t.¹
2. There is evidence that a protracted ‘Brand Valuation Bubble’ is likely due to overvaluation of brands as this ‘trust’ erosion makes itself evident.^1,2,3
3. The recent recession has seen all but IBM and Coca-Cola’s brand valuations drop.²
4. Why? Marketing is one contributor to this failure – Marketing is less effective at persuading people in general and specifically around trust.
5. TV advertising, the traditional driver of both trust, awareness and conversion is being asked to do too many things at once and we need to change our approach.^6,7,8,9
6. We need a truly integrated model where traditional channels drive awareness and conversion is driven through other channels, specifically Referral channels from peer groups, the trouble is most marketers don’t know how to do that.⁶
7. The key Referral Channels are Word of Mouth, (WOM) Word of Web, (WOW) Word of E-mail (WOE) and Word of Cell (WOC).
8. 80-90% of all Brand Conversations happen through face to face conversation (WOM) – only 10% through other channels.⁴
9. Most corporates are using the 10% of channels as essentially a ‘push’ medium – pushing messages just as messages were pushed through traditional media – this approach is effectively adding to distrust as it is inauthentic and leading companies to be ‘caught out’.⁹
10. Word of Mouth is the most trusted Communication Channel there is and it is also the most trusted messaging medium there is.⁴
11. Why isn’t “Word of Mouth Marketing” (WOM) higher up the corporate and marketing agenda? We suggest it is a lack of knowledge and education in this area.
12. This issue has entered the agenda of TEC – the largest global CEO organisation for Better Leadership Worldwide.
13. Referral Marketing is a ‘trend’ not a fad according to a) International surveys from the US, NL ¹¹ and b) the recent establishment of Referral Membership organisations globally.^10,11
14. Referral Marketing can be applied in three ways to an organisation – as a WOM pulse, as a marketing approach or at an organisational level.
15. In all cases TVS emphasise introducing it to your organisation through a series of low risk, low investment managed projects to allow your organisation to understand its value and fit.
16. TVS is the only company with a specialist system to magnify Referrals positively – and give you better financial efficiency for your marketing dollar.

Bibliography

¹ Yankelovich Report 2006
² The Brand Bubble, Gerzema and Ledbar 2008
³ Interbrand ‘Best Global Brands 2009’
⁴ AC Nielsen – “Trust in Advertising” & Kellar Fay Group
⁵ The 2009 Barkley Cause Survey/PR Week
⁶ McKinsey – Boosting Returns on Marketing Investment 2005
⁷ iCrossing “connected brands scorecard” October 2009
⁸ Seth Godin “Meat Ball Sunday”
⁹ Joseph Jaffe – Join the Conversation
¹⁰ www.womma.org
¹¹ DM Barometer – DDMA The Nethelands