Interview: The fundamentals of referral marketing and Word of Mouth

The following is a summary of my chat with Alain and Tarek from Growth Tribe. You can listen to the chat here:
GrowthTribe - Viral Loops, an Interview Podcast

Growth Tribe offers individuals and organisations digital skills training, growth hacking, and data-driven marketing courses. Founded in 2015 and headquartered in Amsterdam, 🇳🇱 
They aim to help businesses grow by leveraging cutting-edge digital technologies and data-driven strategies. 
The company’s courses and workshops typically focus on growth marketing, data analytics, artificial intelligence, user experience design, and conversion optimisation. Tarek and Alain are instructors of these courses.

Who are Alain and Tarek?

Tarek has a technical background and studied computer science but switched to marketing. He has been with GrowthTribe for three and a half years, training startups, scale-ups, and big corporations on growth mindset and experimentation. 
Alain has nine and a half years of experience in social media marketing, SEO, content marketing, and customer support. For the past two and a half years, he has been focusing on growth marketing at GrowthTribe, where he enjoys helping people from beginners to experts about the customer journey and referral stages.

Who do you help at Growth Tribe?

The people who join their courses come from all sorts of business life—including managers who want to understand frameworks for their teams, execution team members who want to run experiments, and individuals who are shifting their careers and want to learn about marketing.

What industry is WoM marketing most suitable for?

Organic word-of-mouth marketing is more effective in B2B, as they rely more on customers telling their business friends and content marketing. 
For B2B companies, sharing valuable content, such as end-of-year reports, industry benchmarks, or playbooks, can generate more word of mouth—and ultimately bring more customers than branded t-shirts. 
Perhaps that’s why so many B2Bs focus so much on content, part for the SEO and part to create sharable material (like customer case studies) that can be shared with and from their prospective clients.
For example, GrowthTribe might create a blog article about 20 successful experiments they’ve done, which is valuable for the audience and can be shared widely, increasing brand awareness.
Engineered marketing tools can also contribute to organic word of mouth by offering value to customers or potential customers. An example from the B2C industry is, a website that checks internet speed and features a “Powered by Netflix” logo. This discreet branding generates organic referrals to Netflix as users share and interact with the tool.
For e-commerce and consumer brands in general, incentivised referrals like gift cards for referrals might be effective. 

How can a brand know if they are succeeding with Word of Mouth? (since it’s very hard to track)

To gauge the success of word-of-mouth marketing, brands can use qualitative and quantitative data. One approach is to survey customers, as Growth Tribe does by asking new students how they heard about the company or product. Although this method may not be 100% accurate, it can provide insights into whether word of mouth is effective.
For quantitative data, brands can track links with UTM tags in Google Analytics, as in the Netflix example, to measure clicks from specific sources. While it may be challenging to track direct referrals, looking at correlations between marketing efforts and changes in traffic, acquisition, activation, or revenue can provide valuable information on the impact of word-of-mouth marketing.

How can brands actively pursue word-of-mouth as a marketing strategy?

Brands can actively pursue organic word of mouth as a marketing strategy by focusing on the quality of their products. When a product offers value to customers, those customers are more likely to share their experiences with like-minded people in their networks. 
For instance, 30-40% of people who take Growth Tribe’s courses are referred by their network, which highlights the power of word-of-mouth marketing.
A well-crafted customer journey involves awareness, activation, retention, and referrals. Ensuring a high-quality product is crucial for successful activation, affecting retention and referrals. Before experimenting with methods to encourage referrals, creating a product that customers enjoy and find valuable is essential.
An example of word-of-mouth success is ChatGPT, which reached 10 million users in just two months. This rapid growth was not due to advertising or referral programs but rather the high quality of the product, which led to people talking about it and sharing their experiences with others.

When should a brand focus on incentivised referrals?

Incentivised word-of-mouth strategies like referral programs are what most people think about when the topic of referral marketing is brought up.
Focusing on incentivised referrals might make more sense if you’re a small startup and want to acquire customers quickly. However, organic virality takes time to show results, so it may not be the best choice for immediate impact.
Ideally, a company would experiment with both incentivised and organic word-of-mouth strategies. The marketing team could be responsible for creating and promoting referral programs, while the product team focuses on ensuring a high-quality product with features that increase organic virality. If the team has the time, budget, and resources, it’s best to pursue both strategies simultaneously.
The growth mindset—a big part of what Alain and Tarek teach—involves the collaboration between marketing and product teams. 
  • The marketing team gathers data on customer preferences and shares it with the product team to improve the product.
  • The product team creates features that enhance the user experience and make the product more marketable. 
This alignment between both teams is essential for achieving successful word of mouth marketing.

How can the product team care about marketing?

