How SMB Networking is Driving More Referral Marketing

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When Eric Groves left his job at Constant Contact in 2011, he took six months off to go on a quest – a research mission to better understand the problems of small business owners.

“I wanted to understand small business customers, where they come from, where the best source of new customers was coming from,” Groves says.

He heard the same thing again and again: “The best new customers came from word-of-mouth referrals,” he says.

For many years, consumers have trusted recommendations from friends as the most credible form of advertising, Nielsen research has shown. That insight, gained firsthand by Groves, was the inspiration for a solution. Today, Groves is the co-founder and CEO of Alignable, a social networking platform for small businesses.

“I thought, why hasn’t technology made it easier for businesses to acquire new customers?” he says. “Why don’t small business owners have a network of other small business owners to help them build up their referrals?”

Since founding Alignable in 2012, Groves and co-founder Venkat Krishnamurthy have been working to solve one problem that many business owners find themselves dealing with: handling problems alone.

“One of the biggest challenges to small business owners, if you ask them how they feel, they’ll tell you that they feel isolated,” Groves says. “It’s very lonely as a business owner. You’re trying to figure out all the answers to a lot of questions on daily basis. The best answer to a question you have might be 10 feet away through drywall, but if you’re not connected to the business owner on the other side, they can’t help you.”

Many small businesses have picked up on referral marketing options, such as using online “Refer a Friend” advertisements, but word-of-mouth referrals are an ancillary benefit of networking with other local business owners. Ro Prakash, co-founder of another hyperlocal networking platform for small businesses called Townsquared, also says that being alone is a huge challenge for many small and medium-sized business (SMB) owners.

“The entire business community needs a way to connect and have ongoing dialogue,” Prakesh says. “Entrepreneurs in this country, the business owners, sometimes they feel alone. When Townsquared began, we literally walked up and down the streets of San Francisco and asked business owners, ‘What’s the thing that kept you up at night?’”

Prakesh and co-founder Nipul Patel compared notes and found a trend.

“So many times, the people who he [Patel] had met could help the people who I had met,” Prakesh says.

The business owners had a good grasp on their products – coffee shop owners didn’t need help with making coffee, they needed help with local regulations and how to adhere to city codes.

“Regulation issues are local,” Prakesh says. “Permitting is local. The street issues are local. The taxes they pay are partially local, safety is local, and the cultural base is largely local just by virtue of those business owners being in the same place.”

Townsquared is now used by tens of thousands of businesses, grouped in hundreds of neighborhoods across the U.S., The platform focuses on organic referral marketing – not solicitations.

“There’s a really thin line between soliciting and being helpful,” Prakesh says. “Whenever you create a community of business people, that line needs to be very well understood. The difference between being helpful and soliciting – I’m going to define solicitation on one extreme – is that, it’s like any other relationship you have in your personal or business life. In order to gain trust, it’s always useful to try to be helpful first. That’s what you see on the [Townsquared] network.”

People have expertise in different areas, he says, and through the platform, business owners are able to connect and be helpful without a self-serving motive – though the connection is often beneficial for both parties.  Overall, Townsquared’s goal is to improve the failure rate of small businesses.

Groves from Alignable says that local business owners are in a unique position to understand what the different types of challenges are and help others solve them.

“Whether a business is trying to figure out how to get a sign approved by the local government, or if they’re trying to decide whether to add employees or what point-of-sale system to use, they – like consumers – would rather have someone they trust give them a recommendation than just blindly try to figure stuff out on their own,” Groves says.

April Nowicki is a contributor at Street Fight.