Definition of a Referral
What is a referral? A referral is the act of an existing customer recommending or vouching for the value of a company’s products or services to another.
Why are Referrals Important?
Listed below are four reasons that referrals are the most powerful way to get new perspective customers and close more sales.
1. Referrals Influence Purchase Decisions
Referrals positively influence purchasing decisions. The Ambassador poll found that 82% of Americans seek recommendations from friends and family when considering a purchase. In addition, there’s a significant correlation to purchasing behavior when someone shares or talks about a brand on social media.
2. Referrals Spawn More Referrals
A prospective customer that finds your company through a referral is more inclined to refer your company to another friend or relative. Since customers tend to give more than one referral over time, sales from referrals can grow exponentially.
3. Minimal Cost Per Lead
Depending on your industry, the cost per lead averages anywhere between $11 -$100. Financial service companies, marketing agencies, software and information tech, and services have the highest average cost per lead at $51 – $100. The lowest cost per lead at $11 – $25. In comparison, the cost for a referral can be as small as a small thank you gift.
4. Higher Closing Rates
Prospective customers that find you through an introduction from a trusted source are more inclined to trust your advice. As a result, the sales process may progress more quickly as the referred prospect may come predisposed to doing business with you. Referred sales typically experience higher closing ratios (sometimes closing ratios as high as 50 to 70 percent).
How to Get Referrals
A well-executed referral program will earn you lots of referrals and sales. Listed below are 5 highly effective ways to get your customers talking about you and referring their friends, family, and colleagues.
- Foster customer loyalty. Customer referrals are dependent on earning your customer’s loyalty. If you want more referrals, exceed your customers’ expectations and deliver a superior customer experience.
- Create a referral program. Referrals are an important part of growing your business and can be left to chance. Develop a referral program for how you will generate referrals, target referral sources, communication channels, incentives, track and manage the process and measure results.
- Make it easy. The most successful referral marketing programs have the referral CTA integrated into the sales process. From asking for them in person to your website to point of sales system to email, make it easy for customers to recommend you to others. Some customers won’t want to give you a referral, make it easy for them to endorse you through online reviews, Facebook star ratings, testimonials, LinkedIn recommendations, etc.
- Thank you for referrals. Make your customers feel valued and appreciated. This can be as simple as a handwritten thank you card, phone call, email. You can use incentives as an added bonus for referring. The 2016 Harris survey found that 88% of Americans would like some sort of incentive (money, product or service, loyalty points, early access or swag) for sharing a product via social media or email.
- Perpetually optimize. Evaluate what is working and what is not. Look at who is referring you and who is not. Analyze the purchase cycle to determine when you get the most referrals. Identify what products or services get the most and the least referrals. Evaluate your incentives to determine if they are structured based on the consumer’s motivations and are communicated effectively.
Filed under: Best Customer Management