Is Referral Marketing Expensive?
Marketing efforts add up. There are many, many marketing tactics and strategies that financial firms use to drive prospects to their front door. Think about all that you’ve seen or used yourself. Billboards, print ads, business cards, flyers, brochures, dinners, client events, social media, websites, client appreciation gifts, networking events, radio ads, podcasts, sponsorships, list purchases, apparel, pens, pads, mugs, etc. etc. Some work much better than others and have better ROI while others cost more with very poor ROI. However, this is not a blog to analyze them all.
In my opinion, the least expensive marketing strategy (with potentially the best ROI) by far is word of mouth marketing or referral marketing. And here’s why.
Word of mouth marketing, otherwise known as referral marketing, leverages the vast network of people surrounding you to influence the people they know to consider working with you. On the surface, referral marketing really doesn’t cost you anything. However, that’s not entirely true. Aside from paying for a course or coaching on the topic, the main cost associated with referral marketing is your time. The more efficient you are with your time, the less it will cost.
It’s important to realize that it takes an investment of time to develop relationships to where they feel confident in referring you to others they know. It also takes time to teach people how to refer you effectively. However, by doing so, you enable people to talk to others on your behalf. When you do this consistently with a repeatable process, in essence you’re building an army of advocates all equipped to speak about you successfully to others. You magnify your efforts.
Today, the average person knows 600 people. If over time you empower 100 people with your referral marketing efforts and each one knows 600 people, that’s an audience of 60,000 people. Granted not all of those people are viable prospects for you. Even if one eighth were indeed potential prospects for you, that’s 7,500 people who you probably don’t know that are one degree away from you. The more important element here is that you are implementing a proactive referral marketing campaign (meaning you intentionally perform actions towards a specific result). Your intentional activity engages people on your behalf. Most other marketing strategies are reactive, meaning you are dependent upon other people taking action, without your influence.
Referral Marketing and ROI
Referral marketing historically has a much higher ROI as well. For example, if after one referral conversation with a client (1 hour of your time) you receive two new clients with over 2 million in new assets, the ROI is incredible. In addition to that, studies have shown that clients who experience being referred to you tend to refer others as well and maintain strong loyalty. The cost to acquire those two clients would be extremely low.
Perhaps you make a decision to invest in yourself and add to your referral marketing expenses by enrolling in a course or coaching experience to enhance your skills. An average coaching program could be a $10,000 investment for a year. Let’s say that you acquire 10 new clients with a total of 15 million in new assets by client referrals because of what you learned. You can easily see that your ROI is exceptional from the marketing perspective. I’m sure you wouldn’t hesitate to recommend an investment to your clients with such good returns.
Referral marketing is a marketing strategy that proves itself time and time again. Most financial advisors don’t have any formal training or coaching in this area of business development, despite wanting to build and nurture a practice by referral. Any way you look at it, from my perspective, you can’t go wrong when you invest money in a marketing strategy designed specifically for how you choose to do business.
Productivity Uncorked, LLC provides referral and productivity coaching for financial advisors around the country. Visit our website at www.ProductivityUncorked.com to explore our services and the value we bring to our clients.