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Customer Referrals: The Theory & Benefits

A growing business will almost always rely on word-of-mouth to succeed. Whether it is talking about their products and services on social media or gathering recommendations from people who have already invested in their product, customer referrals are a powerful tool for growth.

By bringing new customers into your service or business, you’re helping them feel more confident in what you offer and supporting their decision to use your product or take advantage of one of your offerings.

It’s all about creating an experience that makes other people happy and encouraging them to spread the word. This article will go over some theories as to why this is so important for businesses and how to implement referral programs at yours.

There will be no sales pitches, just information! So get ready to read and learn. Let us begin then.

Customer referrals are your brand and your reputation

Side view of crop concentrated young ethnic female using touchpad of netbook and shopping online

As mentioned before, referrals are one of the most effective ways to gain new business. When you provide excellent service that people talk about, they will bring in other clients. Your current customers who praise your work are an incredible way to grow your career.

They’re also the easiest kind of referral to get. You would not ask your best friend how she met her next-big-thing boyfriend, so why ask potential customers how you can make more money? Simply put, be genuine and helpful, and watch your business mushroom.

By creating a level of trust with your community, you create growth opportunities.

Customers are always looking for new brands

Customer Referrals: The Theory & Benefits

As mentioned before, your business will not remain successful without word-of-mouth marketing. When their friends tell them about you or what they like about your product/service, they will sometimes do one of two things: try out the products or services and give it good reviews or use your products or service and give it high marks!

This is referred to as customer referrals. Word-of-mouth is one of the most powerful types of advertising there is because it’s cost-effective and comes with no risk.

If someone hears great things about your company, then they may want to purchase your products or services themselves – creating a repeat buyer. Over 70% of all purchases are made due to recommendations from other people.

So how can you get more referral sales? Here are some tips that we will discuss later in this article. For now, though, let’s look at the theory behind getting lots of referrals.

They can be your best advertising tool

Customer Referrals: The Theory & Benefits

As mentioned before, referrals are one of the most effective ways to gain new customers for any business. When you provide excellent service or offer quality products, people will tell their friends about it.

By creating an online community where others can talk about you and what you do, they will!

This is called referral marketing and it’s possible to do it on social media sites like Facebook and Twitter. By offering rewards to those who refer you to more businesses, you can attract even more attention.

The theory

Why not use social media as a way to generate new sales? Companies that earn lots of money use reward programs to draw in new members.

For example, Amazon offers cash-back rewards for buying specific items or via certain brands. This creates a buzz because everyone wants the cash prize or brand-name item.

And while some may think this is expensive to run, the cost per sale can easily outweigh the expense. A few dollars spent on advertisements each month can result in substantial revenue down the line.

How to implement it into practice

There are two main reasons why implementing reward program strategies on your website is a great idea. First, most websites have some form of membership or loyalty program already, so using them as a source of income is already set up.

Second, making purchases is a pretty natural thing to do.

Customer referrals can be tough to get

Young woman in casual clothes helping senior man in formal shirt with paying credit card in Internet using laptop while sitting at table

Even though direct sales is all about you as individual selling products, there are other ways to make money from your business. One of these is customer referrals. This article will talk more in-depth about how to use this to grow your business.

We’ve discussed before why creating a website is important and what kind of content you should include. But now it’s time to look at some practical applications.

One of those is offering rewards for referring customers to you. A growing number of companies offer reward programs that pay you (the referrer) for each person who joins by giving you a percentage or dollar amount of their subscription or purchase.

The reason they do this is that people are influenced by the things others buy, and word-of-mouth advertising is one of the most powerful types. By paying you for referrals, they’re helping promote their product!

What is referral marketing?

This is when someone refers a friend or family member to a company to try out a service or pick up a merchandise item. It’s like having a party and getting paid for having guests. Only in this case, the guests are people looking to try out a product or join a club.

Customer referrals should be nurtured and appreciated

Customer Referrals: The Theory & Benefits

As we already discussed, referrals are one of the most powerful marketing tools in the business. Not only do they help you to connect with new customers, but people who refer your business show an interest in helping you succeed by promoting you and your products.

By asking your colleagues and friends for their contact information or taking a look at a product you have recently launched, you can gain some valuable insights.

Your peers may find what you offer no longer useful or effective so they will probably drop off these services. This could mean losing out on revenue – even if they never paid for the service yourself! Or they might discover another provider that offers better quality or more features than you do.

Either way, you’ll still get exposure since they’ve linked to you. And beyond just sales, referral contacts often provide feedback about how you run your business and whether you match what they believe to be your mission or not.

They should be rewarded

Customer Referrals: The Theory & Benefits

As mentioned before, your business depends heavily on how well you market yourself and what products and services you offer. Customers are a valuable resource that can do more marketing for you than you might realize!

By establishing relationships with your customers, they will feel comfortable to recommend you to their friends or colleagues. This is especially true if these people know good of you as an individual and not just as a company.

The easiest way to gain referrals is by offering quality service. But it’s much better when done in conjunction with providing quality products that will appeal to your customers.

With all this said, here’s an easy trick to maximize the effectiveness of customer referrals: give them something for nothing. A discount coupon for one of your products, a gift, or even a free hour of help from yours truly – the author of this article!

I understand! I do – but my hard work has paid off (for me at least) so why wouldn’t you? It’ll cost you nothing but some time, and maybe a little effort to make it happen. That’s a small price to pay for major rewards.

Take advantage of this tip now, and start building trust today.

They can lead to increased sales

Happy woman jumping with shopping bags

A growing business depends heavily on people coming in to purchase its products or services. As such, the success of your company relies on them!

Businesses spend lots of money encouraging customers to come into their stores or offices- some do it through special promotions, while others use advertising to draw attention. What most companies don’t do is take advantage of one of the greatest assets they have- you.

That is why I would like to talk about something that has helped many businesses gain momentum and grow – customer referrals.

What are referral rewards? That is what you get for bringing an individual into another business or organization. It could be for buying merchandise, seeking service, or both.

The referrer receives a reward (the benefit) for introducing you to someone else. For example, if you go to gives 10 dollars to each person who visits a restaurant page on their site, then when someone you know goes to a restaurant and orders food, you get 10 dollars as well!

Referral rewards can be virtual gifts (like a discount card or free item from Amazon) or physical items (T-shirts, pens, bags, etc.). It doesn’t matter whether you’re giving away coupons for groceries or software, the important thing is to give something valuable to your recipient.

Customer referrals can lead to increased profits

Customer Referrals: The Theory & Benefits

As mentioned before, referrals are one of the most powerful tools in marketing. When you provide excellent service that people talk about, they will bring in new customers for your business.

The more people who know about your product or services, the more likely they are to use it themselves is an effective way to increase sales. It also creates a sense of loyalty which is always good to have.

By giving someone else our contact information, we’re telling them there’s a reason to come back to us. If they receive good service, then they’ll spread the word and help you earn money from advertising, supplements, or even taking merchandise orders.

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