Back to Blogs

Referral Marketing

Referral Marketing vs Digital Advertising

July 10, 2023


Scott Besteman

Referral marketing is a form of word-of-mouth advertising that involves encouraging and incentivizing customers to refer their friends and family to a business. This can be done in a variety of ways, such as offering rewards for successful referrals or creating a referral program that makes it easy for customers to refer others.

Digital advertising, on the other hand, involves using online channels such as search engines, social media, and display advertising to promote products and services. This can be done through paid advertising, such as Google Ads or Facebook Ads, or through organic methods such as search engine optimization (SEO) and content marketing.

Here Are Some Reasons Why Referral Marketing Is Better Than Digital Advertising

1. Referral marketing is more cost-effective.

One of the biggest advantages of referral marketing over digital advertising is that it is more cost-effective. Referral marketing relies on satisfied customers to promote your business, which means you don’t have to spend money on advertising. Instead, you can offer rewards to customers who refer new business to you, which can be much cheaper than traditional advertising methods.

Digital advertising can be expensive, especially if you are using paid advertising methods. Google Ads and Facebook Ads can be highly effective, but they require a significant investment in order to see results. With referral marketing, you can achieve similar results without having to spend as much money.

2. Referral marketing is more targeted.

Another advantage of referral marketing is that it is more targeted than digital advertising. When someone refers a friend or family member to your business, they are doing so because they believe that person would be interested in your products or services. This means that the referrals you receive are more likely to be high-quality leads who are interested in what you have to offer.

Digital advertising, on the other hand, can be less targeted. Even if you are using targeting options such as demographics or interests, you may still be reaching people who are not interested in your business. This can result in wasted ad spend and lower conversion rates.

3. Referral marketing builds trust and credibility.

When someone refers a friend or family member to your business, they are essentially vouching for you. This builds trust and credibility, which can be difficult to achieve through digital advertising alone. People are more likely to trust recommendations from friends and family than they are to trust ads they see online.

By using referral marketing, you can tap into the power of word-of-mouth marketing to build trust and credibility with potential customers. This can result in higher conversion rates and a stronger brand reputation over time.

4. Referral marketing can lead to long-term customer relationships.

When someone refers a friend or family member to your business, they are not just bringing in a new customer – they are also helping to build a long-term relationship. Referral customers are often more loyal and engaged than customers who find you through other channels.

Digital advertising, on the other hand, can be more transactional. While you may be able to attract new customers through advertising, you may not be able to build the same level of long-term loyalty and engagement that you can with referral marketing.

5. Referral marketing is more scalable.

Finally, referral marketing is more scalable than digital advertising. With digital advertising, you are limited by your budget and the amount of ad inventory available. With referral marketing, however, you can scale your program as much as you want – the more referrals you receive, the more rewards you can offer, which in turn leads to more referrals.

This scalability can be especially valuable for businesses that are just starting out and have limited advertising budgets. By leveraging the power of their existing customer base to bring in new customers, they can grow their business without breaking the bank.

In conclusion, referral marketing is a powerful and effective way to promote your business online. By leveraging the power of word-of-mouth marketing, you can tap into the trust and credibility that comes with a personal recommendation from a friend or family member. This can lead to more cost-effective, targeted, and scalable marketing campaigns that can build long-term customer relationships and drive business growth.

While digital advertising can still be effective, businesses that are looking for a more sustainable and cost-effective approach to marketing should consider implementing a referral marketing program. By incentivizing their existing customers to refer new business, they can build a loyal and engaged customer base that can help them achieve long-term success.

Image by Freepik

Interested in learning more?

Find out here
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.