Referral marketing is a strategy that encourages and rewards existing customers for referring new customers to a business. It leverages the power of word-of-mouth by turning satisfied customers into brand advocates who recommend the product or service to their friends, family, or colleagues. Referral programs typically offer incentives such as discounts, cash rewards, or free products for both the referrer and the new customer. Referral marketing is highly effective because it relies on trusted personal recommendations, leading to higher conversion rates and customer acquisition costs that are often lower than traditional advertising.