According to McKinsey & Co, word of mouth accounts for 20 to 50 per cent of all purchasing decisions. It has the greatest impact when consumers are making their first purchase or when products are relatively expensive. In these cases, people tend to conduct more research and seek more opinions. Hence, this tactic practiced by Samsung is suitable for their business selling electronic products.
Samsung has a Referral Program that entices their existing buyers to make referrals in exchange for a reward.
In order to send or redeem a referral, customers have to first create a Samsung rewards account. Only then will the referrer get a unique Samsung referral code to share with their referee. Referrers will earn rewards of up to $100 per referee who has made a purchase while referees get to enjoy a 5% discount, thanks to the referral code.
Referral marketing is effective because it capitalizes on the power of social proof. When a recommendation comes from someone the customer already knows and trusts, they are more likely to convert into a loyal customer with less research and friction required on their end.
By implementing a referral program, any purchase has the potential to result in a second purchase through a referral. This tactic offers multiple benefits, including helping online stores to expand their customer base, increase customer lifetime value (LTV), reduce customer acquisition costs (CAC), and improve conversion rates.