Referral Marketing Software Market Size, Share & COVID-19 Impact Analysis, By Deployment (Cloud and On-Premises), By Enterprise Size (Small & Medium Enterprises, and Large Enterprises), By End-user (BFSI, Retail, E-Commerce, Education, Hospitality, And Others), and Regional Forecast, 2020-2027

The global referral marketing software market size was USD 226.9 million in 2019 and is projected to reach USD 713.3 million by 2027, exhibiting a CAGR of 15.5% during the forecast period.

Referral marketing is a marketing strategy to acquire new customers by offering rewards to the existing customers for advocating or referring the brand name to friends and family. It is typical word-of-mouth marketing using platforms such as social media, applications, referral codes, and emails, among others. The extreme competition to gain maximum customers is driving the market growth. Also, today, customers rely more on recommendations provided by friends, colleagues, or family members, which is boosting the demand for the software. For instance, as per the findings of the Nielsen Company, customers are four times more likely to buy a product that is referred to by a friend.

COVID Impact

Rapidly Changing Customer Buying Pattern amid COVID-19 to Enhance Market Growth Potential

The COVID-19 pandemic has severely affected consumer behavior and buying patterns.  Brands across industries have witnessed a sudden drop in sales owing to changing customer priorities amid the pandemic crisis. This significant change has also surged online purchasing activity as consumers are rapidly adopting e-commerce and online retail platforms. During this crisis, marketers are putting more emphasis on referral marketing strategies as people trust the recommendation from friends and family than any other source. For instance, UK’s Brompton implemented the Mention Me referral platform and witnessed significant growth in its sales during the pandemic. According to its CEO, industry sales went up by 15%. Thus, marketers and brands are heavily investing in novel software to gain customer trust and enhance customer engagement by introducing innovative offerings.

Also, customers acquired through referral marketing enhance the potential value of the company that further helps in improving brand identity. Such software will also help enterprises in retaining customers and provide more brand advocates to successfully implement referral marketing strategies. Fashion, beauty products, and home essential businesses have shown substantial adoption of referral software during the pandemic.

LATEST TREND

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Companies Striving to Increase Customer Base to Boost Market Growth

The growing penetration of advanced technologies and digitalization are supporting e-commerce and online retailers in transforming customers’ shopping experiences. The adoption of these technologies is enabling them to reach more customers. This is increasing the competition between the brands to acquire a large customer base. The intense competition among brands to enlarge their customer base is driving the demand for referral marketing software to efficiently reach the target customer group. To gain new customers, enterprises are offering discounts, cashback, and new deals for customers referring the brand to others.  

• For example, the men’s grooming product company, Harry’s, registered 100,000 sign-ups using a referral campaign before even launching. The company rewarded free shaving products to every customer for sharing the brand name with other people.


• Similarly, after the launch of the Amazon Prime referral program, the company witnessed a surge of 25 million Prime users in seven years and the new customer acquisition was up to 9 million users till 2017.

Thus, to gain maximum customers, companies are adopting referral marketing strategies that are likely to boost the software demand.

DRIVING FACTORS

Expansion of Social Media to Drive Software Market

Today, all the businesses and customers are actively present across social media platforms such as Twitter, Facebook, Instagram, and Pinterest.  Most of the time, the users utilize these platforms to share their experience regarding the purchased product or the services offered by particular brands, among others. Such practices assist in increasing brand awareness among potential customers. Social media provides a huge platform for referral marketing as it is executed in front of a large set of viewers and followers.

• According to the Annex Cloud marketing statistics, 55% of customers share their purchase experience on social media. Thus, with the help of referral marketing software, brands can target their audience on social media platforms.


• As per the 2018 Nielsen’s report, 85% of people around the world spend almost six hours on the internet every day. The content of social media platforms highly impacts user buying decisions.


• Also, as per the facts stated by a key referral company Extole, 83% of generation Z trusts referral ads, and 28% of millennials purchase only those products that are socially approved by friends.  

Thus, social media and other digital platforms are creating vast growth opportunities for brands to create awareness about their products and services using referral marketing strategies. This is expected to drive the demand for referral marketing software solutions.

