Word-of-mouth marketing is one of the most beneficial types of marketing for any business.
Why?
When there are people talking about a brand and the good experience that they had with a company, it is a seal of approval from a real person.
It is not a television commercial trying to convince consumers that a product is amazing. It is friends and neighbors who found a product helpful, that met their needs, and is happy to get the other people in their lives to try it too.
For this reason, referrals make the best sales prospects for businesses. A referral is a customer endorsement of a business. They found satisfaction with a company and when they find a friend, relative, coworker, or stranger on the street that could benefit from the product too, they will tell them about it.
Lead generation can be a big investment. Encouraging customer referrals is actually one of the least expensive ways a company can gather potential sales leads. And yet, many businesses fail to focus on this area.
Trust is an important factor when it comes to making the decision to buy. A person is more likely to buy from a business if someone they know has had a positive experience with that company. They trust the opinion of the other person and are more willing to spend money with a company that was given a personal seal of approval.
Building trust with a stranger is difficult. When a person comes to a company because of a referral, it fast-tracks the process of earning trust. There are fewer hoops to jump through.
Referral marketing might be less expensive than other forms of marketing, but it takes a good investment of time and energy. Businesses must plan how they will obtain referrals and what steps to take in order to cultivate those referrals into sales.