The Power Of Referral Marketing

By Vincent Newton (c) 2008

Q: What's the number one secret you really need to know if you want to grow a big business in the shortest amount of time?

A: You need to know what your customers are telling their friends about you.

According to a survey conducted by eMarketers.com:

"More than half (53%) of Internet users had visited websites referred by friends or family members in the previous 30 days."

Industry giant Nielsen Media, who surveyed 26,486 internet users in 47 markets from Europe, Asia Pacific, the Americas and the Middle East, discovered this:

"Advertisers around the world are able to reach consumers across an increasingly diverse range of media platforms. Even so, the recommendation of someone else remains the most trusted source of information when consumers decide which products and services to buy."

And why shouldn't that be true for web-based businesses? It's certainly true for brick-and-mortar ones. I doubt that there is a person among us who hasn't been asked by a friend, co-worker or family member to recommend a good mechanic, doctor, lawyer, accountant, shoe store, or some other kind of business. You know it's true.

And what happens when you get that referral? If you trust the person who made it; if that person has credibility with you, then the business that person recommended gains instant credibility. "If Joe got treated well there, I will too," is the way we all naturally think.

Referrals from trusted friends and family members can even generate sales when the prospect is not inclined to buy. Here's an example:

Have you ever heard a bad review about a newly-released movie and, as a result, decided not to go see it? Then, someone you trust comes along and says, "I don't know what the critics are talking about. I went to see it and it was great! You should go." If you ended up sitting in the theater as a result of your friend's recommendation then you know exactly what I am talking about.

Now, we all realize that a referral is not a guaranteed sale, but it is an opportunity to make a sale to a customer who is predisposed to doing business with you because someone they trust said that they had an excellent experience with you. And that is as close to a lay-down as most people can hope for.

When a prospect walks into a place of business or arrives at a website as the result of a referral, the chances of closing a sale are much better. How much better? According to some reports, a referred customer is up to 400% more likely to buy your product or service than someone who lands on your page cold. 400%!

With those types of odds it just doesn't make sense not to mine your existing customers for referrals, does it? Of course it doesn't.

That's why you need to invest in making your current customers happy so they will pass on the good news about your company to everyone in their lives. But how's the best way to get that job done?

Many online business owners run affiliate programs that offer cash incentives to customers who refer other buyers. And while there is certainly nothing wrong with cash, pay-per-performance programs aren't the right solution for everyone. First of all, it's "pay-per-performance" not "pay-per-referral." This means that people who are providing referrals don't receive any reward for their efforts unless and until the people they referred make a purchase.

On top of that, the customer has to make an effort to fill in the referral form with their referral's name and email address. Worse, most affiliate referral forms only accept a handful of names at most.

These are just a few of the reasons why there needs to be a better way to collect the maximum number of referrals possible and to instantly reward people for providing those referrals. Of course, giving away cash for simply providing names isn't a good business model, but there are free and low-cost ways to instantly reward people that can be just as good as cash.

But you still need a way to automatically collect every possible name from each visitor. Well, it turns out that there is a way to do that.

A sophisticated viral marketing tool can gently persuade your customers and visitors to give you referrals. Even better, such a program can automate the entire process. All you have to do is plug it into your web site and turn it loose. Not only does it provide a way for you to gift your customers with instant rewards, it also will import their entire address book (with their permission, of course) right into your referral system. This is the wave of the future except it's available today.

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