When it comes to a business that is trying to grow, a qualified referral from someone who has used your services or products is probably the most effective form of marketing available. This is why word-of-mouth marketing has remained the most popular and most effective form, even in our current digital age. This is why referrals are important to your business.

But what makes a good referral and why is it the most effective form we have available to us? Let’s have a look at what makes a good referral and how to get them.

Referrals vs Leads

The main difference between a referral and a lead is quite simple. A referral involves three people, whereas a lead involves only two.

Let’s have a look at some examples.

You have a friend who owns a business selling televisions, and he has the latest high-definition television available. He’s looking for guest houses or bed and breakfasts that may have old televisions so that he can sell his to them.

Now let’s say that last month you stayed at a guesthouse and you notice the televisions were old, and the picture was little bit blurry. Although you had a great stay in the guest house this one little thing may have caused you to have a slightly bad experience. Therefore, you pass on the contact details of this guest house to your friend so that he can contact the manager or owner and set up an appointment.

As you can see this involves two people, yourself and your friend. There has been no mention or discussion with the guest house manager or owner and therefore it is very much a cold call.

So now let’s take the same scenario but turn it into a referral.

Whilst you are staying at this guest house you comment on the TV quality and the owner mentions that replacing the televisions is next on her list. you then proceed to tell the owner that you have a friend who sells high-quality televisions for a really good price. You continue to tell her about his service and how quickly he can deliver, and you give her your friend’s business card. You also mention that you will ask him to give her a call so that he can set up an appointment with her.

As you can see in this instance there are three people involved, the person in need of a service or product, yourself, and your friend.

There are also different types of referrals. In some instances you may just pass on the business card and then instruct the business owner to contact the person who needs the service or product. In other instances you can set up a meeting for that person. To take it a step further you can set up a meeting where all three parties meet, those parties being the person needing the product or service, yourself, and the business owner.

Why is a referral better than any other marketing tactic?

The average person needs to see your product or service 5 to 7 times before they will engage and consider actually purchasing. This is all part of the sales funnel, which we will discuss in a future article.

The main method of marketing is to get a potential customer to trust you and your product or service. To even get them to this point of trust first involves showing them your brand, who you are, and what you do or sell. Only after they are aware of you, will they be able to engage in a purchase. However before they do purchase, they will first need to trust you, especially if they already use a brand that they trust.

Think about a brand that you have been using for quite some time. Let’s say you use a popular brand of toothpaste, and someone comes along and says they have toothpaste that is 10 times more superior than that brand. Are you going and trust them and take their word for it? Probably not.

So you forget about this person selling this so-called superior brand of toothpaste. But then as you go about your day you keep seeing their brand and the superior toothpaste. You noticed that other people are buying this toothpaste, so it makes you curious.

Once you have become curious you than investigate further. After some time, you begin to trust this other company, so you give it a try, and you have made the purchase. Although the method works, it is a long process.

Now you’ve tried the new toothpaste, you find it is much better than the brand you were used to. You go out with some friends on the weekend and one of them mentions that they’re not happy with the toothpaste they are using. Because you are so impressed with this new brand of toothpaste that you have tried, and will more than likely continue to use now, instead of your original brand, you mention it to them, and suggest they try it for themselves.

Because they are a friend and they trust you, hopefully, they usually don’t go through the whole process of having to see the brand so many times, becoming curious, and finally trusting the product, because the trust is already present. This makes them more likely to make a purchase immediately.

This is how word of mouth referrals work. If the person in need of the product or service trusts the referrer, the trust of the product or service is already there.

How do you generate referrals from existing clients?

The best referrals you can receive are from those people who know your business the best, and who better knows your business than the people who actually use your products and services?

This type of referral ties in very closely with client service, and more importantly, retention of existing customers. If your client service is very bad, then your existing customers and clients aren’t going to want to recommend you to their friends and family. However, if your client service and product or service is excellent, then your existing customers become advocates for your business.

This obviously means that instead of just trying to attain new clientele we need to be creating loyalty within our existing clientele, and from there our customer base and our audience will grow, and with little effort we will gain new clientele through our existing customers.

Once you have this loyalty from your customers you can create a referral program. This program can also incorporate a rewards or benefits program. So what you can do is ask your existing customers to refer friends or family and if any of those referrals conclude in a sale then your customer gets a reward. This reward could be a discount on their next purchase which again encourages  them to keep buying from you, or it could be a gift of some kind.

This means that not only are you using your  existing customer base to get more customers and business, you are also  giving them an incentive which generates more income from future sales from themselves.

How do you increase customer referrals?

There are many ways to get good customer referrals, and we’ll discuss  them more in-depth in future articles, but let’s outline some of these methods here.

As discussed in the previously one of the best ways to get more referrals is from your existing customers and in order to do this you need fantastic customer service and satisfied customers who become very loyal to your company. This is definitely one of the best ways to get referrals.

You can also use the power of social media and encourage your existing audience to share posts that you make on Facebook or Instagram or LinkedIn or any of the other social media platforms that you use for your business.

One good method which comes back to your existing clients and is more marketing based, is to showcase them. You should obviously ask them for permission beforehand, but if they give their approval then add them to a page on your website which shows them using or wearing your products. This actually makes your customer feel important because they now got their small window of fame. A good way to do this is to create a hashtag that is unique to your business and to your customer showcase, and then ask them to take a picture with your product, upload it to their Instagram, and use the hashtag. On your site you can then pull that unique hashtag from Instagram onto your website. This makes things very easy for you because customers are then creating content for you which automatically gets added to your website.

Apart from using your own customers, one of the most powerful methods is to give referrals to other people. It’s very much a scenario of giving in order to receive. Through giving referrals to other people, they are more inclined to seek out  referrals for you, but even if they aren’t in a position to give you a referral somebody else that they know, may be. So through giving other people referrals you are extending your network and creating relationships.

This is where Net-Working-Pro becomes very prominent. The whole objective is to create groups of people or entrepreneurs that will pass referrals between each other. Within this group of people, or as we like to call them, bubbles of entrepreneurs, if certain people are passing on referrals to others they become more trusted. On the other hand, people who aren’t passing on any referrals and are simply sitting back and receiving, tend to become less trusted. It is for this reason that we encourage people to seek out referrals for their fellow members. Passing a referral to one person could very well result in multiple referrals from various members of your own group, or bubble.

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