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5 Simple Benefits of Referral Marketing

Referral marketing has become increasingly popular in recent years.

It's a great way to get business from customers who already know and trust you. It's also an effective way to grow your business. But if you're not familiar with it, you may not know what works best for your company.

So...How much easier would things be if you had a legion of brand advocates tirelessly advocating on your behalf with the only goal being to help you grow your business? Amazing right?!?

Well, that’s exactly what referral marketing can do for you. It’s one of those “free money” strategies that will pay off big time if used correctly.

But before we dive into how to acquire potential customers through referral marketing strategies...

...What exactly is referral marketing? 

Referral marketing is a marketing strategy where companies use existing relationships to generate new leads or sales. In other words, referral marketing helps businesses build their customer base by leveraging the power of word-of-mouth recommendations.

The idea behind referral marketing is simple:

When someone recommends your product or service to another person, they are essentially telling them that you have something worth buying.

5 Benefits of Referral Marketing

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1) You'll be targeting a more specific audience.

Your existing customers already use your product or service, which means they're likely to recommend it to their friends, too. So why not start a referral program specifically for your trusted brand evangels?

The best part is that this strategy will help you build a loyal following of evangelists who are ready to spread the word about your business. As a result, your business acquires high-quality targeted customers who need the benefits your products provide, without an expensive advertising budget.

B2B businesses with referral programs have 69% faster closing times on sales and approximately 70% higher conversion rates than those who don't.

2) Increased Sales & Leads

One of the biggest benefits of referral marketing is that it increases sales and leads. A referral program can help you increase your revenue by optimizing your sales funnel. Referrals are proven to produce a higher return on investment (ROI) than cold calls or generating brand-new sales leads from scratch.

A referral program also helps you reduce your sales budget because you focus on customers who are already happy with your products and services, instead of spending time and money trying to sell to new prospects. You can generate referrals through existing customer relationships, social media campaigns, word-of-mouth recommendations, and online advertising campaigns.

78% of B2B marketers say that referral programs generate good or excellent leads.


3) Improved Customer Service

Another great benefit of referral marketing is that customer service improves. Reading customer reviews are the new trend. Why? Because we want to make sure we're getting exactly what we paid for.

By paying attention to your customers' comments, reviews and questions your customers feel valued. Consumers feel more comfortable recommending your product or service to their colleagues, friends and family because they know that these referrals come from people they trust.

What is more, people are 5X more likely to recommend your product to their friends and family when they have a good customer experience.

 4) Better Brand Awareness

Referral marketing allows you to increase brand awareness. Consumers are generally selective about the brands they use and favor brands that have a positive reputation. Therefore, building brand awareness and reputation is essential. A strong referral program gets your existing customers talking about you.

In fact, 49% of USA buyers say that their friends and family are their top sources of brand awareness.

5) More Traffic To Your Website AND increase SEO at the same time

A final benefit of referral marketing is increased traffic to your website. This is exceptionally important in any inbound marketing strategy. The more people that see your website, the more potential clients you'll attract. And with more traffic, your product or service gets in front of new people, giving you that opportunity to turn that visitor into a lead for your sales team to close.

And the bonus...referral traffic has some great SEO benefits, too! When someone visits your website from another site, they're clicking on a link or completing a task on a social platform. Search engines like Google consider these links and social signals as positive ranking factors as long as they're coming from other trusted websites.

Customers are 92% more likely to trust the word of their peers over traditional advertising

Now that we've looked at some of the benefits of referral marketing, let's take a closer look at how this strategy actually works.

How Does Referral Marketing Work?

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In order to understand how referral marketing works, you need to first understand the psychology behind it.

When someone recommends another person or business to you, there are three main reasons why they might make such a recommendation. These reasons include:

1) They Like You

People usually recommend businesses or products that they like. If they don't like you, they won't recommend you.

2) They Trust You

People usually recommend other businesses or products that they trust. This means that they believe that you will treat their friend or colleague fairly.

3) They Want What You Have

People usually recommend businesses and products that they think their friend or colleague wants. For example, if you sell shoes, then you may recommend a shoe store to a friend who has just bought a new pair of sneakers.

Things to Consider When Implementing a Referral Marketing Program

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The overall goal of a referral program is to generate more satisfied customers, ensuring you have a continuous cycle of repeat clients and referrals. However, there are several things to keep in mind when implementing a referral program.

