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What is Referral Marketing?

What is Referral Marketing?

Referral marketing is a popular way for businesses to reach customers through recommendations and word of mouth. Find out more here.

22nd April 2020
Reading Time: 3 minutes

One of the most important aspects of running a business is marketing it. There’s many different ways you can do this including online advertising, content marketing and also, referral marketing. In this article, we’ll explain how referral marketing works and why it can be a good way to promote your new business.

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What is it?

Referral marketing is the selling and promoting of a business’s products or services through referrals. Also known as ‘word of mouth’, these referrals can connect your business to high-potential customers. The benefit of referrals is that customers are already likely looking for a service like yours and are also more likely to engage your business if it’s been recommended to them.


Although referral marketing used to occur simply by word of mouth, many businesses these days have partnerships with one another. These partnerships normally entail a financial incentive, such as paying the partner business a 5% commission fee for each new referral.

Referral Marketing strategies

1. Asking customers for referrals

This is a simple and effective strategy. You can ask happy customers to leave a review or refer you on to any people they know that might need your services. Incentives are also a good way to encourage customers to recommend your business for example, giving customers a 15% discount for any referrals they make.

2. Employee training

It’s important that your employees are across your referral marketing plan. Train employees in how your program works and how to encourage others to join up. This will also be important if your employees are presenting your program to other businesses.

3. Joint venture referrals

Some businesses partner with other businesses to maximise referrals. Most businesses offer partners a commission fee or percentage of the fee for referrals. The benefit of this is that you can tap into each other’s customer bases, and offer customers a solution if they’re looking for other products or services.

Why is it important?

No matter how good your products or services are, you will need to market it at some point. Referral marketing goes a step beyond traditional advertising and offers customers something they’re already likely in the market to purchase. The power of recommendations also cannot be overestimated. Many prospective customers will look at a business’s reviews before making any purchase decisions. Further, if your customer has already had a good experience with another business, they’ll be more likely to accept their recommendations for other businesses.

Reviewing your marketing strategies

You should review your marketing strategies every few months, and see what works and what doesn’t. Further, if you find that your referral methods are not converting to paid customers, consider revisiting how you get people to refer your business. Some businesses find that customers are the best source of referral, but other businesses. Whichever way you do it, referral marketing is a demonstrated way to bring in customers and broaden your reach. Overall however, it’s important to first make sure that your business is worth recommending.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

Sheza Shahid

Sheza is a legal intern at Lawpath. She is completing a Bachelor of Laws at Macquarie University. She is interested in corporate/commercial issues within the legal industry.