We all want sales leads but referral leads are warmer, cheaper and have a higher conversion rate than other leads.
As competition and operating costs continue to rise for Australian small businesses, the key to survival for any owner remains increasing sales by any reasonable means.
Traditional marketing efforts such as TV and radio advertising are all proven, effective routes, but the cost of doing so can be prohibitive, to say the very least.
One alternative is to provide incentives to existing clients or customers for generating referrals to your business.
The beauty of referrals is that, as opposed to seeing an advertisement on TV, or hearing something on the radio, when people hear about you through the grapevine, they're more likely to take things on board.
Tech industry marketing executive Kimberley Drobny says as members of a social society, many people typically ask for their peer's opinions when trying to make a decision.
“In the same way, consumers rely on their friends' reviews of businesses when trying new products,” she says in a blog on the Fonality website. “The word of a friend that has been satisfied with the service will entice more clients due to reliable information they have of the business's good standing.”
“(So) word of mouth and referral marketing is an easy way for organisations to gain customers while retaining their most loyal clients in the process.”
“The benefits of referral programs have been the focus of many studies over the years,” explains Amy Pudlo from Rewards Come True, a provider of custom-branded Eftpos gift cards in Australia.
“The verdict? Referral leads are warmer, cheaper and have a far higher conversion rate,” she says in an article on the company's website.
“In fact, a study completed by the Wharton School of Business found that referred customers are 18 percent more likely to stay with your company over time and even bring a life-time value that is 16 percent higher than customers acquired through other sources.”
Pudlo warns, however, that “only serious value will keep your referral sources actively engaged and help you build a steady referral network”, so it's important to “prioritise their needs and meet their expectations before other groups”.
“Use cash-backs, discount offers and gift cards to show how much you appreciate their referrals and encourage them to refer again,” she says.