Customer referral programs are one of the most effective marketing tactics–and it’s free, too. Here’s how to take advantage.
The most effective types of marketing programs that exist are those that cost nothing, or next to nothing, and are proven to work. It’s almost as good as having a cash printing machine. While most marketing techniques don’t fall into this category, there is one which does: customer referrals.
The term referral is sometimes used interchangeably with viral marketing, but viral marketing is a little broader. Let’s keep it simple. By referrals I’m talking about having existing, satisfied customers voluntarily recommend your business to people within their circle of trust.
Referrals are effective precisely because they aren’t considered a form of marketing or sales. Consumers are bombarded with hundreds (some sources calculate it as thousands) of marketing messages daily. We have become relatively skilled at blocking out most of these messages. It takes a high degree of cleverness, differentiation and persistence to have your message penetrate a consumer’s busy mind.
Why referrals aren’t perceived as marketing
Referrals aren’t considered marketing by consumers for two reasons: first, it’s the buyer that solicits the information. People don’t call everyone they know to tell them about a great plumbing experience they just had. Instead when someone needs a plumber they ask people they trust. This means you already have a willing buyer.
Secondly, the referrer isn’t receiving monetary compensation in exchange for the referral. They are referring the business to appease some of the most basic human desires—to help someone else and to feel empowered to help. I’ve never heard someone respond to a request for a referral by saying “I know just the company that can help but I won’t tell you because they aren’t paying me.”
Referrals are probably the oldest and still the most reliable form of generating new business
Sometimes companies try to artificially accelerate the referral process by offering compensation. “Refer a friend and get a $20 gift card!” and things like that. I would be hesitant about instituting that type of compensated referral program.
- Firstly, it can be very expensive. The referral amount needs to be sufficiently interesting to elicit participation.
- Secondly, it can create a type of winner’s curse where the referrer may feel they aren’t being paid enough to refer your company and will feel a bit resentful about it.
- Thirdly, it can cloud the genuineness of the referral and may raise doubts about the quality of the referral in the eyes of the recipient.
- Finally—and this is the best reason—people are willing to do it for free! So why pay for it?
How to accelerate referrals the right way
Instead of paying, there are some productive methods that you can implement to enhance and accelerate your referral program:
