Business referrals can be the greatest way of building business and marketing your services or products to other relevant customer target profiles. Referral leads convert 30% better than other leads and have a 16% higher lifetime value than traditionally sourced customers.
Customers referred to your brand by someone else, are themselves 4 times more likely to refer another customer! If you aren’t currently pursuing a referral or feedback strategy within your business, you are leaving revenue behind and missing out on one of the most sure fire ways of building your business.
A referral plan is a fine way of marketing your business, in fact 82% of small businesses cite referral as the biggest source of new business.
Referrals to your business, when managed well, can be the most efficient and effective form of marketing for new leads to your business. Think about the last time you recommended a coffee shop, a restaurant, a professional services provider to a friend or colleague at work. I bet most of the people you spoke to at the very least checked out the recommended venue or services.
Isn’t this all just ‘word of mouth’.
NO! Don’t just wing it. You need to harness an effective referral plan. Businesses with a formalised referral plan grow in revenue terms 86% more than those companies who do not have a process to capture feedback and encourage referrals, yet only 30% of businesses implement an actual plan.
Word of mouth is not a strategy to rely on.
Worth of mouth is great, don’t get me wrong. But I don’t think it is a strategy – you cannot control it. You canuse it as a validation of what you are doing is working, which is fantastic, but to rely on works of mouth as your only place for new leads is reckless and dangerous. By harnessing a referral strategy you are taking more control of your marketing and encouraging your existing base to do your lead generating for you, not just hoping the wind blows the right way for you and your happy customer, just by chance, tells 5 other people who also want your services.
What are referrals worth?
So many business owners I speak with assume that the value of the customer, or the transaction, is finished when the invoice is paid or the cash and product are exchanged. You are missing out on huge amounts of leads and revenue from ignoring the opportunity you are presented with once you have a happy customer and finalised transaction.
How do UBER use referrals in their marketing?
You will see referral strategies in action everywhere you look. Large companies are harnessing the power of the existing customer base to leverage new business, and you should too!
The video below is a promotional video from UBER outlining their referral strategy – a great piece of marketing!
A real life example for small business referral marketing.
Company X knows it’s new leads are costing approximately £50. They attracted 100 leads this year, costing £5000. Of these leads, 50 of them convert at a price of £500, meaning £25,000 revenue from £5000 worth of leads. They have had growth for 3 years and have served 120 customers.
Now, the business wants 20 new leads this year maintaining it’s conversion rate of 50%, so growth of £5000 in confirmed sales from 20 new leads. Those leads in traditional sense will cost £1000 (at £50 each) assuming all marketing activity is scaleable in this circumstance. HOWEVER, by harnessing the power of an existing database of 120 customers, if only 20% (1 in 5) of those customers referred or reviewed your business for new customers – a total of 24 new leads – we know that conversion if 30% higher we can suggest our conversion rate from referrals will be 65%, so of the new leads, which have been captured for free or less than the £50 lead generation, we also generate 16 new sales, not 12 as would come from general marketing.
These 16 new conversions are worth £8000 in sales revenue for the business, and have come in art a fraction of the cost.
This leads to not only more sales, but a more sustainable model for growth, better profits, and more authority in your field as more delighted customers are referring more delighted customers!
In this case, an effective referral strategy can be worth £8000! The cost of implementation is minimal – so are you leaving £8k on the table or more by ignoring the magic of referrals when marketing your business?
What’s stopping you?
Excuses! People use all kinds of excuse to not do something, when in reality, all you need is one good reason to do it, and if the opportunity as highlighted above doe not whet your appetite, I’m not sure what will!
- I cant ask people that!
- It’s wrong to ask for the review
- What do I say?
- It’s too much like hard work
- Who’s going to take time to refer me?!
Are all genuine excuses I hear to not get to the point of asking for reviews and referrals.
But I urge you all to consider how best to ask for referrals within your marketing plan and specific to your industry.
What do competitors do when asking for a referral?
What do other sectors do (look at EasyJet, Sky, Banking for examples)
How much will it cost you to create a referral plan and what is the cost once it kicks in (this needs to be factored in to your profits!)
Summary and further reading.
I hope I have shared with you enough reasons to consider a structured and well placed referral strategy to help your marketing work for you and grow your business in an efficient manner.
The 0114 Marketing online platform guides you through this and much, much more. It is the best way to implement effective, modern marketing within your business, and a great way to have the benefit of an award winning marketing company working with you!
There are more articles about reviews and referrals on the blog, so take some time to improve your marketing today!