“By Referral”: How to make referral marketing incredibly rewarding – Part 1

Let’s get started with a simple example to understand referral marketing. When you are looking to buy a new machine or appointing a carpenter, who do you think about? You ask around, and are likely to get recommendations from friends, family and the internet. The basic premise of this research is getting a well-connected referral who would eventually help you snag a good deal.

Why Referral Marketing?

Be it a product or service an able referral ensures promotion to business. Referrals are not industry specific and pertain to all types be it a start-up, small-scale industry or a company with a huge turnover.  More so, in B2B businesses ‘by referral’ is a standard strategy to win new business. It is a rather simple and cost-effective process to gain a customer base, build a network of satisfied customers who in-turn would refer your business to their network.

Below, is a graphical study by Sandler Sales Institute depicting the conversion rate from a prospect to a business customer:-

Here, 80% of customers seem to prefer personal calls or referral calls made when you are personally introduced to a prospect. 50% of the customers are quite okay when they are called with permission and more importantly, when your call is expected.  15% customers respond to unexpected calls. For example, when you use a colleague’s name in the call – but your call is not expected. Only 5% of respond to cold calls, which makes sense. Why would you want a total stranger hounding you with a sales call!

So, how good can your referral marketing get?

Build trust and credibility: When your product or service is well received by the customer you instantly create a happy customer. You gain the customers’ trust and can thus bank on credibility. This is the first step in building an effective referral program. Provide exceptional, high-quality services and watch people recommend you and welcome a steady stream of new customers. In fact, there are many successful companies who have built entire businesses on recommendations and word-of-mouth.

Define metrics and plan sales: Craft a review and lay down a ground plan for your target prospective customer goals. Strategically plan and work on networking with the right customers. Select and decipher prospects by segregating them demographically in accordance with your business. Constantly build and expand your network to seek new members organically i.e., email solutions. Align your marketing team to identify the right customers and train sales reps with the right tools to deal with referral leads.

Customer referrals drive profits at a low price: It is a true fact that referral marketing is by far the most trusted form of advertising. Building a customer referral program does require your ultimate involvement and may also be time consuming. But, if done effectively it is likely to far outweigh the costs. Keep a smaller conversion rate of 10% as a break-even point to calculate the referrals in your sales funnel. By setting a smaller goal, it will help you measure your metrics and account profit.

The key to a powerful referral program is not to rush with the campaign and expect immediate results. Inculcate this process into your marketing strategy and create meaningful business opportunities.  The most effective way to do this is to be consistent.

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