Does referral marketing actually work?

Does referral marketing actually work?

One of the biggest issues with online marketing has always been attribution – how do you attribute a conversion, whether that be a sale, lead, download, sign-up or something else, to a particular source?

Sure, if you track your goals in Google Analytics, you can see where someone has come from before completing a goal, but how do you know if that’s where they first found you?

For example, your Google Analytics may well state that someone found your website on Google’s organic search before completing an action. You don’t know, however, if that’s where they first found your website. They may have Googled for you because they had already seen your website – perhaps even the specific product or service you’re offering – on social media, in an email, on a blog or in a PPC advert.

If you take this strict ‘final source’ as the source of your goal, you could be forgiven for thinking that other forms of online marketing aren’t as effective and then stop doing them. This could be a mistake, especially if your product or service is the sort of acquisition that takes a lot of time to consider for a customer. If you were to stop your social media activity, you may find your conversions from Google reduce as fewer people are Googling for your brand, products or services after first seeing you on Twitter or Facebook.

Online and offline

This issue isn’t one that only occurs with online conversions, either. It’s the same for any type of sales process. How do you attribute from where a sale came?

I mention this because I recently attended a new networking event. I try to attend a lot of networking events because it’s important to get to know other business owners, build relationships and be seen out and about in the business community.

At this particular event, I bumped into someone I already knew. He was the only person in the room I knew and I got chatting to him (perhaps a networking mistake, as I should have been speaking with new people, but I hadn’t see him for a while so I’ll let it slide). He noticed I was wearing my BNI pin badge, symbolising I’m also a member of the networking group known as BNI. If you haven’t heard of BNI, it’s a global networking organisation where groups meet every week to pass business between each other. It’s very formal and, as such, doesn’t suit everybody.

Anyhow, after seeing my BNI pin badge, he proceeded to tell me why BNI didn’t work for him when he was a member. As he was speaking, other people entered the room and said hello as they passed. Many of whom also had a passing dig at BNI as they did so.

He explained how, towards the end of his 15 years of BNI (yes, he did this for 15 years), he was receiving a lot of referrals from other members that didn’t convert into business, and a much smaller number that did. He drew the conclusion from that that BNI wasn’t effective for him, as he felt members were pressured to meet targets and pass referrals to other members, which resulted in poor referrals being passed. He stated this new networking event was much better. It was much more informal, with no targets on giving business referrals, introductions or even on attendance.

This type of networking events suits a lot of people.

As I was talking to him, I listened about his new business and, as I’d known him for many years after first meeting him in BNI, I stated how we would be able to offer him some work on a new business venture we have at the moment.

There’s a result – he’s already got a referral for work we’ll need doing shortly.

After the networking event, as I drove back to the office, I thought about what he’d said about not getting enough work through BNI over the years, and I thought about the age-old problem of attribution. At Engage Web, we track the referrals we get through BNI, we add them to a spreadsheet and we know the status of each one, such as where it’s at and how much revenue it has generated. But what about those business leads that don’t come through as referrals, yet still come about as a result of contacts you have made through the networking group?

An example of this is the work I spoke about with our friend at this new networking event. I offered him some potential work after speaking with him, yet I wouldn’t have offered it if I hadn’t known him for many years after meeting him in BNI. If this offer leads to invoiceable business for him, he would probably attribute this to the new networking group, yet arguably I wouldn’t even have spoken with him had I not already known him through BNI – there were 20 or so people there, and I really only spoke in detail with two or three.

I then thought about the sales we had made with Engage Web over the last 12 months. The ones that can be traced back to a direct BNI referral are obvious, as they’re in the spreadsheet. However, is that the limit of the sales we can attribute to BNI?

No, not at all. I can think right now, off the top of my head, of two specific large projects in the last 12 months that were not BNI referrals, yet were won by Engage Web because the decision makers in charge of those projects came straight to us as they had previously met us through BNI. They were no longer members and we hadn’t actually previously worked with them directly, but they knew of us and trusted us to do the work. Had it not been for BNI, we would not have won that business.

The source of a business lead

The problem of attribution online is the same as the problem of attribution offline. Tracing your sales and leads to a single, specific source is not always possible and, in many cases, isn’t a good idea to try. By doing so, you could dismiss a valuable source of business, mistakenly believing it be ineffective when, in fact, it’s supporting your other sources of work.

Technical Director at Engage Web
Darren is Technical Director at Engage Web, as well as being a co-founder of the company. He takes a hands-on approach to SEO and web design, helped by more than 20 years’ experience in these fields.

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