3 reasons why referral marketing is so important

by Evan Davies, Chief Executive - QLD, VIC, NZ | |   Growing Your Business
3 reasons why referral marketing is so important

A personal referral to a business prospect is far more likely to turn into revenue than other prospect sources. Why is this?

In a recent Syndicate meeting, some well reported statistics were bantered around on the frequency of various prospecting channels that turn into business:

  • 5% from cold calls;
  • 15% when you use a colleague's name in the call - but your call is not expected;
  • 50% when you have permission to call and your call is expected, and
  • 80% when you are personally introduced to a prospect (i.e. referral marketing)

So why is it that referrals are far more likely to turn into revenue than other prospect sources?

  1. Transferred Trust

    It is very difficult to establish trust with a cold lead. A referred lead is better because your service was referred to them by someone they already trust. Therefore, this trust is transferred from the referral source to you. Transferred trust will also shorten the sales cycle for a referred lead compared to a cold lead.

  2. Reduced Emphasis on Price

    Referred clients are less sensitive about price, because in their mind, risk is mitigated. This allows them to focus more on value of your product or service rather than price.

  3. Customised Pitch

    You can be more effective presenting your product or service to a referred prospect because you will generally have more background knowledge about them from the referrer. You can therefore customise the presentation of your product or services to address their specific needs.

Establishing a long term referral marketing system will no doubt lead to a significant increase in overall sales and customer lifetime value.


The CEO Institute was founded in 1992. It is now Australia's leading membership organisation for CEOs and senior executives. It provides a forum for over 1,000 Chief Executive members to connect and share their learning with each other. In 2011, The CEO Institute became the world’s first global certification body for CEOs, and in 2013, partnered with UNESCO in support of the "Malala Fund for Girls' Right to Education". In 2014, they began offering their programs globally. The CEO Syndicate is an exclusive peer support network for CEOs. The first meeting of The CEO Syndicate program was held in Melbourne in June 1992. Offices were opened in Adelaide in 1996 and Sydney and Brisbane in 1997, with Perth launching in 2007. In 2015 the New Zealand office opened.  The Future CEO program is a certification course designed by the business leaders of today for the business leaders of tomorrow. The first Future CEO meeting was held in Melbourne in May 2012. In 2014, the "Future CEO Scholarship Fund for Women" was established, and continues to be offered today. Membership of The CEO Institute is by invitation only. To register your interest click enquire.

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