From the WikiPedia: Referral marketing is a structured and systematic process that maximizes word of mouth potential. Referral marketing does this by encouraging, informing, promoting and rewarding customers and contacts to think and talk as much as possible about their supplier, their company, product and service and the value and benefit the supplier brings to them and people they know.

So referral marketing is really all about relationships you foster with people, and how those people remember you when they talk to anyone that might need your products or services. If you’ve got a storefront or business that serves a certain location (even if you don’t, read on this applies to you as well), your number one goal is to get traffic to that location, right? And hopefully you’ve built good relationships with the business owners around you, or are willing to. So today, I’m going to talk about how your neighboring businesses can use their email list to refer business to you, and how you can do the same for them.

Here is a great example of how 4 local businesses can collectively refer customers to each other:

You have a retail business in a neighborhood where there are other retailers, service businesses or restaurants where people visit. In this case a restaurant called Nova Bar.

The product or service that you sell has complementary (maybe even competitive) products offered by other businesses in the area. In this example this particular restaurant also included another restaurant in their email campaign. You can’t eat at the same restaurant every day, right?

You’ve been collecting email addresses and communicating to your recipients on a regular basis.

Here’s one way to make it happen:

Step 1. Approach your neighboring businesses and tell them that you’ve got an idea that will collectively help all of you get more business.

Step 2. Find out how many email addresses each business has. You’ll want them to be close to the same because if one is 10x bigger than the others everyone else will benefit from the big guy but they might not benefit in the same way. That said, if this does happen, maybe the businesses with smaller lists can make up for it by mailing a few more times.

Step 3. Create separate email campaigns where the FROM LABEL is from each list owner. If you are doing the mailing to your list it should come FROM your business, if your neighbor is doing the mailing to her list it should come FROM her business.

Step 4. Your message should include a paragraph explaining why you’re sending this email. For example:

“The merchants of South Beach all got together and decided that you need to know about everything that’s going on. So opt-in to all of these lists and be the first to know.

Try giving an incentive or coupon to any new people who signed up to each list to motivate them even more to join!

Step 5. In this example you can see that there are links to each of the business’s opt-in forms. Avoid sending them directly to a home page unless the opt-in form is easy to spot. Make sure you also tell your recipients what new registrants can expect, like weekly specials or “email only” discounts. Also include an image or logo for each business.

Other ideas for using email marketing as a referral tool:

• If you don’t want to use this as a “list building” tool and each local business just wants to give a great offer, go for it! Make sure you send them directly to a page where the offer is displayed prominently.

• If you’re business isn’t “locally oriented” but you have complementary business partners, you can still follow the same general steps. Partner up with them and send emails to your respective email lists about your partners, ask them to do the same.

• You can also use the page that you send people after they opt-in to your list, and include your partners/neighbors offers or links, and they can do the same for you.

Bottom line: keep each other honest. Join each other’s lists and make sure all of you are participating. Agreeing to help businesses build their lists is going to help traffic to everyone’s business. And that’s what referral marketing is all about in the long run.

Janine Popick is the CEO and co-founder of VerticalResponse (Inc. 5000 2006-2009). She also is VerticalResponse’s CEB (Chief Executive Blogger) and won the 2006 ClickZ Best Marketing Blog Award, the 2007 Stevie Award for Best Blog, a 2008 SIIA Codie Finalist for best blog and 2009 Stevie Finalist for Best Blog.