By Mike Macedonio
President, Referral Institute
As I’ve stated in previous blogs, referral marketing when done properly, is a cost effective way to get business. However, word of mouth marketing and referral marketing is not FREE advertising. The only way I can possibly see making it FREE, is to do nothing at all.
So what is the investment for referral marketing?
There are two investments with building your business by referral: time and money.
I’m surprised when I ask business owners how much they are investing in referral marketing and they don’t have any idea. Is it because it is so cost effective that they don’t think it is worth budgeting or tracking? Maybe, however I also see business people turn down opportunities to get involved in networking organizations, acquire training, attend conferences or sponsor strategic alliance events for financial reasons.
What about the hidden cost?
How much time are you spending networking and meeting with referral sources? What is your time worth? Often when I ask that question I get the billable rate. Here is the simple formula I use. How much you earn divided by how much you work. For example, if you’re making $120,000 a year working 40 hours per week, 50 weeks a year your time is worth $60 per hour. You may be billing $150 per hour however after you factor in everything else you are doing this is what your time is returning you.
When you consider that the serious active networker will spend 8 hours a week attending networking events, online networking, meeting with referral sources and all the giving activities with their network that works out to 400 hours per year or $24,000 of time invested a year. Hmm, that doesn’t sound like FREE to me.
Referral marketing is the most cost effective way to grow your business. Getting the best return on your time and money requires a clear referral marketing plan.
Will you be spending your time doing the right things with the right people, in the right organizations? Investing in referral marketing knowledge will help you get the best return your time investment. Be careful not to fall into the common trap of being penny wise and time foolish with your referral marketing.
Create a budget and invest appropriately in your referral marketing.
Mike Macedonio is a Partner & President of the Referral Institute. Since 2001, he’s seen the Institute transform from a handful of professional trainers collaborating and working together, to a top franchise organization. Mike has played an instrumental role in the organization’s growth, and was responsible for spearheading the acquisition of 40 new franchises in 8 countries, which he accomplished in only 2 years! Mike Macedonio is the Co-Author of the New York Times best selling book Truth or Delusion, Busting Networking’s Biggest Myths, as well as the fourth edition of The World’s Best Known Marketing Secret, Building Your Business by Referral.