Referral Marketing vs Search Marketing

It marks almost the 3rd month I’ve joined BNI, a business referrals network organization. As stated previously, I joined BNI to tap more into the mind of our local business owners and professionals. And, to get the opportunity to improve the awareness of internet marketing, especially search marketing with the end goal of generating business for increseo.

The experience has been eye opening. I’ve witnessed how much business can be done based on referrals, and in the process, getting few referrals for my company.

So how does this referral marketing works compare to what I’ve doing for years - search marketing?

Though both marketing method is unrelated in one way or another,they have the same goals: get more business. Hence, I thought it would be interesting to do a rundown on these.

How referral marketing works

Business by referrals is the traditional, old school style of marketing that work best for most businesses. Basically, the business is generated through recommendation by the other person. No advertisement. No commission. Purely word of mouth.

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BNI (Business Network International) captures the essence of referral marketing. It puts together a group of non-competing business owners and professionals and provide a structured system to make them refer business to each other. The whole thing comes down to one philosphy : Givers Gain - the more referrals you give, the more you will get. The system is so successful that BNI expands quickly in Malaysia and generates hundreds millions of business transaction every month.

How search marketing works

Ah, the bread and butter of this blog. Search marketing works by presenting the information of your products/services when the targeted audience search for something, with the goal of converting the searchers to customers.

The whole idea of search marketing evolved from one simple fact: People look for information/solution of their problem on the internet (thru search engines). Hence, by ’showing up’ to these people when your products/services could potentially solve their problem, this mean more business to your company.

How do them compare with each other?

I have made a simple comparison table for a better overview. Let’s drill down to the details.

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Key to success
The key to successful referral marketing is always about building relationship. Here, your attitude, personality and networking skills play a very important part. Whether your business associates wish to share their client contacts with you depend pretty much on how much they like you, and how much they trust you.

For search marketing, it is nothing more than extensive market (keyword) research, and spend time to testing and optimizing the campaign with the goal of positive return on investment (ROI). Engaging with the right firm is the easiest way to get it done.

Scability
One of the disadvantages of referral marketing, is that the difficulty to scale. You simply can’t show up at different places at the same time. And, you only can meet that much people face to face in the same day. If the you are also responsible for servicing your customers, it would be very hard to find time to invest in relationship.

As long as the search volumes (number of searches done by people) are there, scability is not a problem for search marketing. If the keywords perform well for you, you can easily set a higher cost-per-click to get more visitors as long as it still generates a positive ROI.

Audience
The potential customers are limited within the circle of your business network through referrals. That being said, sometimes it is already huge enough for most businesses.

The biggest advantage of search marketing is the ability to reach any people in any part of the world by the search queries they typed in. The size of audience, its potential and possibilities to reach out are virtually unlimited.

Competition
This is where referral marketing shines. Business can be given to you by your network not because you are better, but because they know you better. In BNI, there competition are ‘locked’ because they does not allow the same business in the same chapter.

Most of the time, your website is listed side by side with your competitors. The barrier of entry to tap the same targeted audience is non-existence. Your business needs to provide a better value (better package, pricing, services), or a better user experience (through copywriting, web design, appropriate landing page) to win over the competition ‘next door’.

Resource Required
The willingness to invest more energy and time is crucial to build better relationship. If you don’t turn up often, you will probably be forgotten. Remember, long term relationship is not built overnight. Another important point is that you must spend time to educate your business network so that they can give the referrals that you want.

With the knowledge (by knowing how to do, and what to do) and the right tool (e.g: Google Adwords) means half of the battle won for search marketing.

My conclusion

So far, both method works for me. The best thing I like about referral marketing is the ‘added bonus’: you made more friends, expanded your network, have more time to socialize, improve my networking skills and have much fun in the process.

Do I make the comparison so that you can choose one that works best for your company? No! If both method works, why not use both?

What’s your thought on generating business by referrals/search marketing?

p/s: if you would like to visit my BNI chapter - Laurus in Penang, kindly drop me an email at limcs@increseo.com.

Lim CS on July 30, 2007

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