RESTRAINING FACTORS

Limitation of Selecting Preferred Customer Might Hamper Market Growth

Referral marketing software enables companies to target a mass customer base. However, the software is not supportive, if the company aims to customize its selection of the target customers. The marketer or the brand has no control over the selection of the types of customers for its marketing strategy. During the referral marketing practice, there are chances that the referred customer might not be fit for the product or the services. This can adversely affect the sales and spending of the companies. This is likely to hamper the demand for such software.

SEGMENTATION

By Deployment Analysis

 Flexible Deployment and Cost-Effectiveness of Cloud-Based Software to Boost   Demand

Based on deployment, the market is bifurcated into the cloud and on-premises. The cloud-based software segment is expected to gain rapid growth owing to its flexible deployment and its ability to cut down IT infrastructure spending for companies. The referral marketing software uses mobile applications and social sharing tools that are easily integrated with the cloud system. Similarly, the increasing availability of cloud solutions is likely to drive the demand for cloud-based referral marketing software.  Furthermore, enterprises with limited budgets are more likely to adopt cloud-based software owing to its low maintenance and space requirements.

The on-premises segment is set to gain maximum market share during the forecast period owing to its benefits of in-house storage and high data security.

By Enterprise Size Analysis

Low-Cost Investments to Boost Software Adoption across SMEs

Based on enterprise size, the market is categorized into small & medium enterprises (SMEs) and large enterprises. The small and medium enterprises segment is expected to gain maximum market share during the forecast period owing to the low investment cost of referral software. SMEs are using the software for reaching new customers without making expensive investments in other marketing strategies. Companies with a limited workforce are majorly investing in the software to acquire a new customer base or introduce their brands in the market.

• For instance, Dropbox used referral marketing for its launch and growth strategy. The company initiated the “refer a friend” program and offered free space on the Dropbox cloud to its customers. With this strategy, the company grew from 100,000 to 33.7 million registered users in 2017.

Similarly, the referral growth strategy is also gaining the attention of large enterprises to manage their existing customers and acquiring new ones. Thus, the large enterprise segment is likely to witness rapid growth during the forecast period.  

By End-User Analysis

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Growing Need to Engage Large Customer Base in E-commerce to Surge Software Demand

Based on end-user, the market is segmented into BFSI, retail, e-commerce, education, hospitality, and others (healthcare, media & entertainment, etc.).

The e-commerce and retail industries have been the early adopters of referral software and are expected to witness maximum market share during the forecast period. The increasing need for retaining and boosting sales is driving the demand for such software in the e-commerce industry. This industry relies on business-to-customer (B2C) models to attract and engage a broad set of customers.  Therefore, this industry is investing in referral marketing software to acquire maximum customers. 

The BFSI industry is expected to grow rapidly during the forecast period owing to the emergence of small- and medium-sized financial institutions. Banks and financial institutions are undergoing speedy digitalization and adopting efficient & cost-effective techniques to acquire new customers. For instance, the IDFC Bank in India entered the highly-competitive banking industry with a minimal budget for advertising. The company opted for cost-effective referral marketing with a major focus on acquiring new customers for opening savings accounts. With the “refer a friend campaign”, the bank experienced a 120% increase in its engagements, and cost per acquisition (CPA) got reduced by 90% in acquiring new customers. Thus, positive outcomes and low investments are expected to drive the demand for the software across industries. 

REGIONAL INSIGHTS

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By region, the market has been analyzed across five major regions, namely North America, Europe, Asia Pacific, the Middle East & Africa, and South America.

North America is expected to witness maximum revenue share during the forecast period. The rapidly growing e-commerce industry is the key regional factor driving the demand for referral marketing software. For example, as per the Heinz Marketing and Influitive market study, 84% of business to business (B2B) companies in North America start the buying process through referrals. Thus, brands are investing in referral software to boost their sales. The US is likely to lead the region owing to the dominant presence of various key market players. The customer service industries in the country such as e-commerce, BFSI, retail, and many more are likely to drive market growth.

