Your brand is your reputation. And in today’s digitally driven world, news about your business—both good and bad—travels fast.

No matter your marketing strategy, consumers are more likely to trust their peers. That’s why online sellers should think of customers as potential brand advocates, not one-off transactions.

bill quiseng quote importance of online reviews

Customer service expert Bill Quiseng put it best when he said “You do not define your brand. Your customers do,” meaning that treating your customers right and offering the best possible experience is key to defining your brand.

This is where referral marketing (or word-of-mouth marketing) comes in.

Whether it’s an online review, a social media comment or a genuine conversation between consumers, positive word-of-mouth is regarded as the best advertising for your e-commerce business—and it’s a lot cheaper than traditional marketing!

Let’s take a look at the role of user-generated content in e-commerce and why it’s invaluable.

User-generated content as referral marketing

First off, what exactly is user-generated content (UGC)? Regardless of social media having a huge impact on the outburst of UGC of late, it’s not a new thing.

As much as 10 years ago, researchers described it as content that “gives a glimpse into real data from other people, unsanitized by regular media outlets”—a definition that still holds up today.

Unfortunately, UGC in the form of referral marketing is not something that is easily bought. As we recently discovered, a great overall customer experience leads to priceless content from users. However, companies will still make every effort to generate this, artificially or otherwise, because people are four times more likely to buy something that’s been recommended by a friend.

Referral marketing is important when it comes to e-commerce in a number of different ways.

#1. Consumer purchasing decisions

In a general sense, online reviews are useful, but it’s important to dissect when exactly e-commerce derives benefits from the reviews.

Reviews are not only a big determinant of whether people purchase a product online, they also have a dramatic impact on millennial spending. Don’t believe it? Here’s a stat that pushes home the importance of online reviews: they’re 20 percent more influential to the buying decisions of millennials than a brand trying to make a sale over social media.

A study carried out in 2016 discusses consumer motives for researching online reviews prior to purchase and four trends emerged as follows:

  • Information: to glean insider information about the product they’re considering
  • Risk: to reduce the risk of making a bad decision
  • Quality: analyze several online reviews to work out the product’s benefits and drawbacks
  • Social proof: to understand and contribute to a virtual community

Even though consumer behavior is changing all the time, this gives online sellers good insight into what their potential customers might be analyzing prior to purchase.

In particular, social proof is likely the most topical point, especially with UGC spreading like wildfire on social media platforms, as well as the rise of influencers and celebrity endorsement as a form of referral marketing.

#2. Natural endorsement

Moz recently published an article stating that companies should be writing blogs that target influencers in their industry—but why?

Because if blogs are written in such a way that influencers want to share them, that would be considered a strategic move; industry influencers already have an impact on your targeted audience.

The same concept applies to your products online. If you advertise them on social media in such a way that appeals to the most influential people in your industry, they will naturally become interested in your products and start a conversation.

Nowadays, with algorithms on every social media platform being used to push preferences in our faces and celebrity endorsement everywhere, online browsing is permeated with fake promotion and forced marketing. So it wouldn’t be uncommon to see content from people who have been paid to promote a business.

Pinterest’s attitude to UGC is one to note. While the digital scrapbook site understands that marketing strategies are often based on retargeting display ads to get them in front of the right consumer, it can be seen as intrusive. So Pinterest recently introduced a newsfeed without an algorithm to respect the privacy of the online user.

What’s interesting here is that the social network is actively trying to avoid pushing unwanted interests in the face of its users. Perhaps this way, they will find things they enjoy and will continue to use Pinterest, free of advertisements and algorithms.

This is why reviews for online sellers, in particular, are the most honest form of referral marketing because they’re coming directly from the user.

#3. It impacts SEO

It’s easy to say that online reviews increase sales, but what processes lead to this growth? According to MOZ, reviews should make up about 13 percent of how companies are ranked on Google search. To fully understand the quality of reviews for your online store in terms of SEO, four factors must be taken into account.

  • Recency: Fresh reviews encourage trust and relevance and increase discoverability.
  • Quantity: The number of online reviews on your profile tells Google your business should be shown to consumers.
  • Velocity: Did your customers write one-liners or long-form reviews with several details?
  • Diversity: It’s important to have a mixture of positive and negative reviews. If you have just negative, it implies that many of your customers weren’t satisfied by your service. All positive reviews, on the other hand, can look unrealistic.

How can you make referral marketing happen?

  • Exceed expectations: Go the extra mile for your customers every step of the journey; this will increase their chances of sharing their experience.
  • Reward your customers: Thank them for their business. Nordstrom, for example, holds an annual anniversary sale for its loyal customers.
  • Capitalize on employee network: Consider sending a weekly social sharing newsletter internally and get the people who know the company best to kick-start conversations on social media.
  • Ask for a review: Start by targeting the exceptionally happy customers and remind them to reflect on their experiences with you as a brand.

The sum of it?

Word-of-mouth marketing has many forms and serves several purposes in e-commerce, but the importance of online reviews should never be underestimated. Reputation-based referrals should play a part in every marketing strategy—and that starts with providing exceptional customer service. When your work speaks for itself via word-of-mouth marketing, better sales and customer retention will follow.

Get customers talking about you today!

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