The (Selling) Power of Customer Referrals
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Whether you’re a service or product-driven company, your ability to continually bring in new clients is crucial to sustaining and growing your home business. A key marketing element to that end, and one whose impact is often overlooked, is customer referrals.
If you’re not actively pursuing referrals, you’re missing out on a powerful and affordable marketing tool for your small business.
Worth the Effort
Referrals are one of the best ways to grab hot leads — marketing studies point to customer referrals as a sure-fire path to getting new business on a consistent basis. (Nothing new to those of you in real estate, a business that lives and breathes referrals!)
The pursuit of customer referrals is a lot like the word-of-mouth strategy you instinctively used when you started your business — telling friends and family about your new company, which likely led to initial customers. The business came your way in part because your inner circle of people trusted you to do right by them.
Think of customer referrals as another word-of-mouth opportunity, similarly based on relationships and the power of trust. Only now you’ve got real-live clients who have done business with you and can share that experience with the people who know and trust them.
Value to Your Bottom Line
An effective referral plan can have a real impact on your bottom line, generating valuable prospects and a steady stream of customers. And, referred customers can turn out to be more loyal and valuable.
That’s what researchers at the Wharton School at the University of Pennsylvania found when they analyzed a large banking company’s customer referral program over a three-year period.
The case study showed the program was profitable, that referred customers were more loyal, and that they delivered 16 percent more lifetime value than non-referred customers.
Allot Time for Referrals
Companies of every size and type benefit from customer referrals. But like other marketing strategies, like social media or networking, the quest for customer referrals takes a coordinated effort of your time to reap consistent benefits.
It’s not necessary for you to implement an elaborate program like the bigger companies have in place, with outside customer data vendors or tracking software, to reap benefits from a referral plan. But it’s up to you to create a path that will drive these leads. To start, consider these key factors:
Deliver Your Best to Current Customers.
Sure, that’s what you do and strive to do, provide clients with quality goods and top-notch services. But it’s doubly important now — your ability to develop customer referrals rests firmly on getting this right.
Also make sure any employees, even part-time, are aware of your new quest for referrals and then laser focus on keeping customers happy. This may mean raising the bar to stand out.
Get Strategic: Ask and Receive.
Now, you’re ready to actively pursue referrals! So, start spreading the word to those happy customers. They’ll be glad to tell others about their experience with your home-based business. But you’ll need to put that idea to do so in their heads.
Your request for a referral can be in personal conversation, social media, or email (or all of the above). Just find a consistent method to get the word to your current customers. Let them know how much you prize referrals and appreciate any they could send your way.
Identify Rewards for Referrals
A popular and effective tool for customer referrals is the use of rewards. You’ve likely seen offers drop in your inbox or social media -- programs that tie referrals (positive reviews) to discount codes and gift cards. And there are some that reward customers only if their referral turns into a sale.
Rewards serve as an incentive for customers to keep the referrals coming but also just a way to remind your customers to send them on a regular basis. To do rewards for your referrals, align the “incentive” with your type of business, budget and even tailor it per customer if you know them. It could be as simple as a gift card to a local coffee shop or retailer for every referral. (Then it’s up to you to work the lead and get the business.)
Whatever the reward or referral program, remember any initial cost of time or capital is an investment that pays off in the long-term value of new business you’re landing along the way.