Referral Marketing: How can it help Your Business?
Referral marketing is one of the ways you can make your business grow. Thus, it needs to have a strong suit that makes it stand out from the others to deserve your attention. So, what sets this method apart? How effective is it? What benefits can your business gain from doing it?
Introduction
Developing your products or services is one part of business strategy. It is indeed important because having the best quality will create great potential for your business. This should be something that gets top priority.
However, even if you have the best quality products or services, it would be for naught if the people who need them don’t know about you. This makes us realize another crucial aspect of business strategy: marketing. Marketing is not just about letting people know you and your business exist. Marketing also involves building your reputation or image in the mind of the consumers. What makes you unique? What are your strengths? How are your products or services better than similar companies? What makes you worth their time and money? These and other similar questions are answered through your marketing.
We are all familiar with advertising. It is one of the methods of marketing. Businesses spend a good deal of their budget with it. It’s no wonder since the payoff can be really good. Competition, though, is fierce. The cost is also relatively high.
But advertising is not the only or best way to go. Many people can get annoyed by ads. Today, the internet is a huge ocean of consumers. That’s why businesses utilize it to reach people. Here and there, ads can be found on webpages, video streams, etc. But the abundance of ads has led to annoyance. Internet users grew cynical of ads. Some found ways to outright block them through web browser add-ons or maybe other means.
Enter referral marketing. This concept is not exclusive to the internet. This method is also used by businesses in the physical world. It differs from conventional advertising based on where they rely to promote products and services but the objective is the same: to get people to know about the business. Referral marketing has characteristics which make it appropriate for certain kinds of business.
How it Works
While conventional advertising taps on the power of mass media to reach potential customers, referral marketing relies on people – to let them spread knowledge of the business through word of mouth. Simply put, this practice is promoting products or services with the use of referrals.
How exactly does it work? Imagine you have just started your small business. Your budget is probably not deep enough for advertising. Thus, you find leads through other means. You call these leads yourself with the hope of turning them into customers. As you gain customers, you continue to search for leads and the cycle repeats. This is quite time-consuming. Remember also that acquiring new customers is not enough to strengthen the stability of a business. Taking care of your existing customers is just as important. It would be difficult when you need to divide time between caring for existing customers and searching for new ones.
With referrals, you won’t need to go through such a tough time. Other people would find new customers for you. This may even include your existing customers. How do you do that? Well, you can ask them to spread word about your product to their contacts as a favor. If your products or services really satisfy the consumer, the referrals will possibly come naturally. Your customers will spontaneously bring in referrals as thanks to your business. But the world is not such a perfect place. To succeed, you have to give them more incentive to give you referrals.
It works through a systematic and structured process to make the most of word of mouth capacity. It accomplishes this through the informing, rewarding, promoting, and encouraging contacts, including current customers, to spread word about the business, company, supplier, products, and services along with the value it provides them as well as people they know.
Instead of just letting information spread spontaneously, this method is about taking an active role towards generating the maximum number of referrals.
Internet: A Place for Referral Marketing
As it turns out, the internet is a really ideal place for referral marketing. As of today, many referral programs exist and thrive over the internet. That’s because technology makes it easy to track how consumers behave in online settings. These technologies continue to advance giving the online referral programs a high level of accountability and tracking. It is easy to tell where a sale or lead came from, so it is easy to manage who gets the necessary reward.
Today, mobile internet access is growing in popularity – a technology fully utilizable by this method. It may even be accomplished while offline. This is done through tracked business cards. Such business cards usually have a QR code. This links the card to online content while also providing a way to determine the scanned card and thereby tracking the sale back to the person who owned that business card.
Benefits
Marketing through referrals has the following benefits:
- It reduces the sales expense as well as the sales cycle. Since you won’t be spending time calling called prospects, you can devote the time and focus towards your existing customers and the contacts.
- It builds up satisfied customers. When you establish the cycle, it can continue by itself adding in more satisfied customers who love to talk and promote your business.
- It adds sales revenue. From a scientific study, it is found that closing ratio for referred leads is 60% compared to a closing ratio of 10% from cold prospects.
Some Guidelines
Here is a simple guideline on how to establish your referral marketing:
- Make it clear, specific, and time-bound.
- The recommended time to ask for referrals is after your customer experiences your products/services.
- Not all your customers would be referral candidates.
- Give bonuses and support to your clients and they’ll be happy to return the favor.
- Customer Type. Let your customers know the type of customers you can give help to.
- Common rewards for referrals are discounts or commissions.
- Be sure to thank people who give you referrals.