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If you’re low on money, you might want to consider using referral marketing to promote your business. How does referral marketing actually work? In fact, you use the general public to help advertise your company.  They would do this through a special referral site that they would share with their friends and family. If someone converts to a sale through this site and/or signs up for the referral program, the original person who referred would receive an incentive. This incentive can be virtually anything, whether it’s cash, discounts, or give away merchandise.

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

Okay, I can guess what you might be thinking. Isn’t an MLM a pyramid scheme? No, but MLMs can go in a downward spiral if they are not done carefully. This means that they rely only on referrals for their company.  No legitimate sales of products or services are incorporated into their business model.

12 Daily Pro is an example of such an entity. This was an autosurf website that generated millions of dollars.  However, over 95% of these profits came from referrals who invested their own money into the program; very little came from legitimate business transactions.  As a result, older members were getting paid from the new members’ money.As the scheme moved forward, many new members weren’t getting paid because there weren’t enough leads to keep the pyramid strong.

This is the result of pyramid schemes… even those that last several years, (like the Madoff scandal). The Madoff scandal was a ponzi scheme, which is a way more complex than your everyday pyramid scheme.Either way, the concept is the similar.

In order to prevent these problems, always make sure that you’re rewarding referrals from the profits of your company. If this would be hard to do, consider compensating them only on an affiliate basis, meaning they would receive a commission only if their referrals actually buy something.

In conclusion, if you can’t afford an elaborate advertising campaign, consider utilizing referral marketing. Implementation is a snap, and once it’s established, you’ll have tons of people promoting for you with no cost to your business.

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