A seasoned sales and marketing professional, Jena has been keeping up with business, marketing, and technology for more than 15 years. In 2001, Jena launched The Word Tailor, a freelance marketing writing company. Last year, Jena’s first book was published and today she is busy working on three more books. Visit http://www.thewordtailor.com for more information.
When asked about how a business gets referrals, most company representatives reply that they get their referrals from word-of-mouth advertising. Even though the two items are completely different, most business owners don't know or realize it. Let's start with a basic definition of each and then I'll expand on the power of referrals.
Word-of-mouth advertising: This is the cheapest form of advertising a business can do. Most businesses reply that they get new business using this method by practicing good business, treating customers with respect, running a reputable business, treating their employees fairly, etc. When all of these things take place, the customers are more likely to tell others, people in their circles, about the business. Then, these people come in and see for themselves and hopefully become a customer, too.
Referral-based marketing: This method is different from the above in one clear way: the existing customer gives the business owner names of potential customers and the business then sends out a marketing piece (brochure, post card, phone call, email, sales letter, etc.) to this potential new customer (aka lead). The business follows up on this lead and hopefully converts it to a sale.
The main differences between the two are that with word-of-mouth advertising, the customer is an "unknown". With the referral, the "lead" is a known entity and can be actively pursued.
While word-of-mouth advertising is important, referral-based marketing plans are powerful and should not be overlooked. The power of an effective referral program can mean additional dollars in cumulative sales. Take a look at the following illustration:
Time Period Leads Conversion Sales Referrals $ Amt of Sale Cumulative $
1 4.0 50% 2.0 3.0 $100 $200
2 6.0 50% 3.0 9.0 $300 $500
3 9.0 50% 4.5 13.5 $450 $950
Over time, these referrals at a modest sale price of just $100 per sale can result in an additional $51,499 in cumulative sales in just 1 year, with the rates as shown above.
So, now that you've witnessed the power of the referral-based marketing, think about how you can implement a referral-based marketing program into your business. With fears of the economy sliding, take action now. Implement a program into your business and watch the sales and profits grow!
For more information, contact Jena Taylor, The Word Tailor at 970.364.4127 or jena@thewordtailor.com.
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