05 Dec Networking vs. referral marketing – why you should be aware of the numbers
If you are new to the world of business, have moved into a sales development role or are looking for ways to build professional links in your industry then you may have heard of ‘networking’.
1. the action or process of interacting with others to exchange information and develop professional or social contacts. "the skills of networking, bargaining, and negotiation"
Networking is a popular concept, especially amongst local business communities. In its simplest form, networking is the process where business owners and professionals, working within an array of business sectors, meet regularly with the goal of connecting and progressing their business. If implemented consistently and with structure, it works well as a platform to market a company, its products and services, but there are a few flaws to networking that you may not have considered. We’ll touch on these shortcomings shortly but they become even more apparent when you compare the process to referral marketing.
Referral marketing is the method of promoting products or services to new customers through referrals, usually word of mouth. Such referrals often happen spontaneously but businesses can influence this through appropriate strategies.
Quantity versus quality
Both referral marketing and networking rely on developing personal relationships with individuals to promote products and services, but in our experience, networking operates by way of numbers. The more people you meet the more contacts you will make. This is true, but ask yourself this … how many of these contacts will you form a long-lasting relationship with? Quality relationships tend to be small in number and are built on trust and mutual respect. This takes time and effort and if you find yourself in a room of forty people (or more), it will take a significant amount of time to meet everyone and a fair bit of wasted time in the process. I’ll come onto the wasted time later.
How many meetings will you have to have before you know whether you can work well with that person? It takes time to get to know someone and to explore the mutual benefits of working together. To understand whether you can refer them in complete confidence to friends, family, customers and business colleagues. It also takes time for the individuals you meet to get to know you well enough and feel comfortable to recommend you to their contacts.
Be aware of your time – don’t waste it
Success rests on the quality of the relationships you develop. Referral marketing requires fewer people to bring a return for your efforts. Think about when you have 1-2-1 meetings with fellow members of a networking group, outside of your main meeting. These 1-2-1 meetings will be a stipulation of your membership and as a general rule you need a couple of meetings with each member throughout the year.
Now say you are involved in a group of forty people. That would be 120 hours per year if you allow for an hour-and-a-half for your meeting plus a bit of travel time. In reality it’s probably more, but we’ll stick with this for illustration purposes. You need to factor in how much you charge per hour, the mileage cost and the price of a tea or coffee (and maybe a teacake). It soon adds up doesn’t it? And with more people in a room, the more you will have to ‘bank’ to bring a return on investment. Networking will result in a price driven sales situation where the loyalty between business colleagues is often absent.
In it for ‘me’ not ‘us’
You also need to beware of the ‘time suckers’ when it comes to networking! Big numbers in a room can attract the wrong type of people that are happy to pass you their business card but they seem to have zero interest in finding out more about your business. Watch out for glazed eyes!
Plus, have you ever been in a meeting that is supposed to be a 1-2-1 but it’s more like a one-sided ear bashing? This is the situation you find yourself in where you are talked at for two hours unable to get a word in edgeways and at the end you will probably need to nurse a splitting headache. It happens, but your time is valuable so it pays to focus on quality not quantity. Fifty people in a room might look tempting but do bums on seats bring quality? Some will be it’ll cost you a lot of time to separate the wheat from the chaff.
Close referral partners versus acquaintances
Networking expands your contact book and offers the opportunity for you to learn from others and increase your visibility. Yet this is a method that everyone else is doing, so you may find that you and your business can be watered down easily and forgotten about quickly. Networking thrives due to people’s fear of missing out, better known as FOMO. People can’t wait to join a large group and whilst they attend they will prosper (if they have the time to meet everyone and are willing to barter), but once they overcome the FOMO factor and leave, the door can close very quickly as business is passed onto the new bum on the seat!
Trusted relationships need to be kept alive and nurtured and this is difficult when you have numerous acquaintances because the relationship doesn’t expand beyond the foundations of simple networking. Referral marketing focuses on word of mouth and peer recommendation and develops on a much deeper level. It is specific and methodical and you can be extremely targeted in promoting your marketing efforts for the next week, month, or quarter.
Close referral partners become more than an expanded sales team for you and your business. They are your dependable comrades that are always on the lookout for signs, signals and bells to assist the growth of your business.
We’re big advocates of referral marketing and believe it’s a far more powerful method than spreading yourself too thinly at multiple networking meetings which serve only to result in watered down versions of trusted business relationships.