Referral Marketing Is Risky–It’s Also Rewarding

In a radio interview I once did, the host of the program asked me whether I consider referral marketing the safest form of advertising. Without the slightest hesitation, I confidently answered, “By all means, no.” Based on his response, I’m sure he was shocked by that answer.

Photo courtesy of Zuzzuillo at

Photo courtesy of Zuzzuillo at

I went on to explain that I believe very strongly in the tremendous benefits that word-of –mouth marketing can bring. However, there are unique risks associated with referral advertising that are not an issue in commercial or other forms of advertising.

When you give a referral, you give a little of your reputation away. If the business you’ve referred someone to does a good job, it helps your reputation. But if it does a poor job, your reputation may be hurt.

As I said, the payoffs of referral marketing are immense—when it’s done correctly.

But referral marketing involves a really big risk: giving away a piece of your reputation every time you give a referral to someone. When you tell a valued customer that a friend of yours is going to take good care of them, you must have confidence in that friend.

But what happens if your friend lets your customer down? It comes back to haunt you. Your customer begins to lose faith in you and, because of that loss of faith, you just might lose that customer down the road. This is why it’s so important to develop strong relationships with those to whom you’re referring business and vice versa. Once those strong connections are forged you can rest easy, knowing when you tell someone a business associate or a networking partner is going to take good care of him or her, that’s what will happen.

Do you have a story others might learn from about a time when referral marketing really paid off for you, or a story about how you experienced the unique risks associated with referral marketing firsthand?  Please share your experiences in the comment forum below.  I’d love to hear from you–thanks!


One thought on “Referral Marketing Is Risky–It’s Also Rewarding

  1. Valid points Ivan.
    This means opportunities get lost every time such a confident relationship is not yet developed between the 3 parties. But I am sure many businesses want to hear about relevant opportunities, their context and are happy to bear risks on the deal going awry…
    This can only be done if the referrer has anonymity which avoids risks stated in your post to a referrer’s reputation. If the referral is successful, anonymity can be dispensed with. The referrer can then get access to rewards associated with a successful referral( goodwill, return referral, introducer’s fee etc).

    We encountered such challenges and so developed in response. Would love to hear feedback from all participants here.

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