The Good and the Bad of Referrals
Part 1: The Brightside
Just like a hit movie, running a successful company requires effective marketing and sales, which can be hard to get right -- especially if you’re setting up a new shop. That’s why personal recommendations can be a great tool for building up that client base. Over the next few posts, we'll be talking about the pros and cons of agency referral programs. We'll even share some best practices for launching one before we're done.
The Benefits of Referral Programs
One of the best ways to get me to watch a movie is a recommendation from someone I trust. It helps me get out of my comfort zone and feel confident that I’m going to have a good experience. But it’s much more of a crapshoot if I just check reviews and head to the theater. So it’s no surprise that people often choose digital agencies based on the word of a trusted colleague. Here are some of the benefits of a referral program.
Cost-Effective Marketing
If you’ve ever spent thousands on an ad campaign for a click-through rate below 2%, you know how valuable ROI is on marketing. Think about how zombie infections spread in a movie, as each person who gets bitten bites a couple more people. With a good referral program, that could be you (minus the civilization-ending implications)! Resources applied toward recruiting one customer could basically bring aboard several.
Higher Conversion Rates
Movie trailers are fun to watch, but I probably only go see like 5% of those movies. On the other hand, if it’s something a friend enjoyed, that might jump to 50%. Cold sales leads are not exactly the most effective marketing strategy (though you can’t entirely abandon them), but you’re way more likely to get that new client signed if you’ve been personally recommended to them by someone who has benefited from your work.
Better CompatibilitY
Think about a good rom-com where the two characters have a ton in common but never meet until a mutual friend fixes them up. Everyone loves to play matchmaker because you know both parties and can see what they need. In the same way, your valued customer knows how you could help out their friend at their company, which can create a great experience for everyone involved.
Improved Retention
As we all know, it’s much easier to keep a customer than to go out and find a new one, and when someone joins based on word of mouth they come predisposed to have some brand loyalty to you. This doesn’t mean you don’t work hard to keep earning their business, but it doesn’t hurt if they have a positive opinion of your shop coming into the relationship. You’ll keep working with a company when your friends are too.
Building Trust
Your brand depends on credibility, which is something you can’t force. The more clients who have a positive experience with you, the more you can organically raise your profile in the client community and build a strong reputation. The overall impact is more than you can get from just one client.
There are many ways a healthy referral program can give you a sustained lift, so it’s definitely worth looking into if you aren’t already.
But there are also some things to look out for. We'll dive into the challenges next week.