What is a referral?
A business referral is a recommendation made by one individual or business to another, encouraging them to consider a specific product, service, or company for their needs. Referrals can come from various sources, including influencers, affiliates, customers, employees, partners, or other businesses. Referrals are one of the most powerful forms of word-of-mouth marketing because they rely on trust and personal connections. When someone refers a business or product, they are vouching for its quality and suitability.
According to Nielsen, 88% of global respondents trust recommendations from people they know more than any other channel. By building a referral program, your team can tap into this trust as well as the $21.1 billion global influencer market.
You can track and report on your referrals from partners using various methods, such as:
- Manual recording: In some cases, especially with small businesses or informal referral programs, referrals may be tracked manually through spreadsheets or simple databases.
- Referral codes or links: Share codes or links with your referral partners. When a customer uses the code or link to make a purchase or take an action, it is tracked back to the referrer.
- Cookies and tracking pixels: Set up cookies or tracking pixels to monitor website visits and actions that result from a referral link.
- Referral tracking software: Auto-generate and track these various referral signals with PRM software that automates referral tracking. These systems can provide detailed analytics and reporting with both your team and your referral partners.
Tracking business referrals is essential for several reasons. Knowing where referrals come from helps your business attribute the source of new leads or customers accurately. And, in cases where individuals or entities are given commissions or incentives for referrals, tracking them ensures fair compensation.
Finally, referral data can provide insights into which sources or channels are generating the most referrals for your business, enabling you to allocate resources more effectively.
Ultimately, referrals are about relationships. They are built on trust, mutual benefit, and the belief that your business can provide value to others. By investing in relationships with your partners, setting up easy referral systems, and delivering excellent products and service, you’ll generate more sales through referrals.