Your referral business is over

Robin Emiliani  /  Oct 08, 2019

Your referral business is risky. It’s time to build your pipeline.

85% of small businesses rely on word-of-mouth referrals.

Their business is fueled by them. Their sales funnel is laser-focused. Without them, new business would completely dry up.

And, hey, we get it. Referrals are powerful. People are four times more likely to buy when they’re referred by a friend. And the lifetime value of referral customers is about 25% higher than average. Give most of us a choice between random pop-up ads and a personal recommendation from a friend, and we’re going with the latter.

Which makes referral-based sales funnels sound pretty damn good.

But hold up. Because here’s the cold, hard truth:

Small businesses may rely on their referrals. But there’s a reason that the biggest companies with the fastest growth don’t.

Referrals—both organic word-of-mouth from happy customers and marketing-led referral incentive programs—are often part of the strategy for big, successful companies. But they aren’t the whole enchilada.

Because the fact is that referrals only scale so far.

They’re a good way to grow locally or within a niche market. And they’re a powerful part of a healthy ongoing sales strategy.

But if you’re looking for the kind of growth that catapulted companies like Uber, Airbnb, Salesforce, and Adobe to the top of their respective fields, you need more. More than word-of-mouth marketing and personal networking.

In other words, your referral-only sales funnel is keeping you small—and staying small comes with some hefty risks.

In fact, 20% of small businesses fail within the first year. 50% bow out before the five-year mark. And 70% don’t make it to their 10-year anniversary.

In our experience, a referral-only sales funnel increases those risks. Because what happens when the well runs dry? What happens when you’ve already been introduced to everybody within your networking sphere? What happens if that recession everybody’s been talking about hits your small network especially hard?

What happens, in other words, when you realize you need a lead pipeline in order to grow—or even just hold steady in a bad market for awhile?

The answer isn’t pretty. Because building a solid pipeline of good leads takes time. Experts say it typically takes at least six months for tactics like content marketing or SEO just to start seeing results—and that’s assuming you’ve got a solid strategy, experienced team, and a good amount of investment.

Which means if you don’t get started until your leads run dry, your business could easily give up the ghost while you’re still trying to figure out how to get more damn Google traffic.

So, what’s the answer here?

As usual, it starts with planning ahead and treating your marketing as a long game.

Because the truth is that there is no lead gen silver bullet. So plunking down a few thousand dollars here or there on a tactic or two probably isn’t going to move the needle for you. Marketing success builds over time, but only if you invest in it continually.

And if you don’t invest in it continually? Your competitors will.

That’s right. In a 2018 survey, 70% of marketers said their lead gen budgets were increasing. Anybody in that remaining 30% is already falling behind.

And when your competitors knock their lead gen out of the park, it won’t matter if you were first to market. It won’t matter if you’re smarter. It won’t even matter if you have a better product. The steady marketing investment will win the day.

So, here’s the point:

Referrals are pretty great. We’re not telling you to ditch them.

But if you want your business to grow and thrive, you need a long-term marketing strategy. And that applies even if you still want referrals to be a huge part of your business.

Because not only can said strategy diversify your lead sources and grow your business…it can also make your referral business even better.

Don’t believe it? Ask Airbnb. When their team introduced and marketed the hell out of a new version of their referral incentive program, they increased bookings by 300%.

And if you’re ready to stop relying on a single lead source and start building your pipeline? We’d love to chat.


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