Referral Marketing - Understanding the Value of Referral Business

By Laura Lake

When thinking about the importance of referral marketing I'm always reminded of an incident that happened at a fitness center. I made a decision to refocus on my fitness regimen by joining a gym. I was referred to a gym by a friend of mine, so a few of my friends and I called the fitness center to schedule an orientation appointment. After touring the facility we decided to join the gym and agreed to sign up for a membership. The person that had referred us was with us, so obviously being in the sales and marketing business I asked the representative what our friend would get for referring us to them. His response, "I can give her a water bottle."

This response floored me, I could not believe that this fitness center had no referral program. A water bottle? I can go to a discount store and purchase one for under $5.00 yet this person brought them new business and that was how they would show their appreciation? 

Think about this, the fitness center didn't have to pay for an advertisement, they hadn't sent us a mailing, so their outgoing costs for this new business was zero. In response to the referral given to them by a current customer, they had over $300 laying on the desk and two people signing membership agreements. 

Do you think their referral offer was adequate? 

I think sometimes we become so focused on our advertisements and our marketing plans that we ignore the basics. A referral program should be in place for every business, regardless of the size of the business.
Referrals are the most powerful form of marketing that you can use and it's also the least expensive. Your referrals have more of an impact than any other marketing strategy or advertisement. Have you looked at your referral program lately? Perhaps it's time to evaluate and calculate the value of your referrals and develop a program that rewards current clients and customers for sending you new business. 

A referral program should take the following three things into consideration:

• Make it worth your customers time.
• Be creative, be generous, and be reliable.
• Make sure what you offer has value to your customers.

If a customer thinks enough of you to refer someone, show your appreciation promptly and generously - don't offer them a water bottle.

http://marketing.about.com/od/viralmarketing/a/valuereferals.htm