Referral marketing, in the simplest of the terms, is a very clever customer acquisition technique. People tend to talk and recommend. The words of mouths can work as a strong driving force behind a successful purchase. Also, imagine getting benefitted for a spontaneous referral that you made to your buddy. This is exactly what Referral marketing is about.
But how is referral marketing better than other forms of marketing. Let’s have a look.
1. It is easier to trust friends than advertising salesperson
What referral marketing does is establish a word of trust! A buzz from friends, family, colleagues is always more impactful than the words of a marketing salesman of a company. A satisfied customer is more relied upon to provide a good tailored referral being aware of your specifications – budget, style and location etc. Also when a friend provides you a referral, their own reputation is on the stake. They, as such, have no ulterior motives in comparison to a salesperson, whose only purpose is to make money.
2. Better conversion rate
Referrals definitely help increase your sales revenue. As per a world-renowned sales trainer, Tom Hopkins has mentioned in “Sales Prospecting for Dummies” that your closing ratio for non-qualified leads is 10 percent versus a 60 percent close ratio with referred leads.
3. Business from referrals is cheaper
Such business models rely very mildly on traditional advertising methods. With costs cut down on cold calls and invitations, branding and advertising, you have definitely saved some big bucks. The greatest USP in this case is that “your customers itself are a mode of advertising!”
4. Shorter sales cycle
According to a 2010 Nielsen Global Shopping report, 57% of online shoppers look at reviews before they buy. Once pre-sold by the referrer, the new customers are already informed about the quality, pricing, discounts, delivery time and various other general queries about the products and the company. With positive responses from the referrer, buyers are generally ready to make a purchase. There is a clear opportunity to capitalize on the saved time and deliver against expectations resulting in “improved the brand image.”
5. Premium pricing made affordable
Generally, pricing is the first and only differentiation applied when two products are compared. Value and the quality of a service, in that case, go in for a toss. But when the customers have already been referred of your company, they can focus more on the value of your product and service and lesser on price. Paying higher for a referred product than an unknown one is always a more viable option!
6. Customer loyalty
Customers that give referrals become more loyal to you and to your business. In fact, the grapevine is regarded as one of a most reliable and trustworthy source of gathering information, almost about anything and everything. Also the referred customers, in the case, are more profitable and bound to become loyal as well. The Wharton School of Business found that a referred customer has a 16% higher life-time value.
7. Win – win for everyone
This is probably the most powerful reason of them all. It’s obvious to state that there is something in for every member of the referral marketing model. Be it your company itself, the customer or the referral system provider. Everyone is benefited!
As you now know, the referral marketing works. A good referral marketing system is capable of growing even faster. Even better, the leads cost much less to acquire, they’re quicker to close and they lead to warmer relationship building.
Stay tuned to Refiral for more marketing updates…:)
Article: Reetika and Jatin