One of the best ways to increase revenue with little-to-no increase in overheads is through referral marketing. Sales legend Dale Carnegie accounted that 91% of customers say they'd happily give referrals, but only 11% salespeople actually ask for them.
So, how do you implement systems to catch customer and B2B referrals at crucial points of your relationship?
In today’s blog, we’re talking about referrals and how implementing referrals systems can help you drive revenue and customer retention.
WHAT ARE REFERRALS?
Who do you trust more? A shiny prime-time commercial or the rave review you just got from your best friend about this amazing new restaurant downtown?
Word-of-mouth often travels faster than any advertising campaign and its way more likely to be taken seriously.
According to global data analytics company Nielsen, “84% of consumers say they either completely or somewhat trust recommendations from family, colleagues, and friends about products – making these recommendations the information source ranked highest for trustworthiness.”
It’s this phenomenon that brands and businesses have been hacking for centuries, relying on its loyal customer base to refer to the next wave of potential clients.
HOW IMPORTANT ARE REFERRALS?
Most business owners are quite aware of how valuable pre-qualified leads are to acquiring new customers, but there’s some interesting studies that back up just how crucial and high-value referrals can be.
In a 2013 study conducted by Capterra, they found that peer recommendations far outweigh blogs and online media when it comes to researching software options.
In a study commissioned by the University in Frankfurt, they discovered that customers who referred their friends were 18% more likely to remain a customer of the business and generated 16 to 25% higher long-term value than ordinary customers.
In a 2017 survey of over 3,000 businesses, 82% claimed that referrals were their main source of new business.
But it’s not just about driving higher revenue and boosting your customer base. There are a few additional benefits and business insights that come with referrals.
Firstly, it makes both your existing and new customers more loyal. It’s a curious concept but think of it this way. When a customer sends a referral your way, they are essentially vouching for you. They put their reputation on the line to endorse you as a business. This creates a vested interest in both the business and the relationship you will be creating with the referred customer. It’s a win-win!
On the other hand, if your customers or clients aren’t willing or unable to provide referrals, it could be indicative of a few warning signs in your business.
It could indicate that;
Your customers aren’t planning on sticking around or renewing their contract and providing referrals might only serve to prolong the relationship.
You don’t have an easy referral system built into your customer interactions.
Your product or service isn’t impressive enough to warrant a referral.
The customer experience is below expectation.
It’s important that you take notice if referrals are hard to come by, this will give you an idea of where to improve your processes and products.
So, if 83% of consumers say they are willing to refer your business after a positive experience, how can you increase the number of high-quality referrals you receive?
HOW DO YOU INCREASE REFERRALS?
Besides just flat out asking your customers and clients to tell everyone they know how good you are, there are quite a few methods to increase referrals into your business.
The best methods are ultimately the ones that are integrated into your sales, onboarding and ongoing customer interactions. The referral process becomes a system in their own right.
Let’s take a look at a few of these methods.
1. REMOVE REFERRAL FRICTION
As you probably know, friction is the force you get when two or more objects rub against each other in opposite directions. In the context of referral systems, friction refers to how hard it is for the customer to begin and which factors are slowing down the referral process.
Is the referral link on your website hidden behind a convoluted rabbit hole of menu items? Do you have a referral program that involves a lengthy sign-up process?
These are all examples of referral friction and removing these roadblocks can help the flow of high-quality leads to return.
2. OFFER INCENTIVES
No matter who you are, everyone loves something for nothing. Especially when that “nothing” is as easy as clicking a link or typing a friend’s email address into a form.
It can be a great way to dramatically increase the number of referrals you get. However, with this kind of incentive, there’s always the potential that you are only accumulating leads from people motivated by reward.
One way to tread around this pitfall is to offer incentives in the form of services or gifts instead of cash. This may potentially improve the quality of leads coming in through the referral system and cost a significant amount less at the same time.
Another way is to build discount provisions at the point of sale for any referrals given with further incentives provided if that referral converts to a sale.
3. JUST ASK
It’s the simplest and often hardest tactic to get referrals but honestly, it works. Simply asking has a surprisingly good return rate. But its all about the timing.
In general, customers are usually happiest post-purchase, so this is a good time to ask for referrals. For example, an e-commerce store typically asks for referrals their thank you or receipt pages. This process can be automated, making it easy for you.
If your business is oriented differently, try this approach. Find your most loyal customer and write them a polite, honest email. Tell them that you’re looking for growth opportunities and politely ask if they have any contacts that they feel could use our services.
Reassure them that you’ll do your best to give these new referrals a red-carpet experience. You can even throw in an incentive or two to sweeten the deal.
4. MAINTAIN RELATIONSHIPS
A lot of businesses fall into the trap of making a sale or onboarding a new customer and then abandoning them as they go off on search for the next paying customer. A customer with a poor ongoing experience and no support won’t be referring friends or family any time soon.
One of the best ways you can encourage referrals is to provide excellent customer service and this can be achieved by following three main tenets:
Responsiveness – Make sure you’re staying on top of customer complaints, comments and questions. Be across all comms that are coming in, and what’s going out in response. As long as you show a little flexibility and sympathy, customers will be more understanding when there are problems.
Sincerity – The tone you use, your body language and enthusiasm with a customer can either make or break their experience. If you’re too pushy, you may come off as being insincere. Find the balance, be respectful, and be helpful.
Consistency – Familiarity breed loyalty and content. Create repeatable processes so that all customers are getting equal attention. Develop some standards and reasonable expectations for customer interactions.
No matter where you are in building your business, referrals should be an essential part of your marketing program. The increased revenue, brand loyalty, operational metrics and customer base speaks for itself and ultimately, recommendations are what propel businesses forward.
If you’re looking for a referral systems specialist or expert consultant to help you determine your next move, the right advice is priceless. As business consultants and COOs, we work with entrepreneurs every day to set them up for success by identifying where their business is suffering. We help them pinpoint which processes to re-evaluate and adjust to grow their business. And best yet… We offer hassle-free, no obligation 30-minute discovery calls to see how we could help you. Just email us today.
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