Make sure your referral marketing program is easy to join

If your referral program requires users to sign up for an account, collect personal information, or fill out forms before they can refer a customer, then you could be losing potential customers. In addition, if your referral program takes a lot of effort to implement, you could lose those initial referrals.

Get feedback from your existing customers

If you already have lots of loyal customers, then ask them what types of programs they'd be interested in. Ask them which types of promotions they'd find most useful, and use that insight to create a referral program that helps them achieve their goals.

Offer incentives

Offering rewards to your customers for referring others gives them a reason to share your brand with friends and family. Think about what kind of incentive would encourage your current clients to refer you to others. Maybe you can reward them with discounts and other perks when they refer new users to you. And if they do so by sharing an article about you on social media, you'll get even more exposure!

Use social media

Social media sites like Facebook, Twitter, LinkedIn, and Google+ allow you to easily send messages directly to your customers' networks. By sending these messages through social media channels, you're able to reach a much larger audience than you would by simply mailing postcards or flyers to your customers' homes.

Referral marketing software

Referral marketing software such as our proprietary software, Together Social App, blends social media management and referral marketing. Not only does it make is it easy to manage and publish to multiple social networks, it also seamlessly captures leads, runs sweepstakes and contests, incentivizes sharing and more. Social CRM's and other referral marketing software is a must have to streamline your referral process. They allow your customers to share promotions in a fun and easy way while pinpointing your Brand Ambassadors while reducing the cost of customer acquisition.

Set goals

What good is a referral marketing program without goals? Are you wanting more qualified leads, increase revenue, or manage your brand reputation? Determine your goal, then work backwards creating your strategy.

By setting clear and attainable goals, you're increasing sales revenue, providing a higher conversion rate than non qualified sales leads. You're also generating a better overall ROI on your marketing strategy.

Developing a well planned program designed to capture referrals will not only boost its early potential, but create long term results.


Take time to plan out your referral program's marketing strategy. By working backwards from your goal you'll be able to craft a referral strategy that best suits your target audience. You'll see an increase in your initial potential, and create long term results.

Start with identifying your ideal customer.

  • Who is your ideal client?
  • Do you want to target specific demographics?
  • Or do you want to reach out to everyone?

It's completely up to you. But whatever you decide, be sure to identify your ideal customer before implementing any referral program strategy.

Keep track of your results

Once you start tracking the performance of your referral program, you'll know whether or not it's working. If you notice that your referral rates aren't increasing, then you should adjust your strategies accordingly.

You can measure the success of your referral program using several methods. Here are a few examples:

  • How many referrals did you get?
  • Which channels were most successful?
  • How much money did you spend?
  • Did you achieve your target audience?
  • Which campaigns generated the most conversions?
  • Which campaigns had the highest ROI?


You should always choose your timing carefully. You may be tempted to ask for an immediate referral after a sale, but you'll usually find more success if you allow customers some time to evaluate their purchase before asking them to refer you. Say thanks. If your customer base hasn't built relationships on trust, referrals may dry up. Send a personalized thank you to every customer that offers a referral. Treat your valuable customer base with gratitude, and respect. With a strong referral program in place, your marketing ROI will go through the roof and your sales conversion rate will skyrocket.

Final Thoughts

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So, as you can see, referral marketing is all about building relationships. In order to build strong relationships with your customers, you must first develop relationships with your current customers.

Once you have done this, you should use these relationships to get recommendations from your existing customers. By doing so, you will be able to grow your business in ways that you never thought possible before.

Referral marketing programs boost your lead generation efforts at a fraction of the cost of running paid ads. It's provides trust, brand awareness, and increases leads resulting in happy customers. If you operate in an extremely competitive market, this could be the approach that sets you apart from the competition. With many marketers becoming stuck in the sedative loop of investing more and more money into their Pay-Per-Click ads and SEO with no significant increase in return, you may want to consider shifting your efforts towards referral marketing!Email header

Prospectary, LLC provides turnkey digital marketing solutions, including referral programs.

Start a referral program on your own with our proprietary referral marketing software or let us do it for you.

Contact us today at 813-336-8875 to reduce your cold calls and increase leads by optimizing a variety of referral strategies.