Referrals are vital because it is challenging to grow and make new businesses successful.

A new business could take several years to get off the ground.

Meanwhile, the owner must implement several marketing strategies to attract more leads and customers.

This requires a substantial upfront monetary investment with no guarantee of a profit.

How would you like to avoid investing in pay-per-click ads, email campaigns, and other inbound marketing methods?

The one marketing method that requires no investment whatsoever is referral marketing.

What is Referral Marketing? 

Referral marketing is when your existing customers recommend your business to others they know.

These could be their friends, family members, colleagues, or acquaintances.

It is not to be confused with affiliate marketing, which consists of professional marketers promoting your products or services in exchange for a commission on each sale.

You can give rewards to your customers for referring people to your business.

The referrals don’t necessarily have to buy anything either.

For example, you could provide a $20 bonus to any customer who refers at least three people to sign up for an account on your website.

It doesn’t have to be a lavish reward, but it should give your customers an incentive to refer your business to their friends and family.

You could use several tools to make it easier for customers to refer people.

Below are the three most common tools:

Social Media

Social media tools are used the most. If you scroll to the bottom of most websites, you’ll see social media buttons for Facebook, Twitter, YouTube, and Instagram.

When someone clicks on a social media button from a website, it will automatically take the person to their account on that social media platform.

The website URL address with a referral code gets inserted into the message box.

All the person has to do is click “Submit”, and the referral URL is posted to all their friends and followers.

Invite Link 

An invite link is a custom referral URL for each customer account of a website.

A customer can copy the invite link and paste it into an email message, social media post, or text message.

It is a fast and easy way for them to refer your website through any platform they want.

Add Email Box 

An email box lets customers refer people via their email addresses.

If customers know the specific email addresses of potential referrals, they can add those email addresses to an email box on the website and click “Send.”

All those recipients will receive an email with a custom referral link to the website.

What Are The Top 5 Benefits of Referral Marketing?

If starting a new business, you should seriously consider utilizing the power of referral marketing.

It is the best source for gaining new customers and leads, whether you have a new business or not.

Below are the top 5 benefits of referral marketing.

1) Reduce Your Budget with Referral Marketing

Customer referrals can reduce your marketing budget considerably.

If customers actively refer your business to other people, you don’t have to run such expensive pay-per-click ad campaigns.

Instead, you can use some saved money to reward your customers’ referrals.

Don’t forget that each new referral could become another customer that refers people.

It sets up a chain reaction of customers referring new people and those referring more people.

Sooner or later, you won’t need to worry about your marketing budget.

2) Say “Goodbye” to Cold Calling

Cold calling is the one thing business owners hate the most.

Most people don’t like to receive phone calls from marketers and business people promoting their products and services.

It is also awkward for the business person because they’ve experienced the same feeling from other cold callers before.

Referral marketing eliminates the need for cold calling. All the customer referrals will come to your business with an open mind because someone they trust had referred them to it.

3) Improve SEO

Referral marketing is a form of SEO marketing. When your customers start promoting your website’s URL referral links on social media posts and blog posts, it will create backlinks to your website on those platforms.

The Google search engine will detect those backlinks and increase the rank of your website on their platform.

After enough referral links get posted, your website may become an authority in its niche.

Then you will see your website rank at the top of the search results pages.

4) Get More Positive Reviews

Positive reviews are what every business loves. Letting your customers send referrals to your website will increase the number of positive reviews for your business.

Your customers will post more positive comments about your website on social media, blogs, review websites, and so on.

Some of your customers may try promoting your referral links like affiliate links.

There is nothing wrong with that necessarily because the referral rewards are still the same.

It also increases word-of-mouth about your company to strangers as well as friends of your customers.

5) Referral Marketing Increase Sales and Profits

Here is what you probably care about the most. As you gain more customers and referrals, your sales and profits should increase right along with them.

You will have an easier time convincing people to purchase from your business because of the trust they have in it.

You might even find that referrals are willing to spend more money on your products or services. That is why you can expect much bigger orders.

Final Words

It doesn’t take much effort to get started with referral marketing.

Just hire a programmer to create a referral system for your website, where people can generate custom referral links.

Then you can track the progress of those referral links in your administrative dashboard.

That’s how you’ll know which customers deserve the most rewards.

Originally published May 8, 2021; Republished October 10, 2023, to add video.