Word-of-Mouth and Referral Marketing Blog

Going Beyond Ads, Top Brands Are Tapping Into Their Community

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In one survey, 47% of marketers said they’d be “priced out” of Facebook advertising as ad costs keep rising.

Has that time finally arrived?

In 2021, Facebook ad costs were up 89% year-over-year—and ad prices jumped 30% just between Q1 to Q2. With an average CPM of $11, Facebook ads are becoming more unaffordable with every passing day.

There’s no hope for digital ad costs going down, either. Google’s data privacy update follows on the heels of the iOS 14 update, and Facebook has already warned businesses that ad prices will follow the same trend of incremental increases over the rest of the year.

Other social media platforms are seeing rising ad costs, too. For example:

As a result, many brands are now leaning into word-of-mouth marketing. In fact, 64% of marketers believe word-of-mouth is the most effective form of marketing, as 93% of people trust friends and family for brand information and referrals over other sources.

With heightened privacy measures across ad platforms, web browsers, and mobile operating systems, customers will become more costly via tried and true methods of the past. As an alternative, it makes sense to make investments with influencers and referral programs that index highly with the demographic you’re targeting. These programs often offer a more accurate attribution model at a time when attribution is becoming tougher to interpret.

Ian Leslie, Senior Director of Retail Advocacy at Bolt

So how can you leverage word-of-mouth marketing to move beyond digital ads? Here are a few strategies to consider.

1. Partner with influencers

Influencers are established authorities within a specific niche. Over the years, they’ve managed to build relationships and gain the trust of their audience, meaning they have a significant impact on the purchase decisions of their community (and can attract a better quality of leads and customers for your brand.)

With influencer marketing, you leverage this established trust to drive sales and raise brand awareness.

Consumers gravitate to brands that are popular. We tend to believe that if they’re popular, they’re good. That’s why it’s important to get people talking about you. Influencers are great for this. If you get a good amount of them talking about you, they create a cloud of popularity that makes purchasing from your brand less risky. If you can get people talking about you, you should see your lower funnel programs convert better.”

-Roger Figueiredo, VP Marketing at #paid

One of the most important features of Facebook ads—targeting niche audiences—can be replicated with influencer marketing. Influencer marketing allows you to target a highly specific audience with niche interests, much like how Facebook Ads do.

Unlike Facebook ads (which only perform while the campaign is live), influencer marketing can help brands build long-lasting relationships with new audiences through content that lives permanently within feeds across different platforms.

Bottom line: Influencer marketing enables niche audience targeting at scale with much more affordable rates than digital advertising.

How to affordably leverage influencer marketing

You can achieve the benefits of influencer marketing at a significantly lower price than your Facebook ad spend. Here’s how:

  • Send free samples: Not all influencers require a cash payment for partnership. An alternative method is product seeding: sending your products for free to relevant influencers. If they like your product, they might post content about your brand at no extra cost. This is quality user-generated content.
  • Leverage micro-influencers: Contrary to the popular belief that large followings result in better engagement, micro-influencers often generate better results than macro-influencers. The reason: community. Micro-influencers often have a hyper-engaged community, which means their audiences trust (and act!) on their recommendations.

Example of a brand using influencer marketing successfully

Warby Parker, an eyewear brand, was able to generate over 55,250 Instagram likes with just seven partner influencers.

What’s more interesting: the nano-influencer in the campaign generated the highest engagement rate of all.

 

reconsider-ad-spend warby parker infleuncer campaign franklinjleonard

Via @franklinjleonard. Note the paid partnership tag.

2. Build a referral program

A referral program helps incentivize your existing customers (who already love your brand) to spread the word. Rewards for referrals can be things like a discount on products, reward points, or coupons.

Referred customers also have a 16% to 25% higher customer lifetime value (CLV) than customers who weren’t referred.

Having strong word-of-mouth marketing will lower the cost of every other channel, without exception. People talking about your brand can create an echo chamber that makes your prospects feel like they’re hearing about you everywhere. It can cut the number of ad impressions you need to convert a customer in half or more, and in a world of rising CPMs, that can make a massive difference to your bottom line.

-Len Markidan, CMO at Podia

Bottom line: Referral programs help build customer loyalty and trust, resulting in lower customer acquisition costs than social media ads.

