Aleah Taboclaon — December 22, 2017 — December 22, 2017
It’s been said that a single customer, when well taken care of, could be more valuable than thousands of dollars in advertising.
Referrals are often regarded as the most effective marketing tool. They have a higher retention, drive more sales, and can double the effectiveness of marketing.
Most small business owners rely on word of mouth referrals, and when they get it right, it can be one of the best marketing options towards driving growth.
The principles of referral marketing are simple on the surface.
Be amazing, and customers tell their friends.
Too bad it isn’t that easy. Or is it?
A Satisfied Customer Isn’t Enough
One might presume that doing an adequate job should suffice, but when it comes to earning referrals, you could say that good isn’t good enough.
According to one study (Bain) it was found that most companies think they’re doing an outstanding job, with 80% of businesses believing they provide “superior” customer service. But when they investigated further, it was found that only 8% of customers would agree with this statement.
Providing value goes a long way towards earning referrals. While the product or service you offer is a primary means to earning admiration, it’s often customer service that affects the overall experience and has considerable influence towards what customers might think.
Value comes in many forms, from the product or price to quality or service, and it’s one trait of businesses most should aspire to give their customers.
Make it easy for customers to do your marketing by providing them with what they would need to get the job done. From pre-written emails to introduction templates and similar, the more you can do for them up front only increases your odds of them doing something for you.
Your best customers can become advocates, and providing them with tools or the means to help create referrals can leverage one of your greatest assets, your customers.
Gratitude also goes a long way, and one shouldn’t forget to say thank you for any referrals they might receive. From a phone call or email to a handwritten note, even if it isn’t acknowledged, it won’t go unnoticed.
Small gestures are a big part of customer experience and appreciation for a referral with a simple thanks is one of them. You could even offer a small token of thanks such as a coupon, but it’s advised to not mention this upfront as this could be perceived as incentivizing and can work against you.
The foundation for growing your business with referrals starts with ensuring your product or service exceeds expectations, along with customer service.
Referrals and Retention
Additionally, retention is more than referrals. It’s often said that it can cost five to seven times more to acquire a new customer than retain an existing one.
However, many aren’t aware that the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is about 5-20%.
While you need new customers to grow, you won’t need as many to plug the holes of your ‘leaky bucket’ when you manage to retain the ones you’ve managed to acquire.
A lot of focus goes into acquisition, yet it’s your current customers that contribute to near 80% of your revenue. When you focus on retention, you’re more likely to earn more referrals.
Referrals and Reviews
About 97% of consumers say they read reviews about local businesses (BIA Kelsey). With around 85% of consumers saying they trust reviews as much as personal recommendations, and that positive reviews help 73% of consumers to trust a business more, getting online reviews is a key to acquiring more customers through referrals.
When it comes to reviews, it is more than the star rating and number of reviews that consumers look at. They also look at sentiment and how recent the reviews might be.
Ensuring your business maintains a steady flow of recent reviews is important to staying in the good books of potential customers and improving customer acquisition through word of mouth referrals.
Using software for online review management helps to monitor, manage, and keep new reviews coming in with automation to send requests and reminders.
While referrals might always be the preference with consumers, reviews would be a close second, with near 90% of consumers saying they trust them as much as personal recommendations.
Also, consumers trust online reviews “6.5 times more” than advertising.
When you incorporate online reviews with your referral marketing strategy, you significantly increase the potential reach. Most consumers go online to research a product or service, even if they have a recommendation.
When they investigate local products or services, which account for over half of all searches, it’s review websites that appear in those results.
Those reviews are digital word of mouth referrals, and they can be yours. The price of admission starts with the customer experience to earn them.
When you consider that word of mouth referrals is the primary factor behind 20-50 percent of purchasing decisions (McKinsey) it’s hard to ignore their value.
- 97% of consumers read online reviews for finding local businesses
- A one-star difference in a restaurant rating can impact revenue between 5% and 9%
- 62% of home buyers choose a real estate professional based on online reviews
- 72% of patients use online reviews as their first step in finding a new doctor
- 83% of people check lawyer reviews as the first step to finding an attorney
Another consideration is that referrals and reviews build trust and credibility. They provide the social proof many consumers look for as validation, and crucial when choosing a business.
Consumers are looking for reviews, and businesses that don’t embrace and manage this will inevitably lose potential customers to the competition.
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