Referrals bring much more influence

Referrals bring much more influence

Before there were billboards, or flashy neon signs, or silly 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 a complicated science propagated by new sources of media. Have companies forgotten the value of referrals?

This may be the digital age, but humans still rely heavily on fellow humans for advice on how to spend their $$$. In fact, recent studies show that people trust recommendations from close friends seven times more than typical, traditional advertising. Yes, most trust their close friend over a lizard on where to shop for car 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. However, the idea of fitting referrals into the 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 by 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 driven by relationships.

Tit-for-tat mentality

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 as 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 cash into the equation cheapens the relationship and shifts the customer away from social norms.

Relationship driven

This idea promotes establishing authentic relationships with customers. These companies believe relationships are key to successful branding and generating referral business. They understand that when a client refers 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 sweetener. Creating a network of referrals is like building a community. Allow people to feel as if they are part of the team – that they are going to bat for you – and you for them.

Remember that referrals aren’t a knee-jerk reaction to great service and products. Leveraging loyal customers requires a proactive way of incorporating referrals into the overall strategy for marketing your company.

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