How your referral marketing strategy is going wrong?

Adil Zafar
Marketing Realm
Published in
5 min readAug 23, 2020


As business owners we sometimes don’t see ourselves within the bigger picture of our customer’s buying behaviour. We just see their interaction with us and market ourselves to acquire more and more customer interactions.

There’s nothing wrong with that of course. But when we start to look at the bigger picture, we can start to uncover profits that were previously hidden. It’s like finding a $50 bill in a jacket you haven’t worn in a while, but on a much bigger and more profitable scale! Your customer’s transaction with you is one of many they will make that day. Before their transaction with you, they did business with someone else and after you they’ll do business with someone else.

The transactions may or may not be related, but one thing is for certain, someone had your customers before you did and in all likelihood they spent a good deal of money on sales and marketing to acquire that customer.

Finding other complementary businesses that your customer deals with before they deal with you can help you uncover untapped profits in your business. Setting up a joint venture (JV) arrangement with one or more of these businesses that are not in direct competition with you can be a cheap or free source of leads.

If you’re a lawyer, an accountant might make a great source of new leads. If you’re a car dealer, a mechanic could be your source of leads. If you’re a pet food retailer, a vet might be your ideal source of new customers.

While this may seem obvious, it’s rarely done and it is even more rarely done well. Setting up a JV arrangement can be tricky. The most obvious and direct route is to pay either a finder’s fee or a commission for incoming leads or sales.

However, some business owners may not feel comfortable about taking cash for leads they send you and in some industries this may not even be legal. While it’s smart to pay for leads of known buyers who are “hot,” there are other less direct ways that work just as well or better. One awesome strategy involves creating a gift card or voucher for your products or services. Let’s say, for example, your business is “Mike’s Pet World,” a pet food retailer. You could create an arrangement with a local vet. Find out what kind of pet food this vet recommends to his clients, then create a voucher or gift card that be can give away to new clients.

The beauty of this is that it is goodwill all round, no sales pressure, no conflicts of interest. The vet would say something like, “I recommend XYZ dog food. You can buy it at most pet food retailers but you’re a good customer so here’s a $50 voucher that you can redeem at Mike’s Pet World, which is just down the road. They always carry plenty of stock of XYZ dog food.”

It’s a win-win for every party involved. The vet creates massive goodwill with the customer because he is essentially handing them $50 for free. The customer receives an unexpected discount. You, as the owner of Mike’s Pet World, acquire a new customer whose lifetime value is potentially huge in exchange for a voucher with a face value of $50 (and a wholesale cost which is much less). You also get transferred much of the goodwill the customer already has with their vet.

Now it’s true not all customers will redeem a gift card or voucher but the vast majority will. It feels too much like throwing out money to throw out something with a monetary value attached with it. Let’s say that you conservatively calculate that the average lifetime value of a new customer at your pet store is $5,000.

You’ve given away a part of the profit from a sale you would have never have had. Genius!

Flipping it back the other way, you should look to see who has or wants your clients after you’re done servicing them. This can become a great secondary source of revenue to you, while increasing the value of your offering to the end customer. Here are a few methods to monetize your existing customer base in this way :

  • Sell the leads: there’s very likely someone else in a complementary but noncompetitive fine of business who would be willing to pay handsomely for hot, qualified leads. One caveat here is to ensure that you have your customers’ explicit permission to pass on their details.
  • Exchange the leads: if you don’t want to, or if it’s not appropriate to accept payment for leads, you could set up a two-way lead exchange program with someone else in a complementary business. They send you their customers and you send them yours. Again the same caveat as selling leads applies. Never give out your customers’ confidential details without their permission.
  • Resell complementary products and services: you could buy complementary products and services on a wholesale or white label basis and resell these to your customer base. The benefit of this model is that you maintain full control of the relationship and never hand over your customer details to a third party.
  • Become an affiliate referral partner: this is similar to the model of selling leads, except that instead of being paid per lead, you get paid a commission on sales made by the third party you’re referring to. This can be extremely profitable, especially for scenarios in which you get a trailing commission on all future sales. Refer once and get paid forever (or at least a long time). Many people in industries such as insurance, telecommunications and finance have built highly profitable businesses based on this model.

Look at who has your customers before you and after you and find ways of creating value in both directions. This can become an important source of new customers and new revenue for your business.



Adil Zafar
Marketing Realm

A marketing consultant trying to write on subjects ranging from persona; finance to child psychology. As founder of Marketing Realm, I help businesses grow.