Similarly, Europe is witnessing a steady adoption of referral marketing software across enterprises to acquire new customers. As per the OmniStar report of 2019, 62% of European consumers are expected to visit a company site recommended by a friend on social media. The growing number of digital platforms and affiliate marketing systems are the factors influencing the demand for referral marketing software to acquire new customers. Likewise, South America is gaining a steady demand for this software to engage a greater number of customers.

Asia Pacific is expected to witness rapid growth during the forecast period owing to the exponential growth of SMEs across the region. Countries such as India, China, and South Korea have a massive pool of customers with different needs and demographics.  Companies in these countries are making huge investments in referral marketing software to reach the maximum number of customers across the region. In India, small and medium enterprises are adopting referral marketing solutions to target mass audiences. For instance, FabAlley, a clothing and apparel brand in India for women, adopted referral marketing to boost its social reach and sales. Using Friends referral, the company grabbed over 50,000 customers. Similarly, the e-commerce industry in China witnessed significant customer loyalty due to the application of referral marketing software.

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The demand for referral software in the Middle East & Africa is expected to show stable growth during the forecast period. The emerging industries in the region such as banking & financial, healthcare, hospitality, among others are investing in referral marketing to attract new customers. For instance, a digital company DigiMarCon in collaboration with Eventbrite is using a paid referral program for its Middle East 2021 Digital Marketing, Media, and Advertising Conference & Exhibition.

KEY INDUSTRY PLAYERS

Mention Me to Expand Business by Entering into Strategic Partnerships and Shape Market Dynamics

Mention Me is entering into partnerships and collaborations to expand its referral marketing software business. The company is partnering with small and medium enterprises that aim to acquire new customers using referral marketing. Similarly, other key players such as ReferralCandy, Viral Loops Ltd., Hello Referrals, Annex Cloud, and Influitive are collaborating with various enterprises across industries such as BFSI and retail to expand their business horizons. These players are focusing on providing customized referral marketing solutions to increase customer retention and acquisition rate.

August 2020 – Mention Me partnered with Ometria, a customer marketing platform, to provide personalized referral solutions to retailers. The partnership is focused on enhancing the referral conversions and customer experiences for the marketers.

April 2020 – Mention ME announced a partnership with Allplants, a frozen vegan food delivery company in the UK, for referral marketing. Allplants uses the Mention Me referral platform and offers a refer-a-friend program to acquire new customers.

LIST OF KEY COMPANIES PROFILED :

• Referral Rock Inc. (Virginia, United States)


• Impartner (Amplifinity) (Utah, United States)


• ReferralCandy (Anafore Pte. Ltd.) (Singapore)


• Genius Referral (Florida, United States)


• Viral Loops Ltd (London, England)


• Hello Referrals (Wisconsin, United States)


• Tapfiliate (Amsterdam, Netherlands)


• Mention Me (London, England)


• Annex Cloud (California, United States)


• Invitebox (Zuid-Holland, Netherlands)


• Influitive (Toronto, Canada)


• Rocket Referrals (IA, United States)


• Extole (California, United States)


• Refersion (New York, United States)


• InviteReferrals (Bangkok, Thailand)


• OmniStar (Florida, United States)


• Referral SaaSquatch (Victoria, British Columbia)


• Friendbuy (California, United States)


• Buyapowa (London, England)

KEY INDUSTRY DEVELOPMENTS:

• October 2020 – Buyapowa announced its partnership with T-Mobile in the US to offer a refer-a-friend program. T-Mobile opted for Buyapowa’s referral marketing software to gain new customers using its vast existing customer base.


• June 2017 – Annex Cloud announced a partnership with Shopify Plus to support brands in customer acquisition, conversion, and retention tasks. The partnership platform offers referral marketing products, user-generated content solutions and customer loyalty solutions.  

REPORT COVERAGE

An Infographic Representation of Referral Marketing Software Market

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The referral marketing software market research report highlights leading regions across the world to offer a better understanding to the user. Furthermore, the report provides insights into the latest industry growth trends and analyzes technologies that are being deployed at a rapid pace at the global level. It further highlights some of the drivers and restraints, helping the reader to gain in-depth knowledge about the market.

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