A Referral is the process of acquiring new potential customers by being recommended from a third party, with the referral source often being an existing customer.
It is a common business tactic to ask for referrals from satisfied long term customers due to the fact that referral sales are characterized by shorter closing time and less investment required per new customer.
The referral process is tightly connected with Word of Mouth and Referral Selling.
Word of mouth is a marketing strategy that relies on conversations between people in order to generate interest in your product or service and attract potential customers.
Referral selling is a sales strategy that relies on existing customers for bringing in new leads, offering incentives in return. For instance for every new lead they bring in, customers can receive additional credits or another type of compensation.