« "Christmas in July" is too late | Main | The myth of multi-tasking »

Consider referral marketing

Carl Maerz is a co-founder of Rocket Referrals, a startup company focused on helping businesses gain referrals from customers.

Before there were billboards, or neon signs, or quirky insurance commercials disrupting our TV shows, there was only word-of-mouth. Businesses thrived or collapsed base on their reputation. People relied on their family and neighbors to separate the trustworthy from the snake oil salesmen. But anymore, marketing has evolved into an overly complicated science propagated by new sources of media. Have companies forgotten the value of referrals?

SnakeoilThis may be the digital age, but humans still rely heavily on fellow humans for advice on how to spend their money. In fact, recent studies show that people trust recommendations from close relations seven times more than typical, traditional advertising. Yes, most trust their close friend over a lizard on where to shop for auto insurance. Interesting as this is, not much research has been conducted on referral marketing over the last century. The prevailing belief remains that referrals are important to increasing business - especially in those industries that offer services and ongoing relationships with clients. But the idea of fitting referrals into sphere of marketing seems to be uncharted territory.

Unfortunately, many people think that referrals are things that just happen. The problem with this belief is the error of doing nothing to obtain more. This results in missed opportunities. Referral marketing begins with the understanding that there are proactive approaches to capturing more referrals - by implementing a consistent and targeted plan.

Although referral marketing is still in its infancy, companies are beginning to take notice of its viability of realizing new business. There are two conflicting theories currently battling in the market: Those that believe in the tit-for-tat mentality, and those that are relationship driven.

Tit-for-tat

You-scratch-my-back-and-I'll-scratch-yours. Those businesses offering incentive-based referral programs that offer cash and prizes for recommending a friend. The idea here is founded on a business transaction opposed to a relationship. That if a business provides great service, an incentive will nudge their promoters just enough to get them to recommend their friends and family. The problem, however, is such incentives make the customer feel like a source of income for the business. Introducing money into the equation cheapens the relationship and shifts the customer away from social norms.

Relationship driven

This idea promotes establishing authentic relationships with clients. These companies believe relationships are key to successful branding and generating referral business. They understand that when a client refers them they are further investing themselves in the brand. Therefore, the company will find ways to build a sense of community with their clients. By bringing someone new in they are becoming part of the family and the incentive is based solely on the service they will receive. This is accomplished by establishing the referral mindset early on with clients and shying away from the monetary side of things. Creating a network of referrals is like building a community. Make people feel as if they are part of the team - that they are going to bat for you - and you for them.

Remember that referrals are not a knee-jerk reaction to great service and products. Leveraging loyal customers takes a proactive approach of incorporating referrals into the overall marketing strategy.

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d83452ceb069e201a511ce3570970c

Listed below are links to weblogs that reference Consider referral marketing:

Comments

The comments to this entry are closed.

« "Christmas in July" is too late | Main | The myth of multi-tasking »

Technorati Bookmark: Consider referral marketing

This site is intended for informational and conversational purposes, not to provide specific legal, investment, or tax advice.  Articles and opinions posted here are those of the author(s). Links to and from other sites are for informational purposes and are not an endorsement by this site’s sponsor.