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Referral Marketing for small business. Benefits and Best Tips 

referral marketing for your business

Is referral marketing for small businesses viable? Can a small business benefit from referral marketing? Or is it only for the big guns?

Referral marketing is one of the best advertising strategies ever created. Businesses from numerous sectors utilize this form of advertising to promote their services to other people. Here are some stats to back this up.

  • 82% of B2B sales leaders are convinced that referral marketing generates the best leads.
  • Every 1 happy customer can refer your services to up to 9 people.
  • 92% of customers trust referrals more than advertising.
  • People trust referrals from friends seven times more than any other advertising method.
  • Referred customers tend to spend up to 16% more money with your company.

It is estimated that around 2.4 billion conversations occurring daily in the United States are brand-related. 

How can you make as many of these conversations as possible about your brand? 

In this article, we focus on the main benefits of referral marketing and the tips to make it your most effective marketing channel. 

If you’re curious to know what they are, you’re welcome to join us for this interesting read!

What does referral mean? 

While the term marketing probably doesn’t need a lot of explanation, it can be problematic to accurately describe the meaning of ‘referral’ in the advertising context. 

The ‘referral marketing’ expression often gets thrown around in business conversations. 

But do you understand the meaning of it completely? What does a referral mean by itself?

A referral is an act of promoting or endorsing a product, company, or service to others. 

Referrals are done by people with authority and credibility – in your case: by your customers. A referral can also be a person endorsing one company’s services to their friends, family and so on.

Marketing experts use the word referral in the context of marketing to express the act of gaining new customers through recommendations. It is often used in terms of acquiring new customers thanks to your already existing ones. 

So, what’s in it for you?

Referral Marketing for small Business – Benefits

Every marketing method has its own benefits – some have fewer, some have more. The benefits of referral marketing are varied and can directly impact your brand reputation, bottom line and customer base. 

Improved customer retention rate

Are you tired of customers coming and going from your business? Do you want them to stay and prosper with you? If the answer to both of these questions is yes, you must give referral marketing a try. 

One of the many benefits of this marketing strategy is that it can have a tremendous effect on your customer retention rate. Of course, a positive effect. 

Referrals are considered one of the most powerful tools when it comes to building customer relationships. They create more customer intimacy and deepen brand loyalty, which directly impacts the retention rate. 

When customers refer their friends, they are more likely to stay loyal through the duration of their relationship with your business too.

Increased brand awareness

When you have a lot of people talking about your brand to other people, your recognition in the market increases. 

A well-known brand is one that is referred to by many people, is often mentioned and easily recognisable. 

The people who recommend your products and/or services to others are thought of as credible, trustworthy, and knowledgeable within their environments.

When a lot of people are creating buzz around your name, it’s natural for new people to show interest in your company. 

This contributes to your brand awareness rising within your market and, essentially, exposes you to more potential customers. 

Now, you surely can’t go past a benefit like this, can you?

Decreased customer acquisition cost

As we move forward, let’s look at how referral marketing can reduce customer acquisition costs. 

A company may reduce its CAC by targeting customers that are more likely to buy their product or service. 

For example, a company that sells luxury goods may want to target affluent customers who can afford their products. This type of promotion would be more expensive than promoting the product on TV to reach as many people as possible.

Advertising might also cost less if it is targeted instead of mass-marketed. This is exactly when referral marketing turns out to be very handy. 

When referrals refer your business to other people, in hope to get some attractive incentive in return, they will make every effort to ensure they’re sending their referral links to the right people. After all, it’s within their interest as well to have a good referral rate and bring new people to your company. 

Thanks to the fact that referrals work as your brand ambassadors who earn incentives for increasing your customer base, your CAC can be significantly decreased. 

You only reward your customer when they perform a valuable action from your perspective. For example, it could be encouraging a friend to purchase products from your company. This way, the cost of acquiring a new customer is lower and also paid only when successful. 

High ROI

Together with decreased customer acquisition cost, you can expect to enjoy a pretty good Return on Investment with your referral marketing efforts

This marketing technique can be really beneficial to increase your Return on Investment

While the exact numbers vary by industry and markets, referral marketing can generate a ROI of even more than 15x, compared to the cost of the original investment.


Little effort needed

Finally, referral marketing is a great way for small and medium-sized businesses to expand their client base and grow their customer base. This is especially important when they don’t have a lot of time to manage it.

Effective solutions that require minimal input are usually liked by businesses and referral marketing is one of them.

When a referral system is up and running, it requires very little effort to maintain it. A business only needs to set up the referral marketing system and keep track of the referrals generated. 

