4 Steps to Maximizing Customer Referrals

by | Nov 3, 2016

You can throw all the money you want at your marketing campaign. You can spend tens of thousands of dollars on branding, landing pages, funnels, Facebook ads, sales letters, and postcards. But the single-best new customer is still a customer gained through customer referrals. According to a study conducted by The New York Times, 65% of companies’ new business comes from referrals.

One of the best parts about getting a referral is that referred customers spend more than customers gained via cold media. A study done in 2011 by The American Marketing Association, involving over 10,000 customers at a well-known German bank, discovered that referred customers spent more on their first visit, stayed longer, and had an overall 16% higher lifetime value than non-referred customers.

How to generate more customer referrals.

Referrals can come in a few different forms. The 2 most popular forms of referrals are word-of-mouth referrals and partner referrals.

customer referrals

Word-of-mouth referrals are the most basic. One person simply tells another person about your business, product, or service. Partner referrals come when an entity with a list or audience promotes your business, product, or service. For the purposes of this article, let’s focus on word-of-mouth referrals.

To successfully get a mass number of word-of-mouth referrals, you need to:

  • Serve
  • Motivate
  • Recognize
  • Remind

1. Serve your customers.

Referrals all start with how well your product or service serves the needs of your customers. This may seem obvious, but I can’t tell you how many times I’ve gotten great service from the owner, only to have Battle-Ax Bertha at the front desk ruin any chance of a referral from me.

2. Motivate your customers.

Step 2 is to motivate your customer to refer. Typically this is done via a monetary reward, but it has to make an impact. Companies fail at this when they don’t provide a reward with a high enough value. If you want more referrals, now is not the time to be cheap.

customer referrals

I’m often amazed that companies will pay hundreds of dollars for new leads via cold traffic but want to offer a $25 gas gift card for a referral. That’s crazy. Contrary to popular belief, if you want to generate more referrals, it will require a significant investment of money on your part.

3. Recognize your customers.

If you really want to kick your customer referrals into overdrive, find ways to publicly recognize those customers who have sent you the most referrals. Putting their picture on Facebook, on your wall of fame in the office, or in your newsletter are all good places to start.

customer referrals

Write an article about how amazing this person is. Thank them for their referrals in your newsletter. Give them an award at your next customer appreciation event. Giving your best referral sources a way to share their success with others, while promoting your business is a great way to get more customer referrals.

4. Remind your customers.

Finally, if you really want referrals, you have to remind people you exist. Studies have found you have no more than 3 days of top-of-mind awareness after a positive interaction with a customer, and that it is during those 3 days that customers are most likely to refer. You can increase customer referrals when you use a newsletter, greeting card, or individual note to create an additional positive interaction.

customer referrals

If you want to know more about growing your business with referrals, download a free chapter of my book, The No B.S. Guide to Maximum Customer Referrals and Retention, co-authored by myself and Dan Kennedy.

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