Lancer Insurance
Wednesday, November 29, 2023

By Pat Charla

Call it referral marketing, word-of-mouth advertising, or giving PROPS to those who’ve earned it. Whatever you call it, the practice of prompting satisfied customers to refer your services to people they know is slated to be the most buzzworthy trend in marketing in 2018 (and we don’t see the trend slowing anytime soon).

According to the National Harris Poll Survey, 82 percent of Americans seek recommendations from friends and family before they make a purchase. Every sector of business, from mom-and-pop shops to top-heavy conglomerates, are taking note and are busy implementing some form of referral marketing into their repertoire. Referral marketing is loaded with benefits for you, your customers, and new prospects that come your way.

Here are the top five reasons you should be utilizing referral marketing in your advertising strategy.

5 Reasons Referral Marketing Should Be Your #1 Strategy 1. It Comes Naturally (Kind of)
When your customers receive outstanding service from a particular company, one of the first things that many want to do is to shout about it from the rooftops. People are highly likely to pass along praise when praise is due—research shows that people are hardwired for it. However, sometimes those wires get crossed, and people won’t pass along the good word unless you ask them to.

The act of asking adds a whole new dimension to the game of referral marketing. In psychology, there’s a phenomenon known as the Ben Franklin effect. In its simplest terms, it states that when we ask someone for a favor, they are more likely to do us more favors in the future. In essence, it creates an internal message within the favorer. They must like the person (or in this case, business) since they went out of their way to provide a favor. This phenomenon can help you create more loyalty among customers who are already primed to spread the word.

An astonishing 83 percent of satisfied customers are willing to pass along positive reviews about awesome services to their family and friends—though only 29 percent of them actually do. By tweaking your tactics to pointedly ask your satisfied customers to refer you to people they know, you are ensuring that the hardwiring stays in place to generate buzz about your business.

It is natural not only to pass along a good word about a specific company, but also for those who receive the positive review to trust the information coming from someone they know. Business consultant Darrel Zahorsky says that people are prone to feel more comfortable when a trusted friend, family member, or colleague gives them a referral, particularly if that referral is for expensive services.

When a satisfied customer trusts you, they automatically pass along that vote of confidence in their referral. Even if they’ve never heard of your company before, the inherent trust from their friend or family member gives you an in.

Ninety-two percent of buyers trust recommendations given to people they know. Compare that to the 37 percent who trust search engine ads, and you’ll get an idea of how important referral marketing is.

YouGov, an online data clearinghouse, says that even though many people don’t trust online reviews, they still use them for information when it comes to making a purchasing decision. That means these reviews can serve as a kind of mini-referral system if you urge people to post positive feedback on your services.

2. You Get Leads No Matter What
Many lead-generating practices can be like fishing in the dark with a tiny line; Entrepreneur magazine says referral marketing is more like fishing with a giant net. The chances are excellent that you’re going to get fish no matter what—you just don’t know what type of fish you’ll get. You may end up with a few minnows, a couple of trout, or even a big-mouthed bass that lands you a whopping deal. One thing is for sure: You will get something in exchange for your effort.

You can probably predict the approximate number of fish you’ll get, too. Keep your concentration on the process of casting your net and not the individual fish, and you’ll keep the leads swimming your way. And when you catch that giant bass, you’ll know that bass is automatically yours.

The process may take some time, and there may be more minnows than bass in your pond. Even so, you should never discount any single fish, but work on establishing a meaningful relationship with every one. Even if the minnow doesn’t pan out into a giant sale, he swims in the same pond as the big fish all day. He may eventually send his bass friend your way.

People have many hidden, unpredictable, and complex connections to each other, both in daily life and in the business world. If you keep casting your net and asking for referrals, your catch can reveal those surprise relationships that might eventually make their way to you.

All fish analogies aside, the bottom line is that referral marking is reliable. Dependable customers are likely to send other steady customers your way. And, unreliable customers? They probably aren’t reliable enough to remember to give referrals in the first place, so you don’t have to worry about catching the proverbial useless, muddy boot (Sorry, but we couldn’t resist one last fishing reference).

3. Chances Are High for Loyal Customers
Referred customers already enjoy a level of trust in your business. They are also more apt to stick around and trust you for the long haul. A Wharton School of Business study found that referred customers were 20 percent more likely to stay loyal to a company than their non-referred counterparts. The study also found that people are prone to enjoying a stronger bond with a company if their friends, family members, or colleagues already have an attachment to that company.

