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?” and 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 businesses’ 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, when they hear someone else asking for recommendations, your business becomes top of mind.

Referrals are also valuable because they not only generate a higher volume of leads, but these leads 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 lead 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 life, then 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 and thank them for any referrals they have sent your way. Show appreciation for their efforts, whether it 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, you’ve also made your referral source look bad, and you risk losing business from both parties. It also makes your current customer 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 with growing brand awareness and developing 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 a lot of moving parts when it comes to developing a solid marketing strategy that fits your business’ goals and objectives. YGL Enterprises can ensure that you take all of the right components into consideration by auditing your current practices and designing a tailored plan moving forward. Contact us today to schedule a consultation and learn more about how we can support your business today and in the future.