Why It Is Important To Build Effective Business Referral Network ?
A steady stream of customer referrals can transform any struggling business into a profitable one.
Building a strong referral network in business is one of the most effective strategies that any size of business should have. Researches show that most of the SMEs get their biggest boosts from customer referrals, not Facebook, Linkedin or other social media sites.
People influence people. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising.
Mark Zuckerberg, Founder and CEO, Facebook
Getting a business through cold calls is tough. It is always easier when someone recommends your product/services to someone else. The word-of-mouth marketing is most basic yet quite effective form of marketing. It brings in new, comparatively loyal clientele for a company.
Fearless Referrals, by Matt Anderson, cites a study by Sandler Sales Institute regarding how different types of prospecting activities turned into business :
5 % from cold calls
15 % when you use a colleague’s name in the call, but your call is not expected
50 % when you have permission to call and your call is expected
80 % when you are personally introduced to a prospect
It shows that referrals are the most powerful revenue pulling source.
In order to have a strong, active and boosting business, build and nurture a good referral network.
Research giant Nielsen says that people are 4 times more likely to buy when something has been referred to them by a friend.
Asking for referrals is very essential to bring in valuable new customers. Its human tendency that people would much rather do business with people recommended to them and known to them rather than with total strangers. A referral from another customer is like a Five-Star review written.
Here are some reasons why referrals beat out almost any other lead generation channel :
1] Exponential Business growth — Referrals beget referrals. A customer obtained through a referral is more likely to give referrals. One referral can lead to two referrals, two to four, four to eight and so on. This means, many clients will give you multiple referrals over time. As a result, it does not result in linear growth…i.e. one new client at a time. Referral process creates exponential business growth.
2] Low cost — Referrals are the most cost-effective way to acquire new customers and regain old ones.
3] More Trust — You start at a higher point of trust to proceed with your client.
4] Faster Closing — The whole process of conversion of a referral into your customer becomes quicker as the trust is already established. Sales process moves faster. Many prospects come to you predisposed to do business with you. Your ‘closing ratio’ is higher. Most businesses experience closing ratios of 10 to 30 percent from other lead sources. Referral-based sales usually close at 50 to 70 percent (sometimes even higher).