Grow your Business with Referral Marketing


One of the oldest and most effective forms of communication that can lead to customer acquisition is word of mouth (WOM) marketing 1.  For this reason, referral marketing, which makes use of WOM, is getting to the forefront again.

Numerous studies have proven that referrals are the most trusted form of advertisement. To add to that, referrals are created by happy customers, who are usually willing to spread word-of-mouth about your business for free, according to Megan Mosley in

In the previous marketing regime of mass marketing communication, cold calls and mass mailing have lost their efficiency. Also, now in the age of digital marketing, companies are interacting more directly with their customers, not really giving them a chance to speak good about your business…

But are your loyal and satisfied customers communicating their patronage with their community and so helping you to get new customers? There is a real opportunity for businesses to invest in referral marketing campaigns.

What is referral marketing?

Wikipedia defines referral marketing as the method of promoting products or services to new customers through referrals, usually word of mouth. Such referrals often happen spontaneously but businesses can influence this through appropriate strategies.

A referral program is simply a process in which you prime and reward customers for spreading the word about you.

The benefits of referral marketing

The benefits of having a referral marketing program for your business are the following says Dave Kosmayer in Business 2 Community:

  1. People are generally more trusting of family, friends, and consumers that have used a certain product over any advertisements or branded messages in the media.
  2. The benefit of having customers find leads for you is they typically represent higher-quality, niche leads that are more likely to result in sales.

The risks of referral marketing

However, there are also risks to consider when you reward customers to speak positively about your business.

  1. In fact, monetary incentives increase consumer’s social costs 2. That is, recommenders fear to be seen as being motivated by an incentive to the detriment of the social relationship. As a result, high social costs, may in turn, have a negative effect on the likelihood of making a referral.
  2. Another risk is that unhappy customers, even if you gave them an incentive to speak positively about your business, may do otherwise. Indeed, dissatisfied customers are likely to tell twice as many people as satisfied customers 3. So, be very good at what you do and choose your referrals carefully…

How to get referrals for your business

Dave Kosmayer in Business 2 Community suggests the following to generate referrals for your business:

    • Guest post on websites in your niche. To get high-quality back-links, you need to target a websites in your niche that publish content on topics similar to yours. For example, guest posting on a website similar to yours makes it more likely they will share your content with their audiences.
    • Get active on social media. Almost 90% of marketers attribute social media to being a key platform for generating more exposure for their business. For that reason is social media a powerful marketing tool; not to mention, a vital component of your success.
    • Add value with your blog comments. This is a good strategy to help generate leads for your website. Importantly, keep up on the conversations happening within important blogs in your niche and comment early.
    • Deliver quality. The better your services, the more your customers are likely to rave about you.
    • Ask customers for feedback. When you communicate with your existing customers to find out what you’re doing wrong and what you’re doing right, referrals become a lot easier to obtain.
    • Have a rewards system in place for referrals. Having a rewards system in place makes your customers feel valued and motivates them to endorse your business. For example; here are a few ideas to help you out:
  1. Feature your customers on your websites and social media pages
  2. Offer gift cards or subscriptions
  3. Personalize your follow-up communications
  4. Target customers with special offers


Lastly, getting loyal customers serving as advocates for your business should be one of the priorities of business owners. Although referral marketing is a great tool in achieving that, if it is done carelessly, it may do more harm than good for your business.

Additional reading:

  1. Word of Mouth Marketing for Better or for Worse
  2. Influencer Marketing for Retailers

A Marketing Plan helps you to communicate the right content to the right audience.


1 Ahrens, J., Coyle, J.R. and Strahilevitz, M.A. 2013. Electronic word of mouth: The effects of incentives on e-referrals by senders and receivers, European Journal of Marketing, 47(7):1034-1051.

2 Orsingher, C. and Wirtz, J. 2018. Psychological drivers of referral reward program effectiveness, Journal of Services Marketing, 32(3):256-268.

3 Buttle, F.A. 1998. Word of mouth: understanding and managing referral marketing, Journal of Strategic Marketing, 6(3):241-254.



Published by

Douw G Steyn

Management consultant, blog writer, dreamer

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