There may be dozens of ways to reach out to your target market, but one way consistently stays at the top: referral marketing. That’s because marketing is always about connecting with people. People are more likely to buy from those they trust. The more you engage with someone, the greater chance you have of doing business with them.
That’s why a strong referral marketing strategy should be an important part of your business model.
A Nielsen survey on trust and advertising revealed some telltale statistics about where trust is built. Across all demographics, referral marketing tops the list. From Gen Z to Baby Boomers, people trust those they know. Keep in mind that with today’s technology, the concept of friends is changing – people trust their circle of influence.
Referral marketing is a powerful tool that enables your business to vamp up your marketing efforts. But how does it work? How can you align your referral marketing strategy with your current vision and goals?
What is referral marketing?
Referral marketing is sometimes called word-of-mouth marketing. It’s when existing customers recommend a product or service to other people. This doesn’t always require a lot of effort. It can be as simple as answering a question like: where should we go for dinner tonight? The key is having your product or service recognized as a leader in a specific industry, enough so that it boosts customer referrals and helps people spread the word about what you do.
Referral marketing seems like one of the simplest forms of marketing to implement. In many cases, it works on its own. How many times have you asked a customer: if you like our service, please tell a friend?
A marketing survey conducted by Texas Tech reveals that while 83 percent of satisfied customers state they are willing to refer products and services, only 29 percent actually do. The referral gap is where most companies get lost.
Happy customers spend more money. And when someone comes in referred by a friend, they naturally are in a happier, less skeptical space. It’s an easy way to increase sales over time.
Leads or referrals, which is better?
There are many approaches to marketing. Many gurus and experts will tell you to grow your business by increasing your leads. They aren’t wrong; you need leads to grow.
Referral marketing is about where your leads are coming from. Are they warm or cold? When someone already has an association with you, they move faster along the purchase line. The trust factor is there. They understand more about you before ever making contact.
And that means they are more likely to buy.
Referral marketing is not limited to family and friends. A successful referral marketing strategy can come from many different places. Positive reviews and recommendations on social media are considered a referral. That can include customer reviews, news articles, influencer opinions, and even testimonials. Some of these methods can reach thousands of people in a single day and boost the traction to your website almost instantaneously.
What is a customer referral program?
Customer referral programs put marketing into action. Customers are encouraged to share their opinions in various ways. It can include:
- Direct: You request a referral and offer a reward for the process.
- Implied: You find ways to reach out to people who are working with clients similar to yours. For instance, a realtor may hand out brochures for a handyman service to their clients selling their homes.
- Reward: These are built on providing a free product or service to the referral in order to try it out.
- Community: By participating in community events, you hope recognition will bring in new business.
We listen to people we trust. Whether we admire them from afar or we’ve been best friends forever, we have something in common – if they like it, there’s a good chance we might too.
The great thing about having a referral marketing strategy in place is that it hones in on building a strong target audience. The work you put into building your referral program will automatically separate people who have interest from those who don’t. Which allows you to get more bang from your marketing bucks over time.
How do you ask for referrals?
Chances are, you’re being bombarded by referral and survey questions from every place you do business. In the midst of change, the world has turned to trying to figure out what more people are thinking.
Instead of having your sales associates repeat a canned speech at the end of the sales process, identify where your true motivators could be. And think about how you can create incentives your audience really wants. Keep in mind that different business offerings will require different paths; an HVAC company won’t see the same type of referral as a restaurant.
Spend some time identifying who your ideal target referral source would be. Hint – they aren’t always your customer. If you deal with home restoration after flooding, for example, individual customers might not know others who recently had a pipe break in their basement. But if you make a connection with an insurance broker, you may receive multiple referrals throughout the year.
There are many ways to offer incentives. Spend some time coming up with things your referral sources will find value in. It’s not always about the money. Online, an increase in likes or follows may be their ultimate goal. Look at both sides of the equation: Should you reward the referrer and the referred? Should you offer different rewards for different levels? Should it be product-based instead of financial? Size or cost isn’t always the biggest motivator. Pay attention to what your best referral sources really want.
The only way you can determine what works and what doesn’t is to track what happens over time. Set up a system to track what happens as each new lead comes in and where it comes from. You can do that easily online; just ask. We can help you create separate landing pages and other online formats to track where all your business is coming from.
What’s your referral marketing strategy?
Using today’s technology, setting up an effective referral marketing strategy is easier than ever before. How can we help you create more business?