The Value of Referral Networks

A solid referral network is an excellent way to grow your business. This group consists of people who will constantly refer your company to interested leads. These customers, employees, and partners vouch for your company and create a sense of trust.

What’s In It for Members

A business will offer group members a reward or incentive in return for a recommendation. Examples include a gift card or cash payout. After all, the group needs to be motivated to help you out.

Types of Referral Networks

Customer Referral. This is a group of customers who are on board to recommend your business. This is an informal arrangement with folks to share your business with interested family and friends. They love to earn incentives such as free products, branded swag, discounts, store credit, and entry into a drawing for a bigger prize.

Employee Referral. This system rewards employees for their recommendations. In exchange, buy them a ticket to a concert or sporting event, or pay for their training. Cash rewards and gift cards are also popular with workers.

Referral Partner. These networks are made up of businesses, customers, or industry professionals. They sign a formal agreement to refer your company to those they already know. Sharing also builds goodwill with a referral partner’s clients or connections.

Cross-Referral. In this network, your own business and related, but non-competing companies form a partnership. The parties involved are given a timeline to make as many referrals as they can. The payoff is the referrals and new relationships that result.

Referral Network Benefits

Word-of-mouth is an extremely effective marketing tactic. According to Nielsen, consumers are four times more likely to buy when referred by a friend. In addition, 83% of Americans are likely to buy a product or service when it’s recommended by someone they know.

Referral networks are a cost-effective way for a business to get new customers. The only expenses will be the rewards you hand out and the software you use.

A recommendation from a friend can cut through all the advertising noise. According to Nielsen, 92% of consumers trust personal recommendations over advertising that comes from brands.

Referrals multiply loyal customers. Folks who are satisfied will quickly recommend you to their inner circle. A referral creates a sense of trust.

How to Create a Referral Network

There are a few strategies you can use to help start a successful referral network.

Ask for referrals. Identify 3-5 friends or family members who have a large social network. Ask them to help you out.

Get testimonials. Ask past or current clients for a written recommendation. Ask how you can help them as well. Make sure they’re on your holiday card or email list.

Business cards. Make it a goal to hand out a few business cards every day. Wear a logo-branded item. Have a few opening lines on hand and strike up a conversation. You never know when someone will need your product or service.

Maximize your professional contacts. They know the community and can help your business. Offer to hand out their coupons or information in return. It’s also a good idea to get involved with local business networking groups.

Open your mouth. Make sure people in the community know what you do. Get involved and make a personal connection.

It’s not hard to make a commitment to grow your referral network. You simply need to get involved in your neighborhood activities and take action.

Need a Business Advisor? 

If you are ready to work with a top-notch business advisor, give Lodestar Advisors a call. Let us create a better plan for your business. You can reach us at 443-280-0890, or by filling out the online form at the bottom of our webpage. We can’t wait to start this journey with you!