To get product teams to care about the marketing implications of their work, it’s important to foster collaboration between the product and marketing teams—ie. don’t treat them as silos in the organisation that have nothing to do with each other. 
One way to achieve this is by creating a growth team with members from each department. This breaks down said silos and emphasises the importance of everyone’s contribution to the company’s success.
Educating all team members on the growth mindset and the importance of experimentation will also help improve collaboration. Encourage an environment where everyone’s role is valued, and avoid stepping on toes or dictating tasks just because of a higher position.
Product teams should think more like marketers, and marketers more like product team so both can meet in the middle.
In the past 5 years, it has become easier than ever for marketing teams to exetuce and think like engineers thanks to no-code tools. No-code tools can be an excellent way for marketing teams to start testing ideas without initially relying on the product team. This allows them to gather data and demonstrate the potential of an idea before involving the product team to take it to the next level. 
Utilising no-code tools can help bridge the gap between the two teams and pave the way for smoother collaboration.

How long do you wait to evaluate referral marketing results?

Let’s imagine you are experimenting with referral program—to determine how long you should wait to evaluate its results, it’s important to consider factors such as the nature of the experiment, the amount of traffic. 
It shouldn’t take more than two weeks for a quick win experiment like an incentivized referral program using a no-code tool to start seeing significant data.
Once you have gathered enough data, you can then move on to the next experiment or run a validation experiment to confirm the results of the previous one. Sharing this data with the marketing and product teams can help demonstrate the effectiveness of the referral program and inform future decisions.

Is referral marketing worth it for small startups not at the scale of Dropbox?

Referral marketing can certainly be effective for small startups as well. In fact, Dropbox was a smaller company when Sean Ellis developed their referral program, which helped them grow and compete with larger rivals like OneDrive and Google Drive. So, smaller startups can definitely find success with referral marketing as long as they follow a few important guidelines.
First, make sure you offer the right incentive. Engage with your customers to determine what they would find valuable. For example, Hotjar did this by asking their customers what they would want as a reward for referrals and then providing hoodies as a result.
Second, ensure your startup has achieved product-market fit before running referral marketing experiments. Without product-market fit, it won’t matter how great your referral program is or how large your incentives are, as people won’t be interested in recommending your product in the first place.

How do you plan a referral program?

To plan a referral program, Alain and Tarek follow these steps:
  1. Decide on the type of referral program: Determine whether you want a one-sided or two-sided incentive program or if you want to gamify the process with leaderboards and milestones.
  2. Ask your customers: Engage with them to find out what they would like as incentives or rewards for participating in the referral program—just talk to them.
  3. Find the right tool: Research and choose a tool to help you implement and manage your referral program.
  4. Brainstorm promotion ideas: Develop strategies to promote your referral program through various channels, such as email marketing, social media, and paid ads, and make it prominent on your website.
  5. Design the experiment: Outline the experiment by defining your hypothesis, success criteria, testing duration, and any potential obstacles to launching the program.
Do not forget to revisit your persona template (or to create one if you don’t have it) to ensure you clearly understand your target audience’s needs, goals, behaviours, and preferences. This information will help you tailor your referral program to better resonate with your audience and increase the chances of success.

The case for referral-based prelaunch waiting lists

Referral-based waiting lists can be an effective strategy for a product or service’s pre-launch and post-launch phases. They can help you test the market, validate ideas, and identify your product’s most effective marketing channels.
Before launching a product, you can use a referral-based waiting list to gauge interest and validate your idea. Create a landing page that explains and promotes your value proposition through various channels like Facebook ads and LinkedIn ads. Monitor the number of people joining the waitlist to determine if there’s enough interest to build your product or service.
For products that already have product-market fit, referral-based waiting lists can be used to create hype around the product launch. Promoting the waitlist and tracking which marketing channels are most effective will give you valuable data on what works best for your target audience when the product is live.
Using waiting lists in both scenarios helps you de-risk your assumptions, prioritize investments, and adopt a growth marketing mindset that emphasizes experimentation and data-driven decision-making.

What are some common mistakes brands make with referral programs?

  1. Offering incentives that don’t align with the target persona’s needs or preferences. Ensure that the incentive you’re offering attracts people to refer others and contributes to retention. Avoid incentives that lead to users signing up solely for the reward and never engaging with your product again.
  2. Failing to analyze and optimize the referral program. Monitor the performance of your referral program, identifying any issues or bottlenecks. For instance, if many people are joining the referral program but not successfully referring others, investigate the reasons behind this.
  3. Not providing the necessary tools for successful referrals. Make it easy for users to refer others by giving them a unique referral link, a media kit, and regular reminders of the rewards available. Break down your referral program into smaller stages, analyze what’s working and what’s not, and make necessary adjustments to improve the campaign.
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