Your friends often know what you like. Though it's likely difficult for them to be entirely accurate, given our fickle nature, the probability of them knowing that you like, say red wine over white, is probably higher than some random sommelier. This type of information is what social marketing company Extole is trying to capitalizing on, as are their new investors.
Extole, formerly known as TellAPal, announced Wednesday that it raised $5 million in series A financing, led by Trident Capital with participation from Redpoint Ventures and Norwest Venture Partners. Additionally, the company announced its name changed from TellAPal to Extole. The startup, which was founded in 2007, plans to use the new funding to hire additional team members and expand its platform, according to its release.
The San Francisco, Calif.-based startup, led by CEO and founder Brad Klaus, provides social-marketing solutions to its clients in the form of friend referrals and social network marketing campaigns by harnessing the power of Facebook, Twitter, and blogs as fallow ground for word-of-mouth advertising. Current clients include MyFico.com, Drugstore.com, and Roku. Among the products that Extole offers are Refer-a-Friend and Social Builder.
Refer-a-Friend is a program that allows customers to earn rewards for recommending a brand or service to a friend. Extole manages the rewards service, which includes service credits, internal rewards, charitable donations, and gift cards to retailers like Target, Wal-Mart, Amazon, Fandango, etc.
The Social Builder service uses Facebook to market a product through the company’s fan page. Sweepstakes applications and “likes” are used to promote the client’s product virally while also allowing the client to track trends and figures among its customers, such as average age and geographic location.
“Social media is substantially changing consumer buying behavior, as an increasing number of brands are relying on consumer recommendations over advertising,” said Chris Moore, a partner at Redpoint Ventures, in Extole's press release.
Indeed, according to a 2009 Nielsen report, 90%t of consumers reported trusting recommendations from people that they know, and 70% look to online reviews from other consumers. Many companies can take heart, though, in the fact that the same number of people (70%) also look to the brand website for insight.
Other services similarly utilize social media for word-of-mouth and friend-referral marketing. SocialTwist, a Mountain View, Calif.-based company, offers a product suite known as Tell-A-Friend to use the power of word-of-mouth referral to promote brands (like Jamba Juice and Barnes & Noble) across the Web via social media, blogs, email, and instant messaging, with a nifty rewards program in place for participating customers.
Rewards programs for friend-referrals might also just be a great way to lose friends who don’t appreciate others capitalizing on their friendship to earn points. Personally, I don’t like finding out that a friend referred me to a hair salon not because she thought I would like it, but because she found out that by doing so, she could get 50% off at her next visit. It’s irritating.
Nonetheless, friend-referral has proven to be a highly successful marketing strategy, as new customers who have been referred by a friend are more inclined to buy a product and are likely to spend more money. So maybe Extole is onto something by combining the marketing power of friend-referral and social media.
Image source: extole.com