Referrals: The Most Important Thing You Can Do For Your Business

“People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral is the holy grail of advertising.”

Mark Zuckerberg

Today most of us turn to a trusted peer for advice or a recommendation when making a purchase, whether big or small. Or have ventured out and taken a chance on a new company after hearing a family member or friend talk about its products and services. This method of referrals is how many of us discover brands. Implementing a referral program is one of the most important tactics that a financial advisor can use to promote their business. 

What is a Referral Program? 

A promotional strategy that encourages a current customer to use word-of-mouth to refer a new customer is often called a referral program or marketing. Referral programs usually associated with an incentive like giveaways, discounts, exclusive events, etc. 

Why is it Important?

Implementing a referral program is vital because marketers rate referral programs as the 2nd-highest source to obtain quality leads. A recent study done by Nielson revealed that about 92% of consumers are more inclined to believe and follow through on a recommendation from a trusted peer in their circle. Referral marketing is a powerful tactic. Having a suitable referral strategy is like marketing that keeps on giving, it can also serve as a complement to your business and help expand your clientele. 

Let’s Take a Look a Three Core Reasons:

  1. Leads to an Increase in Engagement.

 When a current customer refers your business to someone in their circle, the referral will search for more information about your company. The quickest and easiest way for a referral to go about this search is to visit your website and social media pages. In turn, the increased visits to your site will lead to more purchases, meaning a higher potential revenue. 

2. Help Increase in your Closing Rates. 

A statistical analysis done by Huffington Post showed that the closing rate of a cold call is usually less than 1% compared to the closing rate of an inbound lead, which is generally between 15%-30%. When comparing them, a quality referral can account for an 80% closing rate. 

3. A Recommendation from a Peer About a Brand is Trusted More.

This is arguably the most important benefit you can receive from a referral program. Today, more than 80% of consumers reported that they actively seek referrals from trusted peers before making a purchase. So when a customer speaks to a potential client about your company, it’s noted to them as being something of high value because referral tends to come from a  genuine place. This is then likely to result in a conversion. Let’s say that the potential client becomes your customer, chances are that they’re going to also refer you to someone else that they know, and just like that, you have created a cycle that generates leads without you doing anything. 

Implementing a Referral Program. 

Referrals are at the core of generating new business for a company. They take minimum effort to create and maintain and can result in increased revenue. Here’s how you can start building a referral program:

  1. Set your goals 
  2. List possible customer referral sources 
  3. Make a plan to reach out 
  4. Identify your referral incentives 
  5. Create resources to alert your customers 
  6. Set up tracking 
  7. Say, “Thank You.”

Key Takeaways 

Referral programs are an excellent way for your current customers to spread the word about your business. We see that recommendations from peers play a huge role in consumers’ purchasing decisions and can also help improve various aspects of your business, such as increasing closing rates and engagement. If your current business strategy does not include a referral program, now might be the time to implement one. 

Citations

-closing rate stats

https://www.huffpost.com/entry/why-every-business-needs-_b_3767485

-engagement 

https://www.business2community.com/loyalty-marketing/15-reasons-why-you-need-a-referral-program-02179969#Conclusion-Why-referrals-work

-Made up the importance points 

https://referralrock.com/blog/reasons-why-you-need-a-referral-program/

-80%

https://www.business2community.com/marketing/numbers-dont-lie-2016-nielsen-study-revealed-referrals-01477256#TRrVqUTL4gqFCJqb.97

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