You work hard for new leads – spending time, energy and plenty of advertising and marketing dollars to reach them. But as you probably know from frustrating experience, most of the people you reach with marketing, advertising or social media posts will not become leads, and only a tiny percentage of those who do come in for a closer look will actually end up contributing to your sales numbers. Generally, this is how marketing works, whether it’s inbound or outbound.
But there is one way to reach new prospective customers that has a much, much higher rate of success, and for many businesses it’s free: word of mouth. Getting a current customer to refer brand new customers to your business is a no-brainer, really.
Why Referrals Matter
The real benefit of referrals is two-fold: increased effectiveness and decreased costs, compared to traditional marketing or advertising. If a customer is thrilled with your products or services, they may turn to friends, family members, and co-workers and sing your praises. This personal recommendation costs you nothing, but is already exponentially more effective than any inbound or outbound marketing you might have in place. Why?
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There have been many, many studies done to illustrate the efficacy of word of mouth recommendations; check out Nielsen’s Trust in Advertising Report for just one good example. They all come up with the same bottom line. The average person is a lot more likely to trust a referral or recommendation from someone they know, than from advertising or marketing. The person recommending typically has personal experience with the brand, business or service they’re speaking about, and we love to trust people who have tried it out first! We’re also more likely to trust personal recommendations when they come from a person with nothing to gain from the discussion. Think about it: your next-door neighbor vs. the car salesman. Who would you trust more?
How to Get Customers Talking
There are two difficulties here: first, that customers may use your service and not ever think to discuss it with others, and second, that they may intend to recommend your service but never actually follow through.
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This was highlighted in a Harvard Business Review study about the true value of word of mouth marketing. At two different businesses, customers polled for the study were asked about recommending the service. 68% from the first business, and 81% at the second business said they thought they would recommend the company to others. However, only about 30% of customers for both businesses actually got around to recommending. And since not all of those people who hear a recommendation will follow through and make a purchase, you’re whittling down those numbers pretty fast.
So what’s the trick? Well, there are two things you can do to really encourage new referrals, and hopefully the first is something you’re already doing. It’s simple: you need to provide a truly great service or product, with truly top-notch customer service. Your customers are likely to recommend you to others if they are head-over-heels in love with your product or service, or if the process of doing business with you was memorable in some way – whether it’s a quick and easy quote process, fast picking and shipping, or a problem they had with their order that your customer service agent quickly solved.
The other way to really boost referrals is to incentivize them for both parties. In my last blog, I talked about the opportunity you have, after a customer first purchases, to follow up and ask about their experience. If they have positive feedback about the experience or the product, that’s a great chance to continue the conversation and ask for a referral. Asking is already better than nothing, and they might just do it.
But how to increase the odds? That’s where an incentive comes in. If you offer an incentive to your customer (a credit toward their next order, free shipping, etc.), you give them a reason to remember your business and their experience. And if you want to increase the odds of those new referrals actually coming in to your store or visiting your webshop, offer them an incentive as well! Whether it’s 10% off their first order, free shipping, or a BOGO freebie, you’re making a friendly gesture that will welcome new referrals to follow through and make a purchase.
If you’re hesitating, remember that the discount or credit is still likely to be less than you’d pay to generate brand new leads not associated with your current customers. That’s the beauty of referrals – they pay off financially in two ways (increased sales for less advertising cost), and open you up to even more referrals from happy customers!