Biz Tips: How to Build an Effective Referral Marketing Strategy for Your SME

Biz Tips: How to Build an Effective Referral Marketing Strategy for Your SME

Biz Tip:

How to Build an Effective Referral Marketing Strategy for Your SME

Winning new clients is the aim of the game for all startup businesses. Of course to win a new client and gain exposure for your company a portion of time and money will be spent on marketing your business. A recent study of 1,394 SME business owners found that the average SME owner will be putting around 16% of their 2018/19 on marketing.

With budgets being tight in SME’s, it’s crucial to have a marketing focus in place that makes use of cost-effective means to generate business. Often a cost-effective solution can be found not in generating cold leads, but by building good relationships and offering quality service with your current clients to encourage warm leads through referral.

Sounds simple but how does this work in reality?

Referrals are the most cost-effective way to sign clients. Every penny spent on providing great customer service is repaid thorough happy clients recommending you to their friends, colleagues, and business partners. A personal recommendation holds a great deal of sway when it comes to using a new business and is a free way for you to gain new clients. If you’re not sold on their weight, research has found that personal recommendations have been found to be the number one driver of consumer purchase decisions at every stage of the purchase cycle.

It’s a very simple way of promoting your business without the need for expensive advertising campaigns, you simply need to deliver the product or service you offer well, and your satisfied customers do the rest.

Giving the nudge – encouraging referrals

Some companies, particularly the larger ones, often offer an incentive for those customers recommending them; however, this is by no means essential. Companies that have grown through this model include tech-led companies Uber, the rideshare app, and Monzo, the mobile-only bank. Uber offered free journies in return for recommending the app to a friend. Monzo offered even less of a reward for recommending the service app to a friend, with a simple bump up the ‘waitlist’ for one of their debit cards.

As with the incentive-driven approach, when a client joins your business via a referral, they are often already bought into the whole idea of your company, its background and what you deliver. You have to spend less time ‘selling’ yourself to them, and therefore the cost of acquiring them is lower. You haven’t had to run an expensive advertising campaign, send out numerous emails or texts- they have approached you!

A study conducted by customer engagement company SDL in 2014 states that it takes two years to build a trusted business relationship. Trust is a big factor at play, clients via referral often have a high level of trust automatically as they have been told by someone they trust that you are good at what you do. This is an advantage to your business as you can cut the time it takes to build a trusting relationship. Today companies make big claims, but customers are savvy, they know that not all of these big claims are real and are more skeptical, so a referral from someone they already know holds weight.

Social media usage has expedited the method of referrals, with both good and bad feedback and comments being broadcast via Facebook and Instagram. Social media can be a businesses friend if it is managed correctly and you can see referrals grow quickly via these channels. With it as a tool at businesses disposal, referrals are easier to make use of as a small business now more than ever!

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