Once this is done, they can enjoy all the benefits of having a well-oiled promotional machine in place.

Referral marketing for small business – Best Tips 

All these benefits of referral marketing seem very attractive, there’s no doubt about it. But just like with any other advertising strategy, you need to know how to get things started at the right speed. Otherwise, you may find yourself missing out on these great perks.

Make the process easy with a reliable referral marketing tool

To begin, it’s important that you make your referral marketing process easy for you, as well as for your customers. Picking an effective platform to manage your referrals is vital to ensure this.

Keeping things as simple as possible together with using some powerful software will definitely benefit you. 

First of all, you will be able to quickly get used to your tool and learn all its features. This will allow you to use the referral program to its full potential. 

Second of all, you should keep in mind the convenience of use from your customers’ perspective. Try to make things easy. The easier it is for them to refer you, the better results you can expect from your efforts.

And the more people are using referral marketing to promote your products or services, the more people you’ll be able to reach. 

All of this will go a long way in increasing your sales and customer satisfaction. Isn’t it great?

Take advantage of influencers 

Another good tip is to take advantage of influencers and the power they hold. If you’re lucky enough to have some influential individuals within your customer base, it’s time to put this fact into use. 

While there are some differences between influencer and referral marketing, there also are some similarities that are worth looking at.

Influencers are becoming increasingly popular in the marketing world, with many brands seeking them to help promote their product. 

In fact, influencer marketing is worth 13.8 billion U.S. dollars in 2021. If you want to create a persuasive marketing campaign, influencers are the way forward.


Influencers are able to provide customized content for your brand that is considered more authentic and trustworthy by consumers than traditional advertising campaigns. They also have an established following of people who will listen to what they have to say. 

An effective referral marketing strategy isn’t complete without influencer outreach, so do keep this in mind.

Use interesting incentives 

Moving on, let’s not forget that referral marketing isn’t just about how many people you reach or how big your customer base becomes. 

Without attractive benefits for your potential referrals, you won’t go a long way with your strategy. 

Customers are more likely to refer your business to other people if they feel appreciated or have some type of incentive that is valuable to them. 

It does not have to be a monetary reward. It could be an experience or an intangible prize. This is your time to get creative.

For example, customers can get a 10% off coupon for each friend referred up until the fifth referral. 

They will still want to share with their friends because of the discount, but not for personal gain which can lead them to be less proud of referring to their friends in comparison.

Pay attention to customer engagement

Referral marketing is all about building trust and advocacy. 

The more you can do to keep your customers happy, the higher your chances are of them sharing their positive experiences with friends, family, and followers.

Showing that you care is very simple. It can be something as little as a single email to your customer with some nice words. 

While the possibilities are endless, one thing to remember is to always show interest and engage with your customers regularly.

Monitor, monitor, monitor

Finally, let’s focus on the importance of analysing your efforts. 

To understand what you do correctly in referral marketing (or not, and how to change it), you should regularly track your performance.

This includes paying attention to things like the number of visitors, subscribers, customers, referrals and social media mentions.

to name a few examples. 

Without it, even the best tool and the most wonderful customers won’t be able to make your referral marketing strategy successful. It’s all about looking for patterns and things to improve. 

And this is only possible when you track your performance. 

Referral marketing for small business – how to get started?

We recommend you begin with picking your platform first. 

Knowing what type of tool you’re going to use has various benefits:

  • know what features you can use later on
  • can plan your referral strategy in line with the tool and its capabilities
  • get time to get familiar with it before customers begin using it 
  • get a chance to see if the interface will be easy to navigate for your customers

and more.

From our side, we can add that EarlyParrot is a great solution. Whether you’re a SaaS or an e-Commerce business, this tool will exceed your most sophisticated demands and wishes.

EarlyParrot is for coaches, course creators, event hosts to grow through referrals and fill upcoming launches, webinars, or email list.

You may also want to choose from benefits like custom theming, original rewards, advanced fraud detection, translations and more. 

Check it out today and start your referral marketing journey effectively with EarlyParrot.

Over to you

We hope you enjoyed this short but insightful article. 

Referral marketing, when done right, can boost your business on many levels. 

Whether it’s through an increased ROI or an improved customer retention rate, many companies can find ways to benefit from this marketing strategy. 

If you want to deepen your knowledge around the topic of referral marketing, make sure you check our blog out. The rumour has it that it’s really interesting.

Other than that, good luck with referral marketing. And in case you forget how great it can be, you know where to find this article!

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