Marketing is something so important for a startup that every entrepreneur must think about exploring all effective methods of creating awareness. If your new product or service will have a chance of surviving the tough competition, then it must somehow get to the target audience meant for it.

There are so many marketing strategies that various organizations use. They include going to the media like newspapers, Radio and TV stations and printed media. But there is one effective strategy to get new customers which every entrepreneur should think about. That the referal system.

What is the Referral system

In this method, you create a reward structure for old customers to bring their family and friends to patronize your service. You have to create an incentive system whereby old customers are rewarded when they perform some marketing for you such as by bringing a certain number of customers or performing other marketing functions. This method of acquiring new customers has proved effective because of at least 3 reasons. Think about them.

3 Ways new business benefit from the referral reward plan

1. A cheap way of reaching more potential customers: The referral system of getting new customers is much cheaper than conventional advertising. It is a sort of network marking where your customers are encouraged to refer their friends to your business. Imagine a situation where you have 5 customers and each is encouraged to bring 5 friends who in turn is rewarded to bring 5 friends. From that first original customers, it is possible to generate 125 new customers if everyone keeps inviting 5 friends. It is a cost-effective way of reaching out to potential new customers without spending too much in traditional marketing

2. Builds confidence in your brand: When a family member tells you that a product or service is good, you do not ask too many questions. You already have confidence in your friend because you are sure they wont deceive you. So when new businesses use the referral system to bring in new customers, they tap into the confidence already established between the potential and existing customers. In this way, the new customers are meant to trust your business completely because their friend or family member has testified that it is good. Unlike when you get customers directly, using the referral system is way to make new customers trust your brand even when they have never used your products or services.

3. Gets new customers and rewards old ones: As old customers get their friends and family to use your service or buy your product, they are rewarded. This is a way to pay back to your customers for supporting your brand. It is a kind of customer loyalty reward, with the added gain that they brought you a new customer. So the referral system is a win-win situation for all parties involved. New customers are brought to you which is a win for you. Old customers are rewarded which is a win for them too. So through the referral system, you can reward loyalty to old customers.

Conclusion

Marketing could be done in many ways, but the referral system is a smart and cost-effective way to get new customers. As an entrepreneur, you want to think carefully about this method and get your message across through old hands. Whatever marketing strategies that works for you should be implemented. That notwithstanding, the referral reward system should be given a try as it has been proven to work.