In this post, we compare the cost of referral marketing to other customer acquisition strategies—and show you how to build your own referral program in 4 simple steps.
Even though you own a marketing agency, marketing your business is still a challenge.
The cost of marketing tools and ad space is ever-increasing, and every hour that your employees spend marketing your own agency takes away from time they could spend on billable hours on other projects.
It’s hard to make sure your own marketing doesn’t dip into your margins. Referrals can combat this because they’re a low-effort, high-value way to acquire new clients.
With referrals, you gain clients just by excelling at what you do best—your job.
Instead of spending time and money chasing new work each month, referral marketing brings the clients to you. As your agency achieves a higher level of success, more and more people will want your services. It’s the snowball effect.
But you shouldn’t just cross your fingers and wait for referrals to roll in. You can draw them in by building referral requests into your marketing initiatives.
We researched the metrics proving why referral marketing is more profitable than other methods and have outlined a way to make referrals a part of your marketing strategy. Best of all, we show you how to build your own referral marketing program in only a few hours.
The High ROI for Referral Marketing
Referral marketing means that your success—not billable hours or profits—powers your client acquisition engine. You don’t have to spend tons of time coming up with a new email campaign every month or a constant stream of money on Google AdWords. Doing your job well keeps the clients rolling in.
The minimal resources you do invest pay off exponentially over time, though. One Brooklyn footwear company saw a 20x ROI on their referral program, and Tesla’s famous referral program generates over 40x ROI.
These success stories are common, and even if you’re not selling shoes or electric cars, the principle is the same. You make a small upfront time investment—four hours, in this case—to get the snowball rolling, and then there’s minimal upkeep from there and no limit on what you can earn.
Google AdWords vs. Referral Strategy ROI
Let’s take a look at the math to compare the ROI for both strategies. We’ll compare Google AdWords to a referral marketing system. For simplicity’s sake, let’s assume each brings in one new client per month with a similar project: a small marketing campaign that earns you $4,000 (50 hours x $80/per hour billable rate).
To account for the cost of each marketing tactic, you have to add up hours expended multiplied by billable rate, and cash spent. For AdWords, a good test budget is around $1,000, plus one hour per month analyzing keyword results. For a referral strategy, the initial investment is four hours, and we’ll include one hour of upkeep for all months after that.
Here’s what the return on investment (ROI) would look like for each marketing effort over time. This chart includes the initial cost of each initiative (for AdWords, $1000 + 1 hour at $80/hr; for referrals, 4 hours at $80/hr), and then includes the revenue of $4,000 for each new client. From there, each month accounts for the revenue of a new client, but subtracts the upkeep costs.
Because the month-to-month upkeep for referral marketing will always be lower than a monthly investment (like AdWords or even an email capture tool) or project-based initiatives (email marketing campaigns), the ROI climbs much faster.
Another huge advantage of using referral marketing is that you don’t have to overhaul your agency’s entire marketing strategy. Investing just four hours in setting up a referral marketing strategy pays off over time, making it a “gift that keeps on giving.”
How to Build Your Own Referral Program
You can build referrals into your agency’s processes instead of counting on clients to remember to refer you. Fortune favors the brave when it comes to client recommendations, so don’t leave it up to chance, or you’ll leave money on the table.
Here are our four steps to creating your own referral marketing program—all of which can be done without investing any cash.
Each of these steps only takes one hour to implement, and from there, the system requires very minimal upkeep.
1. Discover your influencers
Your clients all have professional networks, but some of those are larger than others. Taking an hour to figure out which customers have the largest networks will help you focus your referral program.
Figure out who your influencers are by making a list of all your clients, current and past, and then dig into:
- Their Facebook/Twitter/Instagram following. Shares and mentions are money. Looking at which clients have the biggest social media followings will help you know which ones to reach out to for social clout.
- Blog following. You might not have access to their analytics, but looking at their posting frequency and the number of comments on each post can help you figure out which blogs have the most readers. Often sizable blogs will also let you know the size of their readership.
- Domain ranking. You can get a free trial of Ahrefs to search for your clients’ domain rankings and see whose site has the most SEO power. You can also figure this out by experimenting with keywords in Google to see who makes it on the first page.
If you don’t have the time to research which clients of yours have the most social clout, using a referral marketing platform like Extole will help you automatically figure out who your biggest influencers are. The platform records users’ email addresses and uses them to discover social media data, like where they post most often and have the widest reach.
From there, you can encourage those clients to become advocates and spread the word—both publicly and privately.
2. Distribute templates for collecting easy referrals
Your clients might love your work, but they don’t always want to take fifteen minutes to write out an email to a friend about how good it is. It’s easy to hate networking, and you don’t want to limit your referral network to just the people who are good at accessing their professional connects.
Eliminate this problem by writing email referral templates that you can give your clients. You can also pre-write tweet and Facebook post templates for your clients that are social media influencers.
Writing the templates should only take you an hour—and then you’ll have them forever. Here’s what a good email template should include.
Leave room for your client to customize and insert the proper name and include success metrics, to prove results.
It’s also important to include a “CC-ed team member” from your agency on the referral template. That way, even if the potential client turns down the referral request or doesn’t reply, you still have their email.
3. Offer incentives for referrals
Getting more referrals is pretty simple—your clients are much more likely to refer you when there’s something in it for them, too.
Offering an incentive for every successful referral is a nice gesture that doesn’t cost too much and gives your clients a perk. Here at Teamwork.com, we give customers who refer 25% of the referral’s profits for a year.
If you knock 15% off a mid-size project, and every new referral stays for at least one mid-size project themselves, the math looks something like this:
But you don’t just get the money from that first project. It’s proven that referred clients stay with your agency longer than other clients—leading to an average of 16% higher lifetime value. Taking 15% off a client’s invoice is a small price to pay for a potential loyal client, and writing a short blog post on your site explaining the program should only take about an hour.
4. Ask for referrals at “key moments”
Timing is key when asking for referrals. You’ll get the highest quantity of and highest quality recommendations if you ask for one when your clients are most likely to give you one.
Build asking for referrals at “key moments” into your process. Having a designated plan for when you ask for referrals means that opportunities (and potential clients) won’t slip through the cracks.
Ask for a referral:
- When you invoice. Offering clients a chance to knock 15% off their bill in exchange for a successful referral will work even better when they have the bill in hand.
- After you meet goal metrics. Clients are more likely to give you to referrals when they’re excited about the results they’re seeing.
- Any time your agency goes above and beyond. Clients will want to recommend your exceptional service after you’ve set yourself above the pack.
- In your email signature. When a link to your referral template is built into the bottom of your email, your clients will know it’s there—but it won’t seem like a pushy, personal request. That way, every email you send is a reminder of the fact that they can refer, but not an insistence that they should.
Creating canned responses and agency-wide email signatures that encourage referrals shouldn’t take more than an hour. In fact, you can copy the responses we’ve created by downloading our sample templates right here. After that, every referral email you send should take no more than five minutes out of your day.
Get the Snowball Rolling
Referral marketing means that when you do great work, you can harness the snowball effect—and client after client will be knocking at your door.
Remember that just because it’s snowing (you’re doing great work) doesn’t mean you have a snowball. It’s up to you to pack it together and get the snowball rolling down the hill.
Build referrals into your process, and then let momentum take over as they power your client acquisition engine.
We’ve made it easy to start right away with our referral-generating email templates, which you can download here.