by Stephanie Dube Dwilson, Demand Media

In business, networking can be everything. Although other forms of marketing can be more attractive, like running a well-polished TV ad or buying a glossy ad in a magazine, referral marketing is an area you shouldn’t neglect. With social marketing a popular tool for customers, referral marketing has new avenues that continue to make it a relevant advertising tool with real results.

Statistics
Statistics and studies also back up the importance of referral marketing. Almost half of customers who choose a service-based business do so based on the recommendations of their friends, according to a study by Paul and Sarah Edwards, who wrote “Getting Business to Come to You.” In addition, a survey by Dun and Bradstreet showed that advertising and personal referrals were the two main ways that small businesses successfully marketed and found new customers. With such positive statistics to back it up, referral marketing is certainly worth a try.

Limited Budgets
According to the Referral Institute in Ithaca, New York, referral marketing is especially helpful for businesses that have little to no budget to put toward marketing and advertising. That’s because referral marketing, in its simplest form, is essentially free. All you have to do for basic referral marketing to work is give your clients or customers a positive experience, and encourage them to refer your business to other people based on their positive experiences.

Reliable
Referral marketing is effective because it’s so reliable. A happy client is likely to recommend new clients that are of the same quality that she is. So you’re more likely to end up with high-quality, reliable customers if your initial customers are also reliable. In addition, a referral is more likely to result in a paying customer because friends tend to listen to friends more than to cold calls or distant advertising techniques. Friends are trusted, so if a client recommends a particular product or service to his friend, the friend is likely to act on that reference and become a new client. The process may take awhile, but the results are more likely to happen than with a cold call.

System
Referral marketing works best when you have a good system in place. Rather than relying solely on spontaneous word of mouth, you should ask your clients to recommend your services and offer incentives in order to increase the effectiveness of referral marketing. This can involve giving customers a discount if they refer a client who uses your product or service. You can also give your clients ideas of where they might mention your services, such as suggesting they talk about your business to a club or professional organization they belong to.

With features published by media such as Business Week and Fox News, Stephanie Dube Dwilson is an accomplished writer with a law degree and a master’s in science and technology journalism. She has written for law firms, public relations and marketing agencies, science and technology websites, and business magazines.