Referral Marketing: Letting Customers Lead the Way

Referral marketing is all about getting leads through existing relationships.  People like to share good finds and good experiences so developing a referral marketing effort should be an essential part of a nearly every marketing plan.  Your plan should focus on the customer and their experience and aim for customer-centric leadership in the channel.  Let’s look at why customer referrals work.

Birds of a feather really do flock together

Your best leads—the ones most likely to convert to a sale—come from employees and customers.  Why?  It turns out that your parents were right when they told you that birds of a feather flock together.  Networks tend to be full of like-minded peers.  Business owners network with other business owners.  Lawyers tend to belong to the same professional organizations.  Stay-at-home moms share finds with other stay-at-home moms.  The goal of referral marketing is to get targeted leads from your existing customer base and relationships.  Find your way into the circle-of-peers conversations by encouraging customers to share their product experience with others.

You already have their attention

While the Marketing department creates leads, it is Sales organization’s job to convert them.  Right?  Absolutely not.  Sales and Marketing must work collaboratively to develop qualified leads.  When a sales rep closes a deal with a customer, she should ask “Do you know anyone else who could benefit from ….”  There is little downside to asking for the referral.  Another good time to ask for referrals is during a service experience.  Of course, good judgment is required here.  If a customer service manager is handling an escalated call, it may not be a good time to ask for referrals.  You should assess your customer touch points and identify the best opportunities to engage.

That employee touch point is already a sunk cost

If you think that the time it takes for a sales or service rep to ask for a referral is too expensive, I encourage you to think more deeply about your costs.  Most sales reps are salaried with commission.  Consider the incremental cost of asking for the referral versus spending your marketing budget on another marketing channel (radio, direct mail, even social media).  You will likely find that the cost of using additional media far exceeds the cost of using the human resources you already have engaged.

Of course, you don’t have to limit your referral marketing to customers and employees.  You can give vendors, contractors and others an incentive to refer leads as well.  But before you dive into an incentive-based referral program, start with a no-incentive program.  Start with the low hanging fruit.  Start with your customers.  You might be surprised by what happy, satisfied customers will do for you.