We keep hearing about the word, referral, and that, it is essential for sustainability of a business. But what exactly are the benefits of getting a referral? And how do we conduct an effective referral marketing to receive all these benefits?

Benefits of A Referral

The business of referrals makes sense for most companies for the following reasons:

1. A referral system is passive and reduces your sales expenses and cycle. Instead of employing money on call calling, you can focus on product research and better customer service.

2. Referrals snowball on their own. A satisfied customer recommends more of his friends and the cycle repeats with even more satisfied customers referring others to your company.

3. Referrals increase your sales revenue. Duh! Isn't that what business is all about? According to Tom Hopkins, in "Sales Prospecting for Dummies"; your closing ratio for non-qualified leads is 10 percent versus a 60 percent close ratio with referred leads.

Based on the three advantages of getting referrals listed above, you will think all small business owners will be falling over themselves trying to implement it right? Unfortunately no. Because they are not aware or have adopted the wrong approach in building referrals and not realize that success can be spectacular.

Referral Marketing

This brings us to the next issue of Referral Marketing. Most people don't have a clue and those who claim they are experts in getting referrals may not know either. The marketing pros are not making as much money as they like because although they’ve heard of referral marketing, they have no idea what it is about. Getting referrals has a lot to do with word-of-mouth marketing.

It is a very powerful tool for business growth as we trust the reviews of friends more than strangers. Once you have a proper referral system where referrals continue to build without much efforts, you are on your way to a profitable and passive cash cow.

To those who say getting a referral depends on luck, being in the right place at the right time, that is a load of bullsh*t. It also has less to do with who you know. Knowing Donald Trump may be prestigious but that alone is not enough to get you a steady stream of referrals.

Good Referral Business

So what differentiates a good referral business from another? First and foremost, referral marketing is not about selling or promotion. Below are three points which succintly describes the concept.

1. Referral marketing requires you to share referrals, ideas, information and support.

2. Referral marketing is about gaining trust, rapport and creating incentives for your referral partners so that a mutually beneficial partnership is fostered.

3. Referral marketing also entails educating and training your referral partners about your target market.


To put it simply, a target market is a group of people interested in your products, large enough to be worth your time, yet small enough and interrelated enough for your reputation to precede you when you arrive.

When you know what referral marketing is, you will have partnerships with people who can get you to your perfect client. Your referral partners will get you what you want more quickly and with less effort and you will come pre-approved.

Imagine what would happen to your business if you were to master this referral marketing strategy?