Business referrals can be in different ways and with different purposes. But one thing is for sure - no business can be successful without a business referral program. As organizations take advantage of the latest technologies, they can develop contemporary and modern forms of big and small business referral programs that gamify the whole concept of marketing for their customers.
Customers enjoy taking part in business referral programs because they always have something at stake in it. Businesses offer incentives and rewards to customers who take part in business referral programs and help them grow in sales.
The point of all business referrals is the same, and that is, to have a cost-effective means of spreading positive word about a brand and its products. Customers often become a means to produce a business referral for a company or brand, without even consciously knowing about it. Have you ever recommended a product that you really liked to someone? If yes, when you did that, you created a business referral for the company that sold that product.
Since customers may bring in business referrals for their favorite brands and not knowing that they do that, educating people about how business referrals work can help them participate in the process more fruitfully.
So before moving forward, let’s define what business referrals are.
What is a Business Referral?
A business referral is a means of promoting your products or services by giving incentives to your existing customers to influence and bring in new customers.
Business referrals benefit a business in many ways. The most obvious benefit is that they help in expanding the business’s customer base, but there are other associated advantages too.
Business referrals can work between one organization and another, between an individual and an organization, or between two individuals out of whom one refers a brand to the other.
5 Different Types of Business Referrals
Business referrals can be categorized into 5 different types, depending on how one customer brings in another customer for the business.
1. Referral Marketing
In referral marketing, one customer, after purchasing from a brand, is advised to get another customer. If he gets another customer, he is rewarded in the form of a discount, cash prize, or some other gift upon the first purchase made by the new customer. This is an effective way to promote your business through business referrals, as it might end up creating a snowball effect to boost the company’s sales.
2. Affiliate Marketing
Affiliate marketing is when anyone from the audience can promote a company’s products, even if they have never bought the product themselves. If they can make a sale for the business, they earn a commission on the sale. The person who promotes is called an affiliate, and business is said to conduct affiliate marketing through an affiliate marketing program. Proper rules and guidelines are laid out in affiliate programs to avoid any confusion on the amount, timing, and payment method used to pay commissions to the affiliates. Business referrals generated due to affiliate programs usually come from high-quality leads.
3. Word of Mouth Marketing
This is an informal way of using business referrals, whereby a satisfied customer casually recommends or encourage their friends and colleagues to buy from a particular company or brand. The customer who promotes a product through word of mouth is not really paid anything from the company whose products they promote. This is a kind of business referral that’s given out purely out of excitement about and likeness towards a brand.
4. Professional Networking
This is where entrepreneurs, professionals, and the general public use their professional network to spread the use of a particular product or service. When someone promotes a product through their professional networking skills, they are again not paid any commission from the company for it. They do this to purely expand their network and find reasons to keep themselves engaged with the professional community around them.
5. Social Media Influence
We are all aware of the power of social media in influencing people’s buying behavior. Continuously posting pictures of a product or writing a positive review of a brand on its social media page are ways of using social media influence for creating business referrals.
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7 Benefits of Business Referrals
Here are 7 benefits that business referrals give to businesses.
1. They Increase Sales Revenue
Since business referrals bring in new customers into a business by recommending its products to others, it definitely causes a rise in the sales revenue. The more sales a business makes, the more revenue it gets. This increase in sales is caused by more customers buying from the brand. In order to maintain these increased sales, the business needs to make sure that it continues to sell high-quality products, or else the increase in sales will be only temporary until the new customers complain about the quality of products.
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2. They Enhance Brand Image
If the new customers like and enjoy the products when they buy based on business referrals, it builds a good brand image. New customers being satisfied means they will further recommend the brand to their friends and peers. The cycle will continue until the company has many new customers referring the brand to others. A good brand image is very healthy for helping a company achieve its long-term marketing goals.
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3. They Make Marketing Cost-Effective
Getting new customers based on business referrals costs a business less than having to spend tons of money to implement their other advertising strategies. Therefore, a business referral program is a lot more cost effective than any other means of marketing. Even having to send out newsletters to subscribers to encourage them and keep them reminded about your brand is a bit more costly than this because you at least need to prepare the newsletter every time. A business referral program, once designed and described to customers, needs no further investment on part of the business. The rest of the effort is made by the customers themselves.
4. They Reduce Your Marketing Effort
As mentioned in the previous point above, a business referral program only requires you to put effort into building it up and conveying to your customers how it works. The rest of the responsibility lies with the customers. Once they understand what to do and what they will get, they bring in business referrals on their own because they want to get the reward out of it you have promised to them.
5. They Can be Easily Automated
Most of the business referral mechanisms are established online. The link for an affiliate or a referral marketer is generated through an online mechanism. There are third party referral marketing platforms available that you can use on a monthly or annual subscription, so that you don’t even have to build the entire system on your website internally.
If you build a website on Strikingly, our business affiliate program allows website owners to earn money by referring people, using their own links that they can find in the Strikingly affiliate page.
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6. They Help You Run a Value-Driven Business
Having a well-established business referral program shows that your business is value-driven. It creates an impression that your brand cares for its customers and, therefore, awards them for helping the business grow. In most cases, customers like to take part in generating business referrals because they are really enticed and excited about the rewards they will get by doing so. They enjoy the process and take part sincerely.
As long as you can maintain rewarding your affiliates and participants of your business referral program, you will be seen as a value-driven business that deserves an increase in your sales revenues and reduction in your inbound marketing efforts.
7. They Cause Long-Lasting Results
An ad campaign might make someone buy from your business once or twice, but a business referral program is more likely to bring in long-term customers. This is because in business referrals, people hear about your brand from their friends and colleagues whom they trust. They see the message as trustworthy and not biased. They do not feel as though they are being pressurized to prefer a brand. That’s why when they make a purchase from you, they make it more whole-heartedly. If they like your product quality, they are likely to become your regular customer. This is how business referrals usually get you new customers who are loyal to your brand and keep buying from you in the future as well. This means they have a higher customer lifetime value.
Business referrals can be a very useful part of your marketing strategy. If used properly, they can drive new sales to your company and enhance your brand image.
If you build a website on Strikingly, you can create an affiliate business referral program and encourage your site visitors to participate in it. We are here to provide you with all kinds of technical support in your pursuits.