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Referral Marketing

Overview （add some words）
The new online referral marketing focuses on the interaction between customers. New web technologies help the user quickly refer products or services online. Marketing is taking new forms such as 'blogs, social networking sites, product reviews and newsgroups that increase the personal influence in selling. The Internet is a common channel for the referral- based marketing. It delivers abundant outlets for customers to share their opinions, product favourites, and experiences, including the company's own website and through social media such as LinkedIn, Facebook, Twitter, and Google+. Companies should consider linking their programs with online activities, and usually, customers will choose two to four channels to interact with them. The marketers can direct the referring parties by giving pre-scripted messages. Advocates can provide their family members and friends with personalised links including a unique referral code and advertisement information through e-mails, blogs and instant messages. The company can give rewards to advocates to advocates when their family members and friends buy through the link.

These same technologies also help companies set up a system that integrates referrals into the marketing plan. By tracking the user traffic, the companies can offer referrals to other online customers.

Benefits （add some words）
There are two types of rewards in referral programs.

In one option, current customers are paid an incentive. The referral rewards can be in different forms, such as cash, prizes, discounts, shopping vouchers, and redeemable points. For example, mobile phone operators, as an incentive, give a referring customer a one-time reward and add long-term savings depending on his or her individual usage. The operators also offer a lower rate for interactions between customers than for interactions with noncustomers.

The second program is where the referrers benefit from existing customers by having increased visibility or recognition as a specialist or by gaining special treatment, especially if the customers become the partners of company.

Advantage （new part）
Referral-based customers are better matched. The referred customers are likely interacting with people similar to themselves.

The existing customers know the purpose of marketers and understand the need of potential clients. The referrers can measure a good fit between the two and the well-matched customers can help the company produce more profits at a lower cost. The value and contribution of customers acquired through referral campaigns are higher than those of non-referred customers.

Referral programs are a good method to define consumer satisfaction. If comparatively few consumers are willing to act as referrers, a company's customer satisfaction may be low.

Referral programs help the company establish long-term relations with customers. The company can match the motivation with consumer expectations and raise the effectiveness of market programmes. Thus, referral reward programs can also be regarded as a tool for retaining current customers.

Disadvantage （New part）
The referrals may be abused by opportunists. They may recommend unsuitable products to other people due to referral fees. The financial motivation between the referring and the receiving customers may harm the sincerity of the recommendation.

To recognise referrers and trace purchases by referred consumers on social media the referral programs rely heavily on the database. The precisely targeted advertising and direct mail campaigns based on the database help the company classify customers and increase the referral rate.