How to build a referral program

Building a referral program can be done in six simple steps:

  1. Understand your customers: Have a thorough understanding of your customers’ desires and wants. What are their aspirations? What do they value the most?
  2. Set your rewards: You can have a variety of rewards like direct cashback, coupons, discounts on future purchases, and free shipping. Based on your customer understanding, set the most suited reward.
  3. Customize your referral emails and pages: This is how you make your customers aware of your referral program. For example, you can send automated emails to customers after they make a purchase to make them aware of your referral program.
  4. Integrate your referral program to your store: If you’re not using a platform like Shopify that has integrations with referral program apps like ReferralCandy, you’ll have to create a tracking code for the application to track the referrals.
  5. Launch your referral program: By now, you’re all set to launch your referral program. You can actively promote the program by announcing on social media, adding a referral tab to your website, and reaching out to existing customers.
  6. Monitor the progress: Unlike social ads, a referral program doesn’t require much manual tracking. But you can keep optimizing your program by keeping a track of what’s working and what’s not working. Apps like ReferralCandy have a dedicated dashboard to track your referrals:

 

reconsider-ad-spend run a referral program

Example of a brand using a referral program successfully

It works, too: Mac of All Trades, an ecommerce store selling refurbished Mac products, was able to generate $600,000 in referral sales in just nine months. They generated 51x ROI with their referral program.

 

reconsider-ad-spend mac of all trades referral offer

3. Create an affiliate program

An affiliate marketing program is a pay-for-performance model wherein affiliates are paid commissions based on goals like sales and signups. Like a referral program, affiliates get a direct share of profits from sales generated, which is a powerful motivator for them to recommend your brand to others.

Affiliate sales depend on two major factors: the percentage of commission and the volume of products they can sell. On average, the percentage of commission can range between 5% to 30% of the purchase value. Typically, higher commissions are mostly on one-time purchase items like cameras while frequently purchased items like toiletries have a lower percentage commission.

Increasingly, we are seeing brands with both a referral program and an affiliate program. A referral program is great for customers who love the products and want to buy them again while an affiliate program is perfect for those who want to make some money from recommending a brand they like. By catering to both groups, brands can increase the amount of word-of-mouth they get.

Alfred Lua, Marketing Lead at ReferralCandy

Bottom line: Affiliate programs work by paying affiliates a percentage commission on conversions, thereby having marketing for your brand at scale through affiliates and reducing the cost per acquisition.

How to build an affiliate program strategy

You can build an affiliate program with a few simple steps:

  1. Define your payment structure: While affiliates are paid commissions on each sale, there are other logistical details you should have clarity on—the percentage of commission, payment terms, etc. Make sure this is documented and shared with all partners.
  2. Use an affiliate marketing app: An effective affiliate program calls for extensive tracking of affiliates, sales, and payments, which can be time-consuming. You can use a marketing app like ReferralCandy that automates the administrative tasks for you, like affiliate signups, generating discount codes and affiliate links, tracking sales and commissions. You can do this manually, as well, but it’ll be a huge headache and the tasks will be prone to human errors.
  3. Find potential affiliates: From there, reach out to your existing customers, influencers who have organically discovered your product, and product reviewers to see if there’s interest in an affiliate partnership. There are lots of templates that make this step easy and remove the guesswork around what to say.

Example of a brand using an affiliate program successfully

MiaoMiao, a medical-technology company, used ReferralCandy for their affiliate program and generated 2800% ROI in less than two months. With just 36 affiliates, affiliate sales made up around 10% of their monthly revenue. They did this by offering a high commission percentage (10% of the total purchase amount) and by carefully selecting affiliates.

 

reconsider-ad-spend miaomiao affiliate program youtube

4. Build a community on social media

Creating an engaged community on social media is non-negotiable for ecommerce stores, considering 37% of internet users in the US have purchased a product through social media. The number of people seems staggering when you consider the total number of internet users in the US (302 million). Although building a community is time-consuming and can take months to have a significant impact, the efforts pay off over time.

Having an active social media following compliments other marketing strategies like partnering with influencers or creating a referral program.

