Why Referral Marketing Is So Powerful

By John Jantsch

Sometimes I can preach till I’m blue in the face about “how” to do something. What I’ve learned is that some business owners won’t ever take the time to learn how to implement a marketing strategy, design the proper systems, and train their people, until they get WHY they should do it.

Almost any small businesses can be built using a good referral marketing strategy and here’s why.

People love to give referrals. If you have any resistance to asking for referrals, you need to know that people just love to give them—for two reasons. As cynical as I can be, I do believe that people like to help when they can. They like to feel that maybe they helped another person grow their business. It feels good.

People also like to demonstrate how smart they are. When someone finds a business that provides a solution, makes their life better, or just plain saves them money, they like to talk about it. They like to tell anyone who will listen that they got a great deal. So don’t hold back. Ask for referrals.

Great return on investment. From a financial perspective, referral marketing can give you a good bang for your buck. Depending upon the specific methods you choose, you can implement a referral marketing system at very little cost. Done correctly, there will always be some cost involved, but compared to other types of marketing, it can provide a great return on your investment of time and money.

More qualified clients. As long as you have developed your target market and communicated who your best clients are, then the referrals you receive are likely to be a better fit than those generated from other forms of marketing. If you are able to go to your clients and say, “I want more clients like you,” you will generally receive referrals that more closely match your ideal client.
Better positioning of your brand. Your existing clients may explain more effectively the value they received in a business relationship with your firm than any amount of marketing materials you could ever produce. Your story is much more believable from a third-party point of view.

Borrowed credibility and trust. Potential clients are looking to work with firms they can trust. When someone they already trust says you’re all right, then you, in effect, borrow that trust. Be careful, though. You can do long-term damage to an existing relationship if you abuse that trust.

Fewer issues regarding price. Small business owners often struggle with charging enough for their services. When you attract clients through mass advertising means, such as the yellow pages, they generally don’t know enough about your firm and are simply shopping for a low price.

When clients come to you because their best friends said you would be the best at something they needed, they not only expect to pay a premium for your services, they are willing to do so because they attach a higher value to you because of your relationship with that best friend.

More client loyalty. As long as your referred clients receive good service, they will generally be slower to leave for a competitor. It’s harder for them to leave because you were recommended by someone they trust. If clients come to you based on price, they will leave based on price.

It makes you better. If your firm is going to make referral marketing a key marketing strategy, then the primary objective of everyone in your firm becomes making every client so happy that they are dying to send their friends, family and associates your way. If that were everybody’s job, including yours, would that change the way you looked at your clients or your business?
So now those of you who have been dragging your feet to set up a fully functioning referral marketing system no longer have a good excuse.

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