How many referrals have you been getting lately? Referrals are a good indicator that your customer is having a very good or excellent experience. There's good research indicating that investing in your customers experience is worth the effort. So what should you do?
One of the delightful moments that occur in our office is when a customer refers us to a prospect. It's delightful because it makes everyone feel good about their contribution to that customer's experience. The salesperson feels validated in building a strong customer relationship; development feels justified in taking the time to produce an excellent product; the implementation team is proud of achieving or exceeding the client's expectations; and the support team is quietly confident in the knowledge that none of it would have happened without their help.
Referrals are a good indicator that the customer has had a good experience. In a Strativity's 2009 Customer Experience Benchmark Study they found a direct relationship between a company's investment in customer experience and the number of referrals the company received.
The more committed the company to the customer's experience, the more referrals.
While referrals are not a guarantee, slightly over half (51.4%) of companies that invested heavily in their customers experience referral rates of 10% or more.
It seems a self evident question, but why do companies invest in the whole customer relationship thing? Well, in short, referrals are about ten times more effective than other marketing tools and are a lot less expensive. In the Strativity study, they found that customers were less likely to leave than those who had a so-so experience. See The Road to Customer Loyalty for more discussion on what drives loyalty.
However, getting referrals is not as easy as just spending money. In a business-to-business setting there are a variety of factors that come into play. The customers:
- Trust of the sales person
- Satisfaction with the sales relationship
- Perception of being special
- Opinion of the product or service
- Overall perception of their customer experience
So what are the investment steps that will lead to a high percentage of referring customers? Here are five steps, most of which are not very expensive, that will increase your referral rate:
1. Set up a referral program
When a customer refers someone, they are placing a little bit of their reputation at risk. Honor and build on that reputation. Don't take advantage of it.
- If you are in a business-to-business environment, find ways to make your customer feel special that don't involve elaborate gifts. Build a referral relationship out of respect and or mutual self-interest.
- If you are in retail, gifts and discounts in exchange for referrals are fine. It is accepted and even expected that price is the primary currency of trade in retail. However, you still have to deliver.
2. Provide your service and sales people with good people skills
Sales and service people that offend prospects and customers aren't going to help your referral program. This can be corrected through customer service training and sales training. People skills can be taught. When combined with a little coaching, customer service training and sales training can have a tremendous impact on customer communication.
3. Over-perform on your promise
Good people skills can't make up for a bad product. They can help, but ultimately you have to deliver. The old adage of "under-promise and over-perform" comes into play when you are talking about referrals.
4. Walk your talk
In a March Blog, Hazel Walker suggests the giving to get approach. She suggests that if you want to make a million dollars, help someone else make a million dollars. Make a referral a week. It's good advise. Also see Monica Postell's discussion in an earlier blog on Give to Get.
5. Get the word out
One you have the mechanisms in place to deliver a customer experience that will lead to customer referrals, tell people about it. Walter Carl, the founder of Chat Threads has done some interesting studies on word-of-mouth marketing. In an advocacy campaign for a Premium Pet Food brand, he was able to track conversations through two waves.
He started with 5,000 people who told, on average, 12 other people, resulting in an additional 61,167 people. In the second wave, the 61,167 people each told 3 people, resulting in an additional 173,101 people. In total 293,268 people heard about the product (5,000 + 61,167 + 173,101 = 293,268). It is unlikely that you will get these results, but you could try.
As I mentioned in part 1 of this series, the experience you provide your customer is your brand. If you make it an exceptional experience, your customer may be willing to become an advocate on your behalf. It is then your responsibility to give him, or her, the opportunity to do so safely. Referrals are an expression of trust. Deliver for your customer. They have delivered for you.