Businesses need referral networks to grow. Referral networks can be bound by formal agreements or word of moth, with both offering genuine advantages to various types of businesses.
Today’s guide explains what a referral network is, the types of businesses benefiting from them and how to set them up.
Types of Referral Networks
Basically, a referral network consists of organizations or individuals, usually within related industries, that provide referrals to each other
One example is a real estate agent who can have a network of mortgage brokers, moving companies and home staging professionals. When real estate customers need a mortgage or moving company, real estate agents provide the name and contact information of those in their network. Then, when the other businesses in the network have customers looking for real estate agents, they refer their customers to the real estate agents.
There are also informal referral networks. For example, professionals in an industry network that share contact details or business cards. There is no actual agreement, but the parties refer potential clients to each other. The relationship is nurtured through regular communication or incentives like discounts or gifts to encourage their referrals.
The network could be between big and small companies that provide the same services. Many large service businesses only work on large projects, but don’t want to turn away potential customers who are too small for them. They can refer those small clients to their network of small businesses in the same industry.
Businesses That Can Benefit From Referral Networks
Referral networks can be useful for service providers where personal recommendations greatly influence decisions. They are also relevant to businesses that have complementary services like the network between real estate agents and moving companies. This concept can also be mutually beneficial even to businesses in unrelated industries.
Building a Referral Network
The way of forming a referral network depends on the types of relationships a business needs. Useful connections can be found by attending relevant trade shows or industry events or by seeking membership in the local chamber of commerce and relevant online communities.
Networks That Bring Customers and Clients Together
Some businesses build a network of clients or customers by offering discounts or rewards for any new business they bring to the company. Information from new customers should always include how they learned about the company to be able to track the best sources of referrals.