Word of mouth is the best advertising

Many small and medium-sized enterprises are recognising that a wide network covering a myriad of business and industry sectors is pivotal to helping them enlarge their client base and draw in new business - and it is especially important for start-ups and struggling companies. Word-of-mouth marketing is an effective strategy to help companies promote their business because it is built on people's confidence of the services and products recommended by people whom you know and trust.

'There are so many ways you can market your business. For example, you can do advertising, use outdoor billboards, organise events and even rely on a website, but word-of-mouth marketing is generally the most effective in terms of cost and results. For some businesses, 100 per cent of new business may come from referrals but there is no structured way to ensure that referrals are generated on a regular basis,' said Cecilia Yeung, assistant director for Business Network International (BNI) in Hong Kong.

BNI started its first business referral group in the United States in 1985 and has grown to more than 4,000 chapters in 45 countries.

'This referral model is repeated around the world, from South Korea and India to Britain and Italy. This is all about building relationships and giving business to each other through a structured system,' said Ms Yeung, a senior associate at BlessingWhite, a consulting firm focused on employee engagement and leadership development.

According to Ms Yeung, the referral system is beneficial and valuable for small businesses and professional practices. 'You will get all referrals from the group for your own business category. You can tap into a world of contacts and the number of your potential customers will multiply rapidly through member referrals. With a small enterprise operating with limited manpower and scarce business resources, this system can help multiply and leverage your human capital,' she said.

BNI boasts a unique referral system where one member represents only one profession or industry sector. 'This arrangement is to safeguard the business interests of each member and avoid rivalry. For example, if we have a member who is in the travel business, all referrals in that particular category will go to that member, not to their competitors,' Ms Yeung said.

BNI launched its first chapter in Hong Kong in 2006 and has grown to seven Chinese-speaking and two English-speaking chapters with more than 300 members, with 20 to 40 members on average for each chapter. Members in the same chapter attend a weekly meeting where each individual takes turns to deliver a one-minute talk to introduce their own business in front of other members, a ritual that helps build trust and establish loyalty. BNI members represent professions including medical doctors, lawyers, certified accountants, investment consultants, public relations consultants and fashion designers.

Stephen Chan, a medical doctor and a partner of Drs Galbraith, Chan & Associates, has been a BNI Hong Kong member for more than two years.

'Professional practitioners such as medical doctors are governed by regulations laid down by their professional bodies to restrict advertising. Word-of-mouth marketing and a structured referral system allow professionals like us to reach out to new clients and gain new business without resorting to the traditional advertising channels,' said Mr Chan, who started his practice three years ago.

He said he had never done any marketing for his clinic and most of his business came from recommendations and referrals. 'Everything I want can be found in the group. You can find a lawyer, an accountant and people who are experienced in areas such as marketing, public relations and information technology. Anything an entrepreneur needs for their business is available under one roof.'

There are very structured ways for members to learn about each other's business. 'Membership requires every member to attend the weekly meeting, and if you can't come you have to send a proxy to update other members on your business,' he said.

Other than the weekly meeting, members can arrange to meet outside to get to know more about each other's business, an activity called 'a dance'. This helps members to build trust and confidence.

The organisation also accepts people who work for companies, even though its targets are business owners and entrepreneurs. 'We are very selective in admitting members and all applicants are subject to a screening process,' said Ms Yeung. A candidate needs to demonstrate their long-term commitment to their business and go through an interview by a membership committee.

'Things we look at in the applicant include how long they have run their business and how long they have been in their own industry. We also need to check their references to ensure the quality of services and products they deliver is high,' said Ms Yeung. 'Most important of all, they should allow us to open their network of clients and customers and refer them to our members.'

Even though this referral system has not extended to the mainland, Ms Yeung sees growing popularity of this referral model among the Chinese business community in Hong Kong and Asia.