Referral marketing is critically important to all types of businesses. So important, in fact, that Chief Marketer dubbed it “a strategic initiative for 2016.” Why is this type of marketing so beneficial and how can it help build your business?
One of the biggest reasons that referral marketing is so stellar is because it works. According to a study conducted by Sandler Sales Institute (cited in the book Fearless Referrals), referral marketing—being personally introduced to a prospect—results in business 80 percent of the time. While that is an impressive number in and of itself, it is even more impressive when compared to other forms of prospecting. Cold calls result in a business transaction a mere 5 percent of the time, and even when you have permission to call upon a person and you are expected, it only returns a sale half of the time. These numbers show just how powerful referrals can be.
Referral marketing has such a high ROI because it offers built-in trust. For many people, one of the first things they consider before making a purchase or securing a service is whether or not they trust the person or business. If that company has been recommended to them by someone they know and trust, that trust transfers and they are more likely to buy. This is particularly true in the medical and skilled trade industries.
In the past, this type of recommendation marketing meant someone giving you the name of a great plumber who did some work for them. And while that still exists, a major portion of referrals happen online, especially on social media. Individuals and even business can link to other companies and businesses that they recommend. Think about sites like Angie’s List—its entire business premise is an online referral and review site.
As mentioned above, referral marketing has an impressive ROI. And, because the “I” is minimal, it is a great way to save on your overall marketing budget. Plus, referred leads are some of the best leads out there.
If your business is recommended to someone, the referrer has already done a lot of the marketing legwork for you. This is a way of getting leads that you may not have caught in your inbound net. By encouraging clients to refer leads to you, you will continually build trust and grow your network with minimal expense. Referral leads can drastically reduce time wasted on uninterested prospects or cold calling.
Depending on your specific company, you may want to consider implementing a program or incentives to encourage your current customer base to send new business to you. And remember to always treat referred leads with the utmost respect and best service, since a negative interaction can affect your existing business.
Essentially, the key to referral marketing is this—provide such excellent service and products that it makes people want to refer you to their network. The better qualified your leads are, the more likely you are to convert them to clients.
Learn more tips to boosting your ROI with this free guide.