There are numerous ways to drive business growth. Today, we focus on one of the most powerful marketing tools, referral marketing. Think about how often you share your opinions with others when it comes to the best restaurants, doctors, financial advisors, salons, schools, or events. A friend asks, “Where did you get that suit?” you happily tell your friend, colleague, or family member about the vendor and your experience. You may also go so far as to write a review online. These actions are the foundation of referral marketing.
What is Referral Marketing?
Simply put, referral marketing is a tactic that leverages recommendations to grow a business’ customer base through its network of existing customers, brand advocates, or other service providers who can vouch for the business’s products, services, value, and reputation. If they’re happy with their experiences, they are much more likely to recommend your company to others, and this action can quickly expand your reach and enhance the quality of your leads.
Why Do Referrals Matter?
For one, referral marketing is cost-effective. Start with your Brand Promise. At the core of every successful business is the promise to develop trust with your customers by providing them with a superior experience. Consistency and commitment are the drivers of referrals. Once you build trust and gain their loyalty, your customers will happily spread the word about their experience to others. Because your business has made them feel like a valued customer, your company becomes top of mind when they hear someone else asking for recommendations.
Referrals are also valuable because they generate a higher volume of leads and tend to be of better quality because they are connected with people who already know about and use your products or services. This connection can make it easier to convert a lead into a customer. According to a Marketo report, “B2B marketers said the average conversion rate (from generating leads to converting sales) was 11% for referrals. Referrals beat all the other marketing channels by big margins when it came to conversion rates.”
Trust Can Make or Break a Referral
It all comes down to trust. Before you can expect referrals to start rolling in, you have to cultivate trust with customers and demonstrate that your business is true to its word and delivers on its promises. Once they are excited about your product/service and see how it has impacted their operations or lives, they are more apt to share their satisfaction with others. According to a Nielsen study, “84% of people trust recommendations from people they know. Making them the most influential form of advertising.”
Do’s and Don’ts
Don’t be afraid to ask existing customers for referrals when they show gratitude for the results you have produced. Encourage them to think about others who could benefit and share contact information.
Offer up a simple email template they can use when connecting with clients or colleagues who may be interested.
Educate your client base. Keep them informed of new products and services and, more specifically, how you help solve problems.
Check in periodically to ensure that they’re still happy with your service. Thank them for any referrals they have sent your way. Show appreciation for their efforts, whether they resulted in a sale or not.
But DON’T forget that trust can be easily broken and turn a loyal customer into an unhappy former supporter. For instance, if an existing customer recommends your business to a friend or colleague, you had better be ready to deliver. If you miss a deadline or turn out an inferior product, not only does your company look bad, but you’ve also made your referral source look bad, and you risk losing business from both parties. It also makes your current customers more cautious about whether or not they decide to refer your company to anyone else.
Part of the Bigger Picture
While referral marketing can generate significant returns, it should not be the sole source of marketing and new business development. Instead, it should be one piece of a broader strategic plan. A marketing strategy should encompass referrals, but it should also incorporate a mix of paid, owned, and other earned marketing. There is still value in designing targeted email campaigns, promotions, social media posts, advertisements, and other collateral. These pieces can help grow brand awareness and develop trust and loyalty to stimulate continued referrals. Don’t underestimate your employees as strong brand advocates and referrers as well; have an internal marketing program in place to capture this business.
There are many moving parts when it comes to developing a solid marketing strategy that fits your business goals and objectives. YGL Enterprises can ensure that you consider all of the right components by auditing your current practices and designing a tailored plan for the future. Contact us today to schedule a consultation and learn more about how we can support your business today and in the future.