Is Your Referral Marketing Strategy Using The Power Of The 80/20 Rule?

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Everyone wants more of the second kind of warm leads, right? The trick is in getting those business referrals and getting them regularly in order to grow your firm. Fortunately, inbound marketing helps you grow those referrals over time.




Here’s how to get more referrals for your business:

The 80/20 Rule Of Referral Marketing

The 80/20 rule of referral marketing comes with good news and bad news for your firm:

The good news:

In most companies – and especially in professional services firms – around 80% of a firm’s business comes directly through referrals or references. Since word-of-mouth referrals are so highly qualified and vetted, they usually present the best business opportunities as well. After all, they’re the most qualified form of a lead that comes with its own built-in success story.

The bad news:

The remaining 20% of your firm’s business requires nearly 80% of your efforts to secure, that is, if you’re still using traditional marketing tactics such as direct mail, trade shows, cold calling, etc. That figure sounds like a pretty low return on investment if you ask me. This small fraction of your business isn’t worth the enormous amount of time and budget required, so you should abandon these old-fashioned tactics as soon as possible.

So, with the 80/20 rule being the case, do you think most business owners and partners actually have a referral marketing program in place? Does your business? The answer in most cases is no.

Creating Your Referral Marketing Strategy

If 80% of your firm’s business comes from referrals, the first step you need to take is to align 80% of your efforts (or more) to growing your number of high-quality referrals. Then, ditch your traditional, outbound marketing efforts that only give you 20% of your business in favor of inbound marketing efforts that nurture your new referral leads. The result is a major boost in your bottom line – one that only inbound marketing is able to deliver.

Your referral program needs to incentivize current clients after their referrals sign on as new clients to your firm. When you incentivize clients for their referrals only after a new client has signed on with you, then you don’t waste time or money on incentivizing for referrals that never become new revenue for your firm.

The Why And How Of Your Referral Marketing Strategy

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First, remember the reason why many customers refer you in the first place: Referring your services validates your clients’ decision to hire you. Plus, the more people they know who use your firm, the better they feel about their previous decision to sign on the dotted line.




When it comes to the how of crafting referral marketing strategies, the most difficult aspect to keep in mind is that you’re not in control of the conversation: a current client or customer has to do the marketing for you – and they may or may not do a good job. However, that doesn’t mean you can’t help your clients in that process: The best referral marketing strategies tap into the power of a human-to-human (or H2H) conversation, and your strategy should empower their word-of-mouth discussion, making it simpler and easier to share about your business.

Here are a few tips for crafting your referral marketing strategy and helping your clients sell your business in an H2H conversation:

  • Ask for referrals – It may seem obvious, but many businesses don’t know how to ask and therefore never do.
  • Be remarkable – The more your business stands out among your competition, the more likely your clients are to share and talk about your business.
  • Create simple, sharable stories – Storytelling is the most powerful way to spread the news about your business, and when you give your clients simple, easy-to-share stories, they’re more likely to give you better business referrals.
  • Harness the power of lead nurturing – Just because you were given a referral from a client doesn’t mean they’re ready to do business with you right away. You need to nurture these new leads with pain-solving content specific to their needs and industry.
  • Accelerate your referrals with a social media strategy – While most referral conversations take place offline, customers are more likely to get reminders or conversation starters from your social media content.
  • Reach beyond the referral – Getting new business referrals for your firm is only the first step: In order to convert your new referral leads into customers, you need an inbound marketing strategy tailored to your audience.

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Building your referral marketing program requires no more work than your other promotion efforts – but the payoff is much better for your bottom line. Put these word-of-mouth marketing tips into practice and watch your referrals soar.

The Do’s and Don’ts of an Effective Referral-Marketing Program

Here’s a list of referral marketing “dos” and “don’ts” that will help you proactively convert happy customers into reliable revenue-drivers:

1. Do give customers the tools they need to promote your company.

For referral marketing to work, you can’t expect customers to invest time and energy into developing tools and assets to support your brand. Instead, you need to make the referral process as simple as possible. This might mean creating a hashtag that customers can share on Twitter, or developing email templates that ensure ambassadors use the right language and share the right landing page URL.

Regardless, decreasing the effort required to deliver a referral is a critical piece of the referral-marketing equation.

2. Don’t expect customers to always be thinking about you.

One of the biggest mistakes companies make with referral marketing is assuming customers always have their brands on the top of their minds. If you’re not constantly looking for opportunities to engage your most loyal customers, then you’re missing a huge opportunity to encourage and incentivize conversations about your products or services.

3. Do think about who (and how) you ask for referrals.

To operate a successful referral marketing program, you must consider who you’re targeting, where those people are most active, and which incentives are most likely to influence specific actions. Early adopters love being the first to discover or experience a new product. Others are driven by monetary gain, such as a $200 credit on their bill or a percentage of the sale.

Regardless of where your customers fall on that spectrum, it’s critical to truly understand their motivations and preferences before you reach out. If you offer the wrong incentive to the wrong customer in the wrong environment, your referral marketing program will fail to generate results.

4. Don’t “set it and forget it.”

Once you get a referral marketing program up and running, it’s easy to fall into the trap of assuming the engine will run itself. Like all strategic marketing initiatives, referral-marketing programs thrive in an environment of perpetual optimization.

This is where referral marketing software can be enormously helpful. With the right tools, you can create a structured process around monitoring, tracking, testing and incentivizing referrals. Why is this valuable? Over time, the analytics created by that process will provide clear trends into the activities, channels and customer personas that are driving the best results. Arming yourself with that insight will make it much easier to successfully scale your referral marketing program.

5. Do incorporate referrals into your overall marketing strategy.

The best referral-marketing programs (see Airbnb and Dropbox) share a common thread: referrals are embedded into every aspect of the user experience. Referral calls to action are included in newsletters and blogs. Employee email signatures feature referral messaging. And the referral program is fully integrated with other critical systems (customer-relationship management, marketing automation, ecommerce technology, point-of-sale systems, optimization tools, etc.).




For referrals to consistently deliver bottom-line results, they must be part of how your business operates. Without structure and commitment, you’re largely at the mercy of chance. But with the right approach, process and technology, you can turn referrals into a predictable, scalable channel of high-quality revenue.