Benefits of Referral Marketing

by Haliyma Barrow

The power of referral marketing can be exploited by all kinds of businesses, both online and offline. Nowadays the term referral generates thoughts about pesky spam emails or relatives and friends trying to “recruit” new people to use a product or service. However, when this marketing strategy is properly executed, it can lead to customer loyalty and better business.

Referral basically makes use of word of mouth, a highly effective method of advertising and promotion. It is a three-way process. A customer can refer an acquaintance to a business or product. A customer can refer the business to another company that can use its services. The company can give a referral to customers to use a product or business that meets their specific needs.

In the first case, customers can be generally impressed by the product which leads them to spread the word willingly to others. Many business owners, on the other hand, give their customers incentives such as discounts or gifts when they bring someone else to the business. This works well with online businesses because the referred user enters the email address of the person who introduced them, thus translating to more reward for the latter. With the right strategy and incentive, affiliate marketing can also work offline.

The second scenario can occur when a business owner asks the customer whether they know anyone or company that could use their product or service. Customers are often willing to share such information because it initiates and maintains a conversation, which in turn promotes customer loyalty. Referrals from other customers are also reliable as you can get contact details of potential clients in the area that you may not have known about.

As for the third instance, there is need for a good relationship between businesses in the area and within and across industries. For example, a small restaurant owner should establish a connection with bigger restaurants, farmers, grocery stores within the food industry, as well as with electricians, plumbers, health professionals and other businesses. This way, should a customer in the restaurant require any of the listed services, they can get a referral from the restaurant. It may seem like losing customers in a way, but this is one of the long-term goals of word-of-mouth marketing, which is to build a better network of contacts when running the business.

Using this style of marketing can save you lots of money on advertising. This is always appreciated by businesses that are experiencing financial challenges. Make good use of the referral system to establish a greater network, customer loyalty and business to business interactions. Such communication will benefit all parties involved. Set aside a working budget to kick start the affiliate marketing process, including costs of giving freebies, discounts and other incentives to encourage customers to spread the word about your business.

It simply starts with a conversation with a willing customer to generate good leads. Once this strategy is adopted your business will eventually take off.

About the Author: This is a guest article written by Haliyma Barrow, a freelance article writer based in New York. Haliyma holds a Master of Public Administration from New York University. She loves to contribute articles on business marketing strategies such as referral marketing.