Referrals cited as important by 96% of marketers – but importance doesn’t translate to spend

Email remains the preferred communication channel for consumers – but the channel does not encourage a repeat purchase compared to discounts and rewards for loyalty and advocacy, finds research.

Marketers claim they place importance in consumer referrals as an effective channel, but just 4% invest the majority of their budgets on advocacy, according to new research from referral platform Mention Me.

And while more than half of marketers rely on email to drive repeat purchases, just 15% of consumers said emails encouraged them to buy again, compared to 53% who would respond to a repeat purchase discount, referral platform, according to the poll.

The survey of 2,000 consumers and 500 senior marketers found a “gaping chasm” between brand and consumer behaviour, Mention Me claims.

Despite 40% of consumers claiming referrals were their most trusted advertising channel, it was one of those least invested in by marketers. Conversely, the least trusted by consumers according to the research – social media –was being over invested in.

More than six in 10 marketers surveyed said they spend most of their budget on social media, followed by TV (13%) and direct mail (7%). But just 4% spent most on referral marketing, against a backdrop of 96% claiming that they felt it was important as a marketing channel.

Referrals: importance vs marketing spend

The survey found that 59% of consumers stated they had made a brand recommendation in the past month – increasing to 89% over all time, with almost all marketers surveyed (97%) believing that consumers “regularly” recommend brands.

Food and drink brands emerged as the most likely to generate a consumer recommendation but just 29% of marketers thought they were only recommended “sometimes”. While marketers surveyed placed beauty as the most likely sector to be recommended, beauty brands placed only fourth in the same ranking by consumers.

Referral marketing was cited as a cost-effective channel which could go someway to explaining the lower spend allocation, but, with 13% of marketers considering referral as an important channel for acquiring new consumers, Mention Me highlighted a “missed opportunity”.

Andy Cockburn, Co-Founder and CEO of Mention Me said: “This research raises an obvious question: if marketers know referral is an important channel – and consumers trust it most – why isn’t it higher up the priority list?

“The obvious answer is that most marketers don’t know how to approach the challenge of driving growth through referrals. Given the changes to third-party cookies and spiralling costs in social media advertising, this is a core capability that all marketers should learn about and adopt if they want to succeed, especially in a more challenging economic environment.”

Email preferred for communication – but not as a repeat purchase tool

The survey found that 63% of consumers would buy from a brand a second time if they were offered a discount - however, when this was a ‘welcome discount’ off a first purchase, this dropped to 14%.

Rewards through loyalty or having made a recommendation made up the top three repeat purchase drivers.

Just 10% were encouraged to buy again through social media communication and only 15% through an email – despite 52% of marketers saying they used email as a repeat purchase tactic.

However, email was consumers’ top channel for brand communications, such as customer service notices or contact (55%), compared to just 8% of those preferring communication by social media. Mention Me found that SMS was rising, cited by 37% of consumers as a preferred method of communication.

This is compared to 77% of marketers using email to interact with customers, and 72% doing so through social media platforms.

“Race for open channels is on”

The survey found that marketers need to race to open channels that collect data from consumers. While 89% of senior marketers felt confident in their organisation’s ability to effectively manage customer data, just 11% of consumers said they were very likely to give personal details before buying.

The report said: “This highlights the importance of employing creative tactics to earn zero and first-party data, such as referral programmes and dedicated lead generation campaigns. Against a backdrop of fast-vanishing third-party data, the race is on to open channels that collect data directly from consumers – and encourage them to proactively share it with you.”

Good customer experience is “expected”

One in five marketers said they believe the customer experience was the most important factor for consumers when considering to buy from or recommend a brand – compared to just 8% of consumers who said it was top of their minds. However, just 5% of consumers said it was the least important factor – indicating that consumers are not disregarding experience, merely they have simply come to expect it, according to the research.

“It’s considered to be table stakes, only considered when it falls short,” Mention Me concluded.

Meanwhile, consumers surveyed cited product quality (32%) and price (25%) as their top factors for deciding whether to buy or recommend a brand – though just 12% of marketers said they thought customers would look to price as a deciding factor.