The reason: your potential customers trust you more as they can connect with you better. Over 57% of consumers will choose a brand they feel connected to over their competitors. Imagine a product launch of two brands—one that posts consistently on social media, and another that has no activity on social media platforms. Which one would you trust more?

Bottom line: Having an active social media community promotes word-of-mouth as it establishes a direct connection with your audience, which helps in easier conversions later on.

How to use social media for growth and sales

Community-building on social media is not as complex as it sounds. Here are some steps you can take to build credibility and engagement across social media platforms:

  1. Create a strategy: A social media strategy will include your goals, posting schedule, type of posts, your buyer persona, and other important details. It’ll take some time to create a winning strategy, but don’t skip this step—it’ll help you stay consistent.
  2. Create shoppable posts: Instagram has made it easier for customers to shop. If you’re not creating shoppable posts, you might be missing out on customers that frequently shop on Instagram.
  3. Post short-form videos: With new features like Instagram Reels and YouTube Shorts, brands can reach a new audience. Make sure your reels are not too salesy and be sure to feature your product in a creative way.
  4. Show behind the scenes: This is one of the best ways to build rapport with your audience. Show them what goes on behind the production, your wins, and challenges.
  5. Engage with your customers: The key benefit of social media is being able to interact with your customers directly. Understand their problems, address any grievances, and reply to as many comments and posts as you can promptly.

Example of a brand with an active online community

Glossier, a DTC makeup and skincare brand, has over 2.5 million followers on Instagram. They were able to build the following by staying consistent and creating a strong community.

Later, they rolled out affiliate programs and partnered with influencers as well. But their core social following remains one of the reasons for their ongoing success: 70% of their sales are attributed to referrals and affiliates.

 

reconsider-ad-spend glossier active ad community

Via @Glossier

5. Collect user-generated content (UGC)

User-generated content includes all the content that your customers generate—things like social media posts, reviews, ratings, and pictures of your product.

People trust recommendations from people. In fact, having just five quality reviews can increase the probability of purchase by 270%. User-generated content works by placing your brand in front of potential customers in a way that establishes trust from the initial touchpoint.

What’s more: With ad costs rising, you can’t afford a low click-through rate. With UGC, you can increase your ads click-through rate by almost four times.

Seeing other happy customers using and advocating for a product is one of the top ways to increase buyer confidence. While most eCommerce merchants understand the value of how more content can help with customer education and brand trust, UGC also provides the greatest variety of content which often shows the various use cases of a product. In addition, UGC is a great place to get inspiration for paid advertising campaigns because often the creativity of your customer base is greater than that of your marketing team.

-Kyle Wong, Founder of Pixlee

Bottom line: UGC helps your potential customers trust your brand, leading to increased conversions and stronger customer relationships.

How to collect user-generated content (UGC)

Customers today are more than happy to write a review for a brand they like. You just have to ask for it. Here are some ways you can encourage your customers to post UGC:

  • Create a branded hashtag: A hashtag that’s unique to your brand will help keep a track of the content posted about your brand. You can promote the hashtag of your brand by adding it in your social media bio, post-purchase and promotional emails, your website, and using it regularly in your posts. This way, your customers will have a clear idea of what hashtag to use, like Crocs’ #ComeAsYourAre or Alo Yoga’s #AloChallenges.
  • Reshare UGC: Curate your profile with UGC (after getting the creator’s permission) to encourage your customers to create more posts for a chance to get featured.
  • Run contests: Create contests and offer incentives to motivate your customers to create UGC.

Example of a brand using UGC successfully

Starbucks ran a “White Cup Contest” where customers were asked to create doodles on Starbucks cups and then post the image on social media. The winning design was turned into a limited-edition cup. In just three weeks, the brand received more than 4,000 entries, which shows the willingness of customers to create content for their favorite brand.

instagram feed of the starbucks #whitecupcontest challenge

Some of the creative entries from Starbucks’ #whitecupcontest

 

Move beyond paid ads without decreasing sales

Paid ads and social media advertising are not the only avenues for attracting new customers and retaining existing ones. Word-of-mouth marketing tactics like referral programs and influencer marketing will not only increase your sales, but they’ll also help in creating long-term customer relationships.

Kaleigh Moore

Kaleigh Moore is a writer and subject matter expert specializing in ecommerce and Saas.

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