If you’re low on money, you might want to consider using referral marketing to promote your business. How does referral marketing generate customers? Basically, you use the general public to help advertise your brand and services.They would accomplish this through a separate referral site that they would share with friends and family.  If someone buys through this site and/or signs up for the referral program, the original referrer would receive an incentive. This incentive can be anything you can come up with creatively, whether it’s cash, discounts, or free merchandise.

Now, there are two ways you can achieve referral marketing.The first would utilize it as a secondary form of advertising, time-sensitive promotions is a great example.You try to encourage as much buzz as possible before your promotion ends.  The second method involves incorporating referral programs into your business model.  If you do this, technically your company becomes an MLM, (which stands for Multi-Level Marketing).

Okay, I know what you might be thinking.Isn’t an MLM a pyramid scheme?No, but MLMs can go sideways if they’re not done correctly.  Specifically, this means that they rely solely on referrals for their business.No legitimate sales of products or services are incorporated.

12 Daily Pro is an example of such an entity.This was an autosurf website that was able to create profits in the millions of dollars during its heyday. However, over 95% of these profits came from referrals who put their own money into the program; a small amount was derived from legitimate business transactions. As a result, older members were getting dividends from the new members’ investments.But as the scheme raged on, many new members weren’t receiving dividends because there weren’t enough replacement leads to keep the pyramid going.

This is the result of pyramid schemes… even those that last several years, (like the Madoff scandal). Of course, the Madoff scandal involved a ponzi structure, which is a bit more complex than a simple pyramid scheme. Any way you look at it, the concept is the same.

So, to prevent these problems, always make sure that you’re paying referrals from the profits of your business. If you find this is difficult to do, consider compensating them on an affiliate basis, where they would receive a commission only if their referrals actually convert into a sale or new customer.

In conclusion, if you can’t afford an elaborate advertising campaign, consider utilizing referral marketing.  It isn’t difficult to implement, and once it’s established, you’ll have hundreds of people promoting for you free-of-charge.

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