• by Laurie Sullivan , Staff Writer @lauriesullivan, October 7, 2011

Referral marketing may begin with a small group of consumers, but in time it can snowball into a more efficient way to not only build on a company's customer base, but to gain loyal followers. Allan Grant, Curebit co-founder and CEO, believes this type of strategy can augment search engine marketing (SEM) and become more effective for the overall campaign. He said this form of customer acquisition strategy allows customers to refer friends, and in exchange, receive a discount.

There are two ways of looking at this strategy. Some may view it as selling out your friends to save a buck. Others might think of the strategy as finding a savings and passing it on. Either way, the movement of referral marketing -- rather than search alone to acquire new customers -- works today for about 700 retailers that are Curebit customers who have integrated the platform, according to Grant.

DiamondCandles, one of those retailers, launched in February and implemented the platform in March. About 57% of customers who buy from DiamondCandles -- which drops a ring worth $10, $100, $1,000, or $5,000 in what it calls "Earth-friendly" soy candles -- share a comment on the company's Web site Thank You page. The company taps Curebit's post-purchase referral tool on the page to give customers a $5-off coupon, valid for three days, to share with friends. If the friend uses the coupon, the customer also gets $5 off on the next purchase. It's part of the company's social media campaign.

Curebit taps social referrals, providing a platform to implement campaigns that encourage consumers to refer the brand or product to friends. Customers can share a unique link containing information about the offer on multiple channels, such as Facebook, Twitter, or via email. The average customer shares the offer 1.6 times. It turns out that Facebook remains the most effective channel for DiamondCandles, responsible for 75% of the referred sales.

For every hundred purchases that occur on the DiamondCandles Web site, Justin Winter, DiamondCandles co-founder, estimates that an additional 15 transactions occur. "We can see what percentage on average of those people click on a link and share it," he said. "We can see all the way down the funnel to determine how much more businesses the company can do because of the Curebit application."

Winter said the referral-type method seems to increase its customer base, but the company is working on ways to offer discounts with purchase and other offers based on social interaction and online word of mouth.