As business owners, we all want to grow. With the Internet and social media, there is a steady stream of noise from marketing services offers for business owners to consider. These offers and services can often be expensive, and many come with a “Too Good to Be True” stigma attached to it.
Don’t get us wrong. Many of these new strategies and products can work, provided that they are given the proper financial backing and timeframe, but as a small business owner, it can be a daunting (and expensive) proposition.
However, there is one type of marketing that is tried and true, has been around forever, and historically results in more new clients for a business than almost any other method – all at a fraction of the cost.
Enter in the art of referral marketing.
Referral Marketing – The Statistics Don’t Lie
The gist of this article is going to be statistics because at its core referral marketing is a pretty simple concept. While there are a few methods that we will get into later, these figures can help drive home the point that if you aren’t focused on getting referrals, then you are likely missing the boat.
Let’s look at some very enticing statistics that have recently come to light about referral marketing.
- 65% of new business comes from referrals – New York Times
- 92% of respondents trusted referrals from people they knew – Nielsen
- The LifeTime Value of a new referral customer is 16% higher – Wharton School of Business
- People are 4 times more likely to buy when referred by a friend – Nielsen
If those statistics don’t capture your attention, then the Boston Consulting Group has also done some additional studies in the area. According to their findings:
1: Consumers rely on word-of-mouth 2x to 10x more than paid media:
“The results of a 2013 BCG survey of more than 32,000 consumers in Europe and the U.S. show that 66 percent of the respondents consult friends and family, and 50 percent consult consumer opinions online before purchasing—two to ten times more often than they consult the media, for instance, and more than they refer even to company websites.”
2: Consumers increasingly trust word-of-mouth over paid media:
“And the trend toward word-of-mouth has been accelerating. According to Nielsen, the number of consumers who trust purchase recommendations from friends and family and online consumer opinions has grown rapidly since 2009, surpassing the number of those who trust TV and print media, which has plummeted.”
3: Incentivizing word-of-mouth referrals pay off:
“Robust advocacy-marketing programs are achieving significant revenue gains—10 to 20 percent for established products and up to 100 percent for new products, according to BCG’s research.”
So Why Aren’t Business Owners Relying More on Referrals for Growth?
That’s a great question, and we have a few answers. We have dealt with thousands of business owners, and more often than not, their lack of activity in this area boils down to a few common reasons:
– They are afraid to ask for the business – believe it or not, business owners neglect to actively ask for referrals, or they don’t like “bothering” their customers to do so
– They aren’t confident in their product or service – in order to ask for other people to refer you, you must truly believe that your product offering is amazing. If you don’t feel like you do a good job or provide a compelling offering, then you probably have more to worry about than a strategy for growing your business.
– They simply don’t make time for it or don’t follow up – most businesses fall into this category. Most people have every intention of asking for referrals, but something strange happens during the year, and it never seems to get done.
What can I do to get more referrals for my business?
You have seen the statistics and identified which bucket you fall in when it comes to why you aren’t receiving a steady flow of incoming referral leads. So what is the next step for tapping into this supercharged business growth stream?
You need to treat referrals like any other part of your business and come up with a plan that you can follow throughout the course of the business year.
The first part of this plan is simply making a commitment to stick to the plan, and creating a series of defined tasks that are needed for every business period. Similar to any other kind of marketing planning, you need to have a roadmap in place that will hold you accountable.
Secondly, you will need to make sure that you are leveraging any technologies that make your life easier. There are a few referral automation programs out there that can take much of the heavy lifting off your plate and create a task flow that runs itself.
Our ReferMeIQ program is an example of a “set it & forget it” type of referral program that automatically reaches out to existing clients to ask for referrals on a regular basis. These software packages can also do a great job of receiving the actual referrals, as well as tracking the results so you can make modifications to improve your performance.
Finally, it is imperative that you put a series of goals into place to track your results. Not only do you want to be able to identify your ROI on your activities, but tracking your referral program will help you to identify tweaks and other enhancements that will increase the overall success of your campaign.
We hope that you are excited about the possibility of growing your business with referral marketing. As the statistics above show, the best place to start with any marketing initiative is probably with your current list of customers. Referrals are usually more profitable, trust your business from the very beginning, and have a larger lifetime value than any other type of business.
To learn more about our referral automation program, please feel free to give it a test drive by visiting our ReferMeIQ Product Page.