What is Referral Marketing and what are its Uses
Referral marketing is a structured and systematic process to maximize word of mouth potential. Referral marketing does this by encouraging, informing, promoting and rewarding customers and contacts to think and talk as much as possible about their supplier, their company, product and service and the value and benefit the supplier brings to them and people they know.
Referral marketing takes word of mouth from the spontaneous situation to one where maximum referrals are generated. Online referral marketing, using digital marketing as a platform, is the internet based approach to traditional referral marketing.
The power of referral marketing can be exploited by all kinds of businesses, both online and offline. Nowadays the term referral generates thoughts about pesky spam emails or relatives and friends trying to “recruit” new people to use a product or service. However, when this marketing strategy is properly executed, it can lead to customer loyalty and better business.
Referral basically makes use of word of mouth, a highly effective method of advertising and promotion. It is a three-way process. A customer can refer an acquaintance to a business or product. A customer can refer the business to another company that can use its services. The company can give a referral to customers to use a product or business that meets their specific needs.
In the first case, customers can be generally impressed by the product which leads them to spread the word willingly to others. Many business owners, on the other hand, give their customers incentives such as discounts or gifts when they bring someone else to the business. This works well with online businesses because the referred user enters the email address of the person who introduced them, thus translating to more reward for the latter. With the right strategy and incentive, affiliate marketing can also work offline.
The Benefits Of Referral Marketing:
- Referral generated customers are the least expensive, most profitable, and loyal source of new business.
- Referral generated customers also tend to buy quicker, negotiate less, buy larger quantities, and refer more business to you.
- Your referral systems increase the results generated from all of your marketing tactics by getting others to spread the word about your company and your products.
- You can easily set up referral systems in your business to increase your profits.
- When someone refers business to you, they provide an endorsement of you as a professional. This is the critical element of social proof that makes the selling process so much easier. When you focus on building your business via referrals, you don’t have to overcome as many objections and your closing ratio goes up.
- Clients that have been referred to you will tend to keep buying your product, or doing business with you as a professional, for a longer time than the clients you acquire through advertising.