Do you know the difference between word of mouth and referral marketing?

And more importantly… Can you leverage both for greater profits?

First let’s identify the difference…

Let’s say a customer really likes your product and they tell four friends about it… And two of those friends come to your business and buy products.

Which is that? Word of mouth or referral?

Now let’s say you ask a different customer to identify four friends or associates who they think would benefit greatly from using your product… Or at least from talking to you about how your product can help them solve their problems. Then, with your customer’s permission, you call up their friends and associates and mention your customer’s name, that they wanted you to call, and then work with these four new people to determine if your product is a fit for their needs. You get two more customers this way.

Is this word of mouth or referral?

The first is word of mouth. The second is referral. Did you get them right? Good!

But do you understand the difference?

Very basically - word of mouth is passive, referral marketing is active.

I’ll break it down further…

Word of mouth is a mostly passive process - it happens without a specific associated action on your part.

I say it’s “mostly” passive because it does depend on you doing one thing very actively - providing the best possible product or service to your customers… A product or service worth raving about to their friends.

But once you’ve done this, word of mouth happens without you doing anything. That’s the passive part. Your customers are promoting your product through word of mouth without you asking them to do anything. It’s viral - and for this reason it’s coveted like nothing else! I’ve seen companies grow like wildfire with mediocre marketing just because they had amazing word of mouth.

On the other hand, referral marketing is a completely active process. Referral marketing involves putting processes and systems in place where you ask customers to put you in contact with friends and associates that will benefit from your products and services. This can be with or without an incentive - meaning, you can give them a gift for referring others, but you don’t have to. The one thing you do have to do is acknowledge their referral, and thank them for it.

So how do you implement an effective referral system? That topic is worth a book, but I’ll try to condense it here.

Step one, know who you want as a customer. Define exactly what they look like. If you’re looking for owners of businesses that do between $500,000 and $5 Million in business per year, who could use more effective marketing systems, processes, and tools… say it! Define your ideal customer as specifically as possible.

Step two, tell your current customers who that ideal customer is, and ask if they know anybody like it. This is best done when they’re talking about how much they like your product. This might go something like this:

CUSTOMER: “Man, I’m telling you. That sales letter you wrote for me is bringing me more leads than I’ve ever had! I’m even thinking about hiring another person just to answer phones, so I can focus on serving all these new customers. I don’t know how to tell you thank you enough!”

YOU: “Wow. Well I’m glad it’s working so well for you. I knew when we were looking at your product that if we could just put the right appeal in front of these people… That they’d beat your door down. Now it looks like that’s happening!

“You know, my business thrives because I can help people like you succeed. And I’m sure you’re at a place in your life where you know a few other people like you - business owners whose businesses are doing between $500,000 and $5 Million per year, who could use more effective marketing systems, processes, and tools like that sales letter I wrote for you.

“Maybe you know them through a local professional group like the chamber of commerce, maybe you go to church with them, or they’re your golf buddies. I don’t know where you know them from, but I bet you could think of three people like that right now - people who could really benefit from at least talking to me about their marketing.

“And the best way to say thank you to me, as well as to really help your friend out by pointing them towards a service that could help them make more money this year - for their business, their family, their hobbies, whatever - is to put them in contact with me so we can talk about their marketing and see if I could do anything to help them succeed. Which three people do you know who’d like a no cost, no obligation marketing consultation from me? Can we call them together right now?”

Step three, call the referrals you get, and introduce yourself:

YOU: “Hi this is Roy Furr. Bob Jones wanted me to call you. My company, Fresh Look, Inc., helps business owners increase profits without spending more on advertising. Right now Bob is flooded with new leads from a marketing package I helped him put together. He’s even thinking about hiring a new person to help him handle the extra business. Did he tell you how well he’s been doing?”

REFERRAL: “Yeah, he mentioned something about it when we were out golfing.”

YOU: “Good! Well, Bob thought you might be interested in working on your marketing and seeing if you could make it more profitable. I told him I’d call you and - because you’re an associate of Bob’s - offer a no cost, no obligation consultation. It’d be about an hour long, at your office if you’d like, and we can do it this week, whenever it fits in your schedule. I’d just like to see if there’s anything I could do to help you get results like Bob is. When are you available this week?”

You think this guy’s going to have a hard time saying no? Right! In fact he’ll be excited to meet with you. Now do this with the other two referrals Bob gave you.

Step four, call your referrer back! Say:

“Bob, I called Tom, Jane, and Bill - and all three were interested in sitting down to talk about their marketing strategy. I really appreciate you putting me in touch with them, and want you to know that I value our relationship and the relationship you have with them - and I’ll do my very best to get them exciting results like the ones I was able to help you get. I just wanted to say thank you.”

Nothing more than that. Unless you want to send a card, or a gift card, or a gift certificate for your services. Or even - I really like this one - a donation to a non-profit organization that they support, in their name.

Step five, provide really good service to the customers you get by referral, so you can start the process all over again.

As I said above, word of mouth is viral - a quality unmatched by referral marketing.

But with referral marketing, you have control, and each customer you get can reliably be turned into a source for two or three or five or ten more.

This double-barrel approach will get you more customers quicker than you could imagine!

Increase profits without spending more on advertising. Roy Furr is President of Fresh Look, Inc., a marketing consulting company based in Springfield, Oregon. Fresh Look, Inc. helps you leverage your business’ hidden marketing assets to increase sales without spending more on advertising. For quick tips about how to make your marketing, advertising, and selling more effective, hop on over to the Fresh Look, Inc. blog at http://www.FreshLookInc.com/blog