Customer referrals can be the lifeblood for growing small businesses. But while it may seem like customer “buzz” just happens to some businesses and not others, there are specific strategies you can use to get your customers talking.

Using “viral marketing,” your company can utilize e-mail and the Web to generate electronic word of mouth that passes on your name through other people’s efforts.

Viral marketing is promotion at its most entrepreneurial, relying on creativity instead of dollars to emphasize your customers’ relationship with your product or service. Used as part of a marketing mix for the right product, viral marketing can be very successful.

Is Viral Marketing Right for my Business?

Because viral marketing relies on electronic word of mouth, it works best for businesses with a strong online presence. If your business relies mostly on local foot traffic and has only a token Web site, you may be better off devoting your time and resources to more traditional marketing methods.

Companies that do business or attract customers through their Web sites and those that interact frequently with customers via e-mail will be much more likely to employ viral marketing strategies successfully.

Pass It On

E-mail service provider HotMail, a free e-mail service provider, blazed the first trails in viral marketing with a simple yet powerful strategy: It attached its Web site address, or URL, to every e-mail its users sent out. Eventually, as e-mails were sent and forwarded, millions of people were sporting the HotMail tag line at the end of every message. It allowed HotMail to grow a large, stable customer base using minimal marketing dollars. The strategy was soon copied by Yahoo and others.

Even if your product is not electronic, you can make sure that all e-mail sent out from your company includes your URL and business motto. Think about how many e-mail messages your company sends out each week. Now multiply that further by the number of people who may receive your forwarded e-mail from those initial recipients. This is viral marketing in action.

Viral marketers also can pass along ads for products and services, hyperlinked promotions, online newsletters, games – anything that creates news, awareness and e-commerce opportunity for your product or service.
 
Offer Incentives to Leverage Your Customers’ Networks

It’s human nature to be more open, trusting, and loyal when doing business with people we know. You can encourage existing customers to drive new people to your site by offering incentives for customer referrals. Create a special program that rewards site visitors for bringing new people to your site, and make sure the program provides a way to track both new and existing visitors.

Another upside to this approach: the incentives could be samples of your product.  This not only gets your product into the market, but provides a compelling incentive that’s highly cost-effective. When one major electronics producer changed the giveaways in a college promotion from cash prizes to a dorm room full of dream electronics (worth far less than the cash prizes), response rates more than doubled.

Be careful to structure or limit the incentive carefully to prevent people from forwarding your e-mail irresponsibly themselves. Even if “spam” comes from a friend, people will still associate it with your business.

For example, offering an open-ended incentive like a $5 credit for every five referrals encourages people to forward the e-mail as much as they can – they get $5 any time someone shows up, after all.

Instead, offer the incentive as a reward for encouraging a more useful action, such as when the person referred signs up for an opt-in mailing list. And rather than offering cash, the reward should be tied more to your business, such as the opportunity to purchase something at a discount.

Track and Analyze Results

Just as you would with any other marketing effort, make sure to track the results of your viral marketing campaign so you can adjust it as necessary to maximize effectiveness.

More sophisticated e-mail marketers can track insightful data that can be used to evaluate performance. For example, they can capture:

• Which e-mails went to original customers
• Which e-mails have been passed along
• Which customers clicked from the e-mail to your Web site
• Which people receiving your e-mail actually purchased something from your business.

Several e-mail programs have built-in tools to track such activity.

If you are just testing the viral marketing waters, you can conduct a more simplified form of tracking the same way you do it for coupons, yellow pages ads, etc. Simply include a prompt in the e-mail such as, “Mention this e-mail and receive a free …” That way, you can gauge the response to viral marketing efforts without a big technology investment.

By separating the click-through and conversion rates for your original customers versus those from referrals, you can better evaluate your viral marketing campaign and figure out which offers and customers drive the highest response and ROI.
 
Have Patience

Finally, don't expect a viral marketing program to pay off immediately. Just as real viruses take time to spread, so too does viral marketing.

Because it requires innovative approaches to creating new relationships and markets, viral marketing isn’t always as cut-and-dried as more traditional methods. But as part of a balanced marketing mix, viral marketing can help your business reach a critical mass of customers by using the effort of others to spread the word about your products and services.