Email, SMS, content, paid ads, and social media are most likely among the first things you think about when it comes to lead generation. These are all great tools. However, you should be sure to remember one of the best tools out there: word of mouth or referral marketing. Referrals are potentially the most valuable sources of leads, yet it remains relatively untapped by most businesses.
According to a study conducted by Heinz Marketing, companies with formal referral programs reported nearly 40% of their leads coming from referrals. In comparison, companies without referral programs attributed a mere 22% of their leads to referrals, relying more on expensive outbound strategies like cold calling to fill their pipelines.
Think about it. How many times have you tried a new restaurant or purchased a product after a recommendation by a friend? I’m guessing at least a few times. Then, if you liked it, you probably shared your experience with another person. That person then recommended the same restaurant or product to somebody else. The referral becomes even more effective if the buying experience and product value are exceptionally good. If you felt strongly about something, you’d spread the word, right?
Why are Referrals So Awesome?
The Trust Factor
We listen to people we trust. We know that if someone we trust recommends a brand or product, it’s typically going to be as good as they say it is. Come to think of it, the person who tells you about a certain product or service must know you pretty well, so they know what you like and don’t like. That’s reason enough to trust their recommendation and heed their advice.
Exact Targeting
The great thing about the referral system is that customers don’t refer products to the wrong audience. People know their friends and family well. Thus recommendations of products or services are targeted to those who will actually benefit from them. The same goes with social media recommendations.
When it comes to online reviews and news articles, readers are specifically searching for that content. This means the user is actively looking for solid recommendations for a particular product or service.
Reach and Acceleration
Referral marketing is not just limited to family and friends. Positive reviews and recommendations on social media and the web are also considered referrals. They can also come in the form of customer reviews, influencer opinions, news articles, and testimonials.
In the digital realm, referrals and recommendations can reach thousands of people in a day, especially if you’re getting a referral from an industry influencer. Though it can sometimes be expensive, taking advantage of an established authority’s existing audience can help amplify your brand’s exposure beyond what would have been possible otherwise.
Cost Effectiveness
Technically, you don’t have to spend a dime for customer referrals. You just have to make sure that your customers are happy. Stand by your product and serve clients with a smile. Just be sure to let them know that you appreciate them spreading the good word about your company.
A good referral program rewards individuals that bring in referral leads, but what the reward comprises of is completely up to you. Whether it’s a referral fee, a discount on a future purchase, or an account upgrade, these rewards are more cost-effective than reaching prospects on your own.
Final Thoughts
If you don’t have a formal referral program in place, you may want to reconsider. Consider how much you’re missing out on by not capitalizing on the opportunity that referral marketing presents. The digital world facilitates an ever-expanding network for each user. Thus, every individual’s potential reach widens.
If you’re still unsure about whether or not a referral program will work for you, just ask your customers this question, “How did you find out about us?” The answer may surprise you.
A great referral program will improve brand trust, enhance reach and exposure, and reduce cost-per-lead. Not to mention the fact that it has a sniper-like ability to target the right people. Quality leads at a lower CPL? You’d be crazy not to give it a go.
Once you’ve gotten those referrals, it’s time to close those leads like a boss! Get a copy of our FREE whitepaper today!
Great tips here, Johanna. I love the graphics, too. I think people should start looking and tapping into their family and friends for possible referrals. And I agree that celebrities are quite a long shot but if you have the luxury to take that risk, then why not? It’s “go big or go home”.