Referral marketing is another form of affiliate marketing, but instead of getting paid for driving sales, you are compensated a flat rate for providing referrals that augment a company’s database.

The referrals become prospective clients who are moved down the sales funnel. Referrals, on average, tend to pay less than traditional affiliate marketing programs, but this type of passive income can be easier, and quicker, to produce results.

Some companies also offer a bonus if the referrals you send their way turn into paying customers. Still, others work with a non-monetary compensation scale, offering such things as discounts, vouchers, or prizes to those who produce qualified referrals.

How And Why Referral Marketing Works

Success with referral marketing comes from using your circle of acquaintances. Referral marketing has long been a very successful form of gaining new leads and clients. People are much more likely to trust those whom they already know. Aren’t you more apt to trust the opinions and referrals of family members and friends? It’s simply human nature.

Numerous recent studies have shown that particularly with the explosion of online social media, the majority of consumers who are in the market for a particular product or service will first seek the counsel of trusted contacts, their “sphere of influence”, before using other methods to determine the best vendor or the highest quality item.

Making Referral Marketing Successful

One of the earliest examples of a successful referral marketing campaign is Hotmail. When it first became available, anyone who signed up for a free Hotmail email account had a small line added to the bottom of each outgoing message that said “Get your private, free email at http://www.hotmail.com”. The more people who created an account, the further this short little message virally spread. These were actually referrals since they signed up via a link from an email contact.

This campaign worked incredibly well due to the key components of any successful referral marketing campaign:

• A free giveaway to entice prospects.
• The offer is easy to spread (with the hopes of going viral).
• The campaign is scalable (allowing the vendor to meet expected or unexpected demand).
• It uses common human motivators such as greed, popularity, or the desire to belong to a group.
• Uses networking to reach the prospect’s circle of influence.
• The message is spread vertically as well as horizontally (to other websites as well as other people).

So for you, as the affiliate marketer, to make referrals successful, you can put the same components in place. Your freebie could be a how to manual, a discount coupon, or special offer provided by the merchant. Post it on your web page or blog and allow it to spread further by providing social bookmarking buttons so your visitors can share it with others (always using a unique URL to track your efforts).

Send an email message to your full database that includes a clickable link to the merchant’s URL. Post the link to the freebie via your social media updates and also on some of the top bookmarking sites.

Don’t forget to use offline referrals, too. A simple business card with the unique URL to the offer is an easy piece of collateral to keep on hand and pass around at any event.

Referral marketing is just one more way to monetise your website and augment your internet marketing income. Why not give it a try?

Sean Rasmussen
Aussie Internet Marketer
Learn Affiliate Marketing with Year Of The Affiliate © 2012