Pretty neat, huh? Referral marketing not only helps you gain a loyal following, but it can also assist you with that nagging problem of customer retention. Marketing pros who took part in IMB’s annual survey said one of their greatest challenges was retaining existing customers while improving loyalty and satisfaction levels. That challenge can meet its match with an effective referral marketing program.

If a referred customer reports back to the person who made the intial recommendation about how happy they are with your services, the source is reminded of your greatness, and their bond with your brand can grow. You can also up the ante by rewarding customers who send referrals, giving them another reason to be satisfied with your ground transportation company.

5 Reasons Referral Marketing Should Be Your #1 Strategy 4. It Costs Less than Other Marketing Maneuvers
Referral marketing is known as one of the most cost-effective marketing strategies, and it earns that title for several reasons. While you may want to compensate your existing customers for sending more paying customers your way, that outlay can be offset by the cost-cutting referral marketing carries.

Referral marketing doesn’t just cut the cost of your marketing budget. Referred customers often pay better than customers you dig up from scratch. The equity firm of MCM notes that referrals are typically less price sensitive, and they’re less likely to try to haggle for a bargain.

After all, they’re already sold on your services, thanks to a trusted pal who sent them your way. ReferralCandy reports that referred customers average a 25-percent higher profit margin than non-referred customers, and Wharton conveyed their finding that referred customers have 16 percent greater lifetime value than other consumers.

Referral marketing can keep costs low by:
• Reducing your sales cycle; therefore, your sales expenses.
• Eliminating the wheeling and dealing with prospects previously primed to pay full price.
• Decreasing your marketing efforts and budget since you’re focusing on customers who are already thrilled with your services.
• Boosting your sales cycle with leads generated from the network of happy customers.

The biggest benefit of all is your bottom line: All the new customers came at a much lower cost than it would have cost the company to snag them through other marketing methods.

5. It Creates Its Own Momentum
A good referral program can be the gift that keeps on giving. Think about it: One happy customer passes along the good word to two of their colleagues. Those two colleagues use and enjoy your services, passing the news to two of their colleagues. You get the idea. In a rather short time, your referral marketing program can rapidly multiply, gifting you with plenty of prospects already attracted to what you have to offer.

With all those interested prospects, you’ll have the power to pick and choose the high-quality leads that are apt to be profitable for your business. You can then focus on them first, building more referrals from the awesome service you’re sure to provide your newly referred prospects.


Even though people are hardwired to pass along happy information, rewarding them with discounts or gifts for doing so never hurts. Referral incentives are just one way to get your referral marketing system up and running.

Here come some others:
• Always exceed expectations (or at least try to). Customers remember when a company goes above and beyond, making them more likely to rave about their experience to their colleagues and friends.
• Don’t be afraid to ask. Remember that most people want to pass along a good word, but most will not unless prompted.
• Time your request properly. The best time to ask for a referral is right after someone just told you how great you were. br /> • Pass along your own referrals. Remember which companies refer you to others, and then refer them to people when there’s a need for the services they offer.
• Use your networks. Networks are a prime place to seek out and pass along referrals. In fact, some networks are formed with the main purpose of generating and sharing referrals.

One more tip is to create a referral system. It doesn’t have to be elaborate, just consistent and reliable. Outline the system to your employees, and have everyone join in the game. The Houston Chronicle suggests asking existing customers for referrals, and offering a discount on your services if their referrals turn into paying customers. You can also offer your own suggestions on when and where it could be useful to refer your company, such as at a business seminar, or among their colleagues in a business group or network.

Word-of-mouth advertising has always been effective, and it’s truly primed to hit its full stride in the coming years. Heinz concluded that companies with referral programs had 86 percent more revenue growth over two years when compared with businesses that don’t take part. With all the online fanfare, and marketing messages competing for attention, a good word from a trusted source can be more valuable now than ever. That value is increased even further, as you learned, by the top five reasons referral marketing rocks. You found out it more or less comes naturally. It gives you leads no matter what. It’s prone to produce loyal customers, and it costs less than other marketing tactics. It’s also a gift that can keep on giving, building on its own momentum for years to come.   [CD0418]

Pat Charla is the founder of DriveProfit. She can be reached at