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Client referrals: The advantages and risks?

As an independent freelancer, it’s up to you to build your own network and secure future work and clients. When client referral goes right, it can feel like the best and easiest way to get work. If referrals start to accumulate a few more clients then we can start to sit and feel great about ourselves, waiting for the next referral to walk in. The worst thing you can do as a small business is to wait for a client instead of looking for them. You need the clients more than they need you, unfortunately. 

Naturally, referrals are an effortless and rather cheaper method to beat the market competition. Referral marketing is necessary but it shouldn’t be the pinnacle of securing clients otherwise you end up with average and peer acquired clients only. Let’s weigh up the pros and cons. 

Advantages of client referrals

The new client is enthusiastic from the get go

“I’ve heard/read great things about you from John!”. Most referred clients normally do not harbour a second thought about your service or product because they have encountered proof of credibility from a trusted person either a friend or relative. Therefore it gives you an easy time dealing with clients since such clients believe you are the real deal and do not come with a lot of questions.

It is fairly effortless

Most business entrepreneurs will agree that of all marketing ideas, second-party recommendation by word of mouth is the easiest to perfect. Word-of-mouth marketing is know-how that once mastered, the results just become automatic.

It is a low-cost strategy

Having your existing customers market your product saves you the extra cost of sales and marketing. Cost-benefit analysis is rather very crucial in any business. The idea is to maximise profit at the lowest cost.

It is one of the most trustworthy forms of passive marketing
Referral is a passive marketing strategy. As the freelancer, all you put in was good work and the client was happy to share that with other clients. There were no strategies, twisting tales or exaggerations involved – just good work and a mutually trusted reviewer. Referral marketing should be a compliment to your primary marketing strategies but not the focus. E-commerce is on the verge of a time when most businesses cannot do without an online presence. Online marketing creates various platforms like SEO, webinars, Linkedin, and search engines to leverage marketing efforts. With new digital marketing ideas propagating a paradigm shift in business, referral marketing is rendered rudimentary. Therefore the digital native times are gradually ruling out the oral referral programs.

Risks of client referral: 

Bear in mind these are the risks if you depend solely or majoritively on client referrals to generate new business. 

Limits the ability to secure more clients

Big organisations and big business owners understand that the market is continuously growing creating a constant scramble for clients. Unless you have diversified your marketing approaches, you will be recording a dwindling sales performance. Technology has created numerous opportunities to reach more clients at once in e-commerce therefore referral business has a very small window to survive in this age.

Gives control of your lead generation to another external party

Referral marketing is like doing passive marketing by proxy which is never guaranteed since you have no control over it. Generating new leads should be your primary responsibility because you control who to approach and when to approach.  When you have no control over your lead generation, your business can not make achievable monthly targets and plans. It is like operating on luck which is the worst form of conducting business.

Missing the quality clients

Referrals normally happen within a specific social circle or peer-selected group of people.  Normally, people identify with lifestyle class and social circle. Therefore a potential customer will most certainly be referred by someone within their social circle. This creates a limited market niche for your service because it factors into the relationship between your existing clients and the people they always interact with. 

Misinformed clients that may not be your target customers

Most existing clients will not give detailed information about your service to a referee. Sometimes the information given is also misdirected therefore you find correcting such information repeatedly quite discouraging. Your referrals might include even misdirected clients who are not even your primary target customers.

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