GROW YOUR BUSINESS BEYOND REFERRALS: WHY SMALL BUSINESSES MUST INVEST IN MARKETING
Referrals have long been a reliable source of customers for fledgling businesses. However, while referrals are valuable, relying solely on them can limit your growth potential. To truly scale your business, it's essential to embrace the power of marketing and how it can grow your business beyond referrals alone.
In this blog, we'll explore the pros and cons of referrals and how small business owners should leverage other marketing strategies to reach new customers, boost sales, and foster sustainable growth.
THE PROS OF REFERRALS TO GROW YOUR BUSINESS
LOW ACQUISITION COSTS
One of the most significant advantages of referrals is that they often come at little to no cost. Your friends, family, and existing customers become your brand ambassadors, spreading the word about your business without requiring hefty marketing budgets.
AUTOMATIC TRUST BUILDER
Referrals come with an inherent level of trust. When a potential customer is referred to your business, that lead is more likely to convert, retain your services and recommend others than through other marketing channels.
This is because they trust the person or organisation that has made the recommendation and as a result, already have confidence in your offerings based on that recommendation.
REDUCED SELLING EFFORT
During the Awareness and Consideration stages, the sales and marketing team are often involved in multiple tactics to build trust and credibility with net new prospects. However, with referrals, there's typically less need for trust-building or aggressive selling.
The recommendation itself acts as a persuasive force, making the sales process smoother and more efficient. If you’re in an industry where sales cycles are typically longer – this is often the case in B2B sales – sales that originate from referrals often close faster as the buyer already has trust in you and is actively ready to purchase.
THE CONS OF SOLELY RELYING ON REFERRALS
One of the most significant drawbacks of relying solely on referrals to grow your business is the unpredictability of the flow of new customers. You have little control over when and how referrals will come in, which can lead to inconsistent revenue streams.
Referrals, while valuable, are not a sustainable long-term growth strategy. Your business's growth potential is limited by the number of referrals you receive, which can vary greatly from month to month.
LACK OF SCALABILITY
Referrals alone may not provide the scalability needed to take your small business to the next level. To reach a broader audience and expand your market share, you must invest in proactive growth strategies.
This is particularly important if you operate in a small or niche sector. The referral potential reduces greatly as recommendations from connections, peers, and friends begins to dry up.
SHOULD REFERRALS BE PART OF MY MARKETING STRATEGY?
Referrals can and should play a significant role in your overall marketing strategy. In fact, statistics show that referrals often serve as a primary driver of new business for small businesses, especially in their early stages. According to a study by The New York Times, “65% of companies’ new business comes from referrals”, and 82% of small businesses claim referrals to be their primary source of new customers. So, although you should look to grow your business beyond referrals, here's why incorporating referrals into your strategy is a wise move.
LEVERAGING EXISTING RELATIONSHIPS
Depending on the nature of your business, your existing customers, professional peers, friends, and family can all be powerful advocates for your business. Maintaining strong relationships with them can lead to referrals.
For the positive reasons mentioned earlier, this can have a significant impact on the early successes of your business, particularly if you have a limited marketing budget.
IMPLEMENTING A REFERRAL PROGRAM
To make referrals more integral to your strategy, consider implementing a structured referral program. This program can incentivise existing customers and partners to refer new clients or customers to your business.
A good example of a successful referral program is Dropbox. Dropbox offers free additional storage space to users who refer others to the platform. Not only this but the new user is also rewarded with additional storage when they sign up via the referral. This simple incentive encourages users to promote Dropbox’s offering which benefits both the existing user and new user, making it mutually beneficial for all.
By implementing a well-designed referral program, you not only encourage referrals but also provide a clear process for customers and partners to follow, making it easier for them to refer others to your business.
OTHER WAYS TO GROW YOUR BUSINESS BEYOND REFERRALS
While referrals are valuable to your business – especially for businesses just starting out – diversifying your marketing strategy can reduce your reliance on them and create a more robust path to growth. Below are some other digital marketing tactics that can help you grow beyond referrals, each one aligned with different stages of the sales funnel.
Content Marketing: Create informative blog posts, videos, or infographics that address common problems or questions in your industry. Share these on your website and social media to increase your brand’s visibility
Search Engine Optimisation (SEO): Optimise your website for search engines to improve your chances of appearing in search results when potential customers are actively looking for products or services like yours
Pay-Per-Click (PPC) Advertising: Use targeted ads on platforms like Google, or social media platforms like Facebook, Instagram, or LinkedIn to reach potential customers who have shown an interest in, or are actively in market, for your products or services
Email Marketing: Send out email communications such as newsletters with valuable content and information to nurture leads and keep your brand top of mind. Be mindful of GDPR legislation and only email contacts who have subscribed (consented) to receive emails from you, or where you have a legitimate interest to do so
Social Proof: When it comes to the buying stage of the funnel, provide proof to prospects about how your product or solution has solved their challenges for others. Customer reviews, testimonials and case studies help you demonstrate this and build trust
Offers: Sometimes there may be very little to choose between you and a competitor. Providing exclusive and tailored offers such as free trials, discounts, and monetary promotions could be the final motivator to purchase
Customer Relationship Management (CRM) Strategies: Implement CRM strategies such as personalised content and offers, loyalty programs, exclusive discounts, early access to new products, or other perks to build customer advocacy. This will keep your business front of mind, build trust and brand loyalty, and increase your potential for additional sales from your existing customers
Online Reviews and Testimonials: Positive reviews can enhance your reputation and attract new business. To aid the creation of social proof, encourage satisfied customers to leave reviews on platforms like Google My Business, or your website, or partake in a case study. Your existing customers will feel valued, will build a deeper connection to your brand and will stay loyal for longer
CAN YOU GROW YOUR BUSINESS BEYOND REFERRALS?
While referrals undoubtedly offer advantages such as low acquisition costs and trust-based conversions, they should not be the sole foundation of your small business's growth strategy. Relying exclusively on referrals can lead to unpredictable and unsustainable growth.
By embracing other marketing strategies you can grow your business beyond referrals. So you should consider investing in marketing to expand your reach, attract new customers, and foster sustainable growth.
Marketing allows for scalability, predictability, and the ability to reach new audiences—essential components for sustainable and long-term success for any small business.
However, marketing is a challenge for many small businesses and one that is an ongoing process that requires dedication and adaptation, but the rewards are well worth the effort.
But we’re here to help. Thanks to our unique approach to small business marketing, we can offer expert, tailored, and cost-effective outsourced marketing support to unlock the true potential of your small business. If you’re looking to grow your business beyond referrals or are interested in improving your existing referral marketing, we’d be happy to help. Just click the link below to book a free, no-obligation consultation to get started.