Why online referrals are changing the customer-acquisition game

By our News Team | 2021

Referral programmes are not new, but they never really worked that well in the analogue world. Digitisation provides new opportunities.

Some of the best-loved brands of the digital age – Netflix, Uber, Airbnb – have powered their growth by scaling positive word of mouth.

Customer acquisition

Photo by Naked Insurance

Referrals are more effective that than expensive advertising campaigns via billboards and TV campaigns. It’s the effect of millions of fans converting more people to their brands that has driven their exponential growth.

One key element of digital word of mouth is the paid referral programme. Here, a customer gets a voucher, discount, or even a cash reward for each new member they recruit into the tribe. 

Ernest North, co-founder of Naked Insurance, which specialises in providing insurance using an online-only strategy, offers the following reasons why and how the picture has changed in the digital world compared to old-school referrals:

  • The customer is in control: Rather than giving your friend’s details to a company, you can simply generate a code or referral link for them to use if they’re interested. They are in complete control.
  • Rewards are tracked accurately: Digital platforms mean that the brand can more easily and accurately track where each customer comes from. A company can track your friend’s journey from getting an online quote via your referral link to signing up as a customer.
  • Customers actually want to share their experience: Digital native companies know they live or die by word of mouth. They understand referrals only work if customers love their product and want to share their experience with others.

Why digital referrals make sense

From a digital brand’s perspective, referral marketing and other forms of organic, tribe-based marketing are a cost-effective and powerful means to build a customer base. The acquisition cost for a customer is low compared to what traditional companies spend on big advertising campaigns in mass media, and it’s more measurable and accountable.

For a forward-thinking company, lower marketing costs are an opportunity to invest in other elements of the customer experience and bring down the price of its offering. 


Source: Ernest North of Naked Insurance via Bizcommunity