Referral networks 'have advantage'
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Exec director: They can deliver greater market penetration, better returns
Referral networks provide a better return on investment than advertising and greater market penetration than social network exposure while trust and testimonials are keys to success for word-of-mouth marketing, said US-headquartered Business Network International.
The referral network’s executive director, Tom Fleming, said investing on a referral network for small and medium enterprises, or during the start-up period, would deliver a greater level of market penetration.
Fleming said it would also save time when looking for clients, cost less than promoting a business through advertising and its greater effectiveness as a marketing weapon compared to the social network was especially the case for the high trust industry.
He said BNI had over 162,000 members in 55 countries while BNI Thailand had over 700 members and 70 per cent of them were service enterprises.
In 2013 BNI Thailand’s members passed over 15,000 business referrals, which translated into more than Bt1.3 billion in business value.
“The deference between a referral network and e-commerce is that the social network and e-commerce are a great retail environment for products but you cannot buy trusted insurance, financial planning, contractors, electricians, plumbers, landscapers via e-bay,” Fleming said.
“High trust industry [professionals], like financial planners, realtors and attorneys, a lot of them don’t generate a lot of results from traditional advertising because of the fact that they are in a high trust relationship,” he added.
Fleming explained that each operator on average knew about 250 to 500 people that they could refer a business to.
And SMEs, especially in the high trust industry, could gain an entrance to these potential clients at a lower cost than advertising if they did it via a referral network and sometime deals could be done even before the operator meet their client because of the power of testimonials.
“When you talk to 50 people in a referral network, you are actually talking to more than 10,000 potential clients and that is a pretty powerful forum to communicate your message in for a very small investment on an annual basis,” he added.
Fleming said it cost on average around Bt40,000 per year to invest in a referral network and overall around Bt1.9 million worth of business value would be returned in Thailand annually from business referrals while the advertising rate on digital TV cost between Bt1,000 to Bt10,000 per minute.
It cost around Bt250,000 per minute for a commercial during prime-time evening slots on public TV channels.
He revealed that word-of-mouth marketing required a large amount of trust and a business would likely choose a service or product recommended by someone they trusted. That was the power of testimonials and the core of a referral network.
“What a referral network focuses on is the relationship-development process by gaining visibility with a business relationship,” Fleming said.
“Then we gain credibility with the business relationship and then, and only then, does profitability transpire. Therefore, the philosophy at play here is giver’s gain.
“When it comes to growing business by referral, testimonials are the most powerful tool and compelling other people to speak positively on our behalf is the number one objective in referral-based marketing,” he added.
Fleming said a referral network could help SMEs by leveraging their marketing message and business – for an operation could be a business for all via word of mouth alone.
“A referral network is team marketing. For example, in the concept of a wedding there’re jewellers, event planners, dressmakers, a disc jockey, etc, and all of them are marketing for the same target market,” he said.
“And in a referral network, when the DJ got a wedding job he would refer that job to other related professions in the network so that a piece of business for one is a piece of business for all.
“And now the DJ’s marketing efforts are leveraged through the people who are in non-competing industries but serve in the exact same target market.”
