If the answer to this question is “no,” then you’re probably not familiar with the term, referral marketing. The fact is that 92 percent of individuals who make buying decisions trust referrals that they get from people they know. You probably know this from personal experience. Of course, these days, social media friends are probably included in that number. If you’re not taking advantage of this statistic, then you’re missing out on an important source of new customers.
It doesn’t matter if you’re selling products or services. Every business can benefit from a primer on how to generate customer referrals. The following five ideas can help you get started.
#1. Don’t be Afraid to Ask
There’s no shame in asking your best customers if they know other people who would benefit from your offerings. Granted, it’s rare when they will just hand over names and phone numbers of potential new customers. But, if they’re like me, they will share your information with prospects who will be happy to find a reliable vendor.
This simple practice works well in highly-competitive markets. For example, I receive daily emails from headhunters looking for technical writers with specific types of experience (typically multiple agencies trying to fill the same open position). I’m not interested, but I know a number of qualified writers, and the agencies often ask for referrals. In the somewhat rare cases when I recognize a particularly reliable agency, I offer to pass the information on. It’s not uncommon to receive a thank-you note from a writer who got a job this way.
Of course, make sure that your new referred customers receive top service so that they will become repeat customers — and share information about your business with other interested parties. This is a true benefit of referred business.
#2. Offer Referral Incentives
You probably know that the cost of acquiring customers is five times the cost of retaining them. With that in mind, you can afford to offer incentives to the existing customers that bring more in and reduce your customer acquisition expenses. They are more likely to help you find new prospects when their referral gains them 20 percent off of their next order.
Two-way incentives are even better. This method is common among cell phone and cable TV service providers. I can’t remember the last time that I signed up for a new service without obtaining a referral bonus that benefitted me and the person who recommended the company to me.
Naturally, no one will steer new customers to a business that provides marginal-quality products or services. But as your young business already understands the importance of providing quality offerings (and hopefully also top-notch customer support), this warning probably doesn’t apply to you.
#3. Form Partnerships With Compatible Businesses
Referrals don’t have to come only from customers. If your business offerings relate to other businesses, then you have a natural referral opportunity. The most common example of these referrals might be a coffee shop located next door to a bakery. If both stores offer discount coupons for their neighbors, this type of referral is a no-brainer.
But this is far from the only example. The right partnerships can even significantly enlarge your small business. So, if you sell data backup services, you might consider negotiating a deal when you use a major Cloud provider. Even as your business achieves notoriety through connection with a big-name, that big business might send some projects your way, as well.
#4. Do Some Referrals of Your Own
There’s a saying that applies here: Those who bring sunshine to the lives of others cannot keep it from themselves. When you recommend other businesses to your customers, those businesses often do the same for you, even if you don’t ask for their referrals.
Don’t go out of your way to recommend other businesses on the fly. But, if you recognize their true value and know that your referral will help your customers, then everyone wins.
A brilliant example of this is in the classic movie, Miracle on 34th Street. The real Kris Kringle works as the Macy’s store Santa, and management becomes flustered when he sends customers seeking better selections to Gimbels. Management’s attitudes change, however, when word of Macy’s generosity gets out — and drives even more customers to their store.
In a non-fictional world, you might not choose to send your customers out to buy from your direct competitors; however, recommending Radio Shack batteries (known for their quality) to one of your drone buyers is a good business practice. Even when a referral is one-way, your business can also gain more customers when it gains a reputation for this level of customer care.
#5. Encourage Internet Sharing
Small businesses don’t typically have the human capital needed to properly monitor every possible type of social media. Nonetheless, it’s worthwhile to provide online links on your website that encourage easy sharing, like those you see at the top of this STARTicle’s page.
Every share potentially puts your company’s name in front of dozens to hundreds of new people who may become your next referred customers. I like to think that cute pet pictures increase the number of shares, but I think that maybe the subject matter is more important.
Keep Trying; Referral Marketing is Too Valuable to Dismiss
The above ideas are bound to generate even more ideas, but keep in mind that the results of any referral marketing approach will vary. Some ideas work better for one industry than another. And seasonal considerations can create boom or bust results.
If one idea doesn’t work well, don’t give up. Whether customers are inspired to refer only during certain seasons, or you need to adjust your approach in some way, keep making adjustments because referral marketing is a valuable practice. Keep experimenting until you have more business than you can handle.