Why Do Local Businesses Need Referral Marketing? All You Need to Know

The business environment has become highly competitive today. Entrepreneurs are looking to try a wide range of growth hacks to increase their business’s reach. One growth hack that most business owners trust today is marketing products and services via referrals.

This strategy is better known as referral marketing. It entails attracting new clients to a business by word of mouth. You encourage past customers to recommend your company to their friends and family. You can offer them incentives and rewards for every new customer brought on board.

Here is why this is a strategy every local business needs today.

  1. People Trust Friends and Relatives More

Many people trust those close to them, such as friends and family. According to research, 92% of today’s customers believe people in their circles more than anyone else. There’s the thought that their family members and friends won’t mislead them.

That makes referral marketing be the leading driver behind most purchase decisions. It further explains why you may not rely only on SEO, digital marketing, etc. With people increasingly using ad blockers, you will need other marketing strategies to succeed. This is where referral marketing is applicable.

  1. Increased Awareness on Social Media

Social media is an excellent marketing tool. You can set up social media pages to boost your business’s online visibility.  Besides, you can work with a Milwaukee marketing agency to create engaging social media posts. Head online and search for a digital marketing agency near me to find a reliable one.

Referrals, too, can boost your business’s social media awareness. To make this possible, ask your web design company to enable sharing directly from your website. According to research, 71% of customers base purchase decisions on social media referrals. The shared posts can bring such customers to you.

  1. It has a High ROI

A business can make a massive profit using referral marketing. Unlike hiring someone to help you, the incentives you give to customers won’t cost you a lot. But then, the people they refer to could order many items on the first purchase. They could end up becoming loyal customers and bring more money.

Hiring a digital marketing agency to help you market on digital platforms is a great idea. However, it won’t bring as much profit as referral marketing. With referrals, you can even get them without giving incentives. Sometimes all you need to get referrals is high-quality products and top-notch service.

  1. Increased Marketing Scope

No business can say that it has exploited its marketing potential. There will always be new markets to venture into. That’s why well-known global brands keep advertising their products. Digital marketing has made it easy for businesses to venture into new markets. 

It all starts with working with a reliable digital marketing agency. But for a business with a small budget, getting SEO, PPC and SEO services can be tricky. Thankfully, referral marketing can also help you increase your marketing scope. Word of mouth spreads fast. One customer can reach over ten prospects. 

  1. It can Boost Customer Engagement

Client engagement is an essential thing for business today. A digital marketing agency can tell you how important it is to keep in touch with customers on social media. You realize that a web design company will also insist on the benefits of having engagement features on a website.

Well, customer referrals also help drive engagement. A customer referred to your business will want to know more about you. Your digital marketing agency will have set up social platforms for your business. Check these pages and your website regularly and respond to referred clients’ questions.

  1. Drives Repeated Purchases

As discussed earlier, referral marketing can be a great source of repeat business. Every business wants customers who can keep coming back to buy from it. Digital marketing can help attract repeat business. You can work with companies that offer web design services and SEO to build a loyal customer base.’

But then, another way to drive repeat business is by word of mouth. Set up your reward system such that every reward earned goes into the next purchase. That means the prize will lie in there until the customer purchases a product. If they like it, they’ll be willing to buy a product to get it.

  1. Simple and Easy to Execute

Local businesses need to try some of the most straightforward marketing techniques. Methods like social media marketing can sometimes get technical. Most companies have to hire digital marketing agencies to help them make the most of them. 

But then, referral marketing isn’t technical, and you won’t require help to execute it. With referrals, you only need incentives and top-notch service quality. Create awareness of your referral program to your customers so they can start referring new clients. Thus, you only need to invest a small fraction of your time and effort to execute it.

  1. Improved Customer Retention Rates

Referral marketing can also improve your customer retention rates. As mentioned earlier, people trust their families and friends more than anyone else. The referred client may be unhappy with the product or service quality at first. But then, they may decide to try once again because they trust their referrer. 

A customer who bumped into your business online may not have such patience. Thus, referrals give you a second chance to impress and keep the customer. That makes referral marketing worth considering as a local business. High customer retention rates mean more profits in the future.


There are lots of ways local businesses can use to market their products. As mentioned earlier, working with a digital marketing agency is one of them. Such an agency can help with setting up and marketing your business on social media. It can also help with SEO and a wide range of marketing methods.

As a local business, you should also think about leveraging the power of referrals. This article has already provided insight into some of the reasons why you should consider it. It is inexpensive but has massive potential in terms of returns and customer retention rates.

See Also, “9 Compelling Referral Marketing Statistics You Need to Know