The Power Of Referral Marketing
Referral marketing is not new – we have shared good news since time began.
And today we all think an apple a day will keep the doctor away…
But what is referral marketing, and why have I commented on it at all?
Referral Marketing Works!
When someone we trust tells us how good something is, we believe them.
We trust the person that told us, so why would we doubt them…
Sure, sometimes we might not think the same as them, but we still believe that what they are saying is correct.
The restaurant they enjoyed will be good.
The movies they watched would be good too.
That doesn’t mean that we will enjoy either the restaurant or movie, but we appreciate their recommendation and are more likely to try the restaurant or watch the movie … there is a very good reason to believe that we will like these in the same way that our friends did.
When Did You Last Endorse Something?
Yes, it was probably not long ago.
We all tend to like to share good experiences – we do it subconsciously and without really thinking about it as being a type of marketing – but it is great marketing for those who we endorse. Of course, we also share bad experiences and we purposely hope that our comments will encourage people not to use that business or service.
As mortgage brokers and insurance advisers we rely on our clients and business associates referring people to us. This is the best and cheapest form of marketing that we can do, and the most effective too. When someone is referred to us they automatically trust that we will do a good job for them – and we hope that we do.
We also refer people to our clients and friends.
Groups Created To Share Referrals
Business Network International (BNI) is a referral marketing group created for business owners. The group meets weekly in formatted meetings primarily to share leads with the other members.
There are a number of other similar groups too.
The group concept works well when all members realise the power of referral marketing, are educated to look out for referrals and have confidence in the other members of the group. It is unrealistic to expect anyone to refer to members that they do not have confidence in.
I am a member of a BNI chapter and you can ask me about my experiences.
When you work from home or within a small office the social interaction that you get from these groups can be very worthwhile too. Some of these groups meet over breakfast which doesn’t interfere with your day while many are after 5pm.
Generally these groups do not promote payment for referrals; however some members will offer incentives and that seems to be well received.
Formal Arrangements For Paid Referrals
Some businesses will join with other businesses and pay for referrals.
In my industry we know of banks who will often pay real estate agents for referring them to people buying houses, and then insurance advisers who will pay mortgage brokers for referrals.
Some of these arrangements work well but they need to be managed and often they fall apart due to a lack of trust whereby one party to the agreement feels that they are not getting their fair share of any earnings.
A Simple “Thank You” For Referrals
Every business is different, but I have always found I get a better response from giving an ad-hoc gift rather than a formal payment.
This might be unique to our industry as we receive referrals from real estate agents who might be making a $10,000 commission for a house sale, so for us to offer a mere $100 might seem irrelevant, but a hamper or bottle of wine worth $100 is seen as a generous gift.
I also believe the fact that it is not expected makes more impact.
The other thing that I tend to do as part of my referral marketing strategy is to send a hand written thank you card for any referral the moment I receive it and regardless of the outcome. This is to reward people for thinking of me, rather than on any results. Again in our industry it can take weeks or months before we are paid for work we do, and therefore if we don’t acknowledge people straight away then we might miss out on those next opportunities.
Have You Heard About Affiliate Marketing?
I stumbled across affiliate marketing a few years ago and it has taken me some time to get my head around the power of this form of marketing.
I have a Miele coffee machine that I love and I tell numerous people about how good it is. No doubt someone that have told has gone away and purchased one and may even have purchased it from the same place that I got mine. If this had been done with online shopping (which is now more common) then I might be able to get paid a commission when someone buys a product that I have recommended.
If you buy a Miele coffee machine from Amazon I will receive a commission, known as an affiliate commission, but even if you choose to buy another product from Amazon I will earn a commission too.
There are many affiliate programs that you can use and with the popularity of online shopping this is likely to become a more common method of making money from your referrals. The key thing to establish is whether you are going to use affiliate marketing to make a few dollars from something that you genuinely would recommend anyway, or whether you plan to make a business from selling online in which case you would be better to set up a dedicated online store.
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We wrote this article on referral marketing to help provide some ideas and get people thinking about creating their own referral marketing strategy for their business.
Referral marketing is powerful!
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