How Can a Small Business Maximize Referral Networks to Launch a Brand?

Referral networking is a crucial marketing strategy used by businesses to get new customers through the recommendations made by the existing customers to their friends, workmates, family members, and acquaintances. Shin & Rothenberg (2020) observed that, utilizing referral networks is a suitable brand promotion strategy for startups because it is cheap but highly effective. People are more likely to visit restaurants, buy products, watch movies, or listen to music that were recommended by a person they know than an advert they saw on television, billboard, or newspaper. Therefore, can utilize referral networks when launching a new product through incentivized customer and brand referral programs.

A small business can use incentivized customer referral programs to acquire customers when introducing a new brand in the market. It involves giving rewards to entice the existing customer to bring new customers from their social circle. This strategy builds brand trust and credibility since the new customers are brought by people they know, who have already consumed the product they are buying (Berman, 2016). This program could use the regular word of mouth (WOM) where the customer refers another customer to a brand through offline communication or electronic word of mouth (e-WOM) where the customer refers another one using social media, internet, phone calls, or any electronic methods. Incentivized customer referral programs enabled companies such as Dropbox, PayPal, Lyft, Uber, and Living Social to get more customers during their initial entry into the market (Lobel, Sadler, & Varshney, 2017). Incentives would make the existing customers to refer as many people as possible to buy the new products. Without incentives, only very few or no one at all would strive to convince others to buy the new products.

Likewise, startups can also utilize brand referral by selecting the right referral partners that matches or understand the new product. According to Shin & Rothenberg (2020), a referral partner with high-brand loyalty is equality effective to a best friend’s referral. This shows that WOM or e-MOM from another brand is highly impactful and low-cost strategy for launching a brand. However, the potential referral partner should have access to the targeted customers for the new products. For instance, a business that sells computer accessories should select another business that repairs computers as a referral partner. This means that the business that repairs computers can refer potential clients to buy some accessories for replacement in the other business that sells accessories.

In conclusion, a small business can perfectly maximize on referral networks when launching a new product in the market by using its customers or trusted brand within the same line of business to refer new customers. It has proven its effectiveness in that it was used by some of the successful brands such as PayPal, Uber, and others to launch their brands. Referral networks are suitable for small businesses because they are cheaper than most promotional strategies yet equally effective in building brand awareness and brand trust for new products.


Berman, B. (2016). Referral marketing: Harnessing the power of your customers. Business

Horizons59(1), 19-28.

Lobel, I., Sadler, E., & Varshney, L. R. (2017). Customer referral incentives and social

media. Management Science63(10), 3514-3529.

Shin, D. C., & Rothenberg, L. (2020). A brand’s referral of another brand: Does it work?.

In International Textile and Apparel Association Annual Conference Proceedings, 77(1), 1-4.