It’s no secret that referrals from satisfied customers are much more likely to generate new customers than any other form of sales or marketing communication. After all, few things are more reassuring than a positive endorsement from someone you know and trust. In this article, we share with you the most powerful ways sales leaders can boost sales by fostering referrals.
Definition: A referral is when one person has a positive customer experience that makes them feel compelled to recommend this experience to their friends and colleagues. Referrals can be a natural phenomenon, making them a particularly great form of lead generation. However, the frequency with which they occur can be increased by better understanding what creates satisfied customers and developing a robust referral program.
Here’s a five-step process for getting more referrals for your small business:
1. Become Familiar With NPS Methodology
In 2003, Fred Reichheld, a consultant at Bain Consulting’s Boston office, announced to the world that he had invented a new way to measure customer satisfaction that directly relates to the likelihood of customers to refer new customers. Reichheld later created the Net Promoter Score (NPS) to help you determine whether customers are loyal, fence-sitting, or negative.
According to Reichheld’s work using the NPS methodology, a customer could be a:
- Promoter: The customer is highly likely to recommend, especially when given the opportunity to do so.
- Passive: The customer is not likely to recommend or share negative word-of-mouth.
- Detractor: The customer is likely to share a poor experience.
People who rate their experience nine or 10 are promoters. Passives scores are seven and eight, and detractors score six or less.
2. Survey Customers
The next step to identifying individuals most likely to refer your business to others is to survey customers. The NPS methodology keeps this step simple. You ask your customers three questions every time they have an experience with your brand. For example, if you’re a real estate broker, this would be after completion of a house sale. If you run a car repair shop, this would be after you return the car repaired.
The three questions are:
- Following your recent [house purchase, car service, and so forth], on a scale of 1 to 10, how likely would you be to recommend [ABC Company] to a friend or business colleague?
- What single thing could I have done that would most help to move this score closer to 10?
- Is there anything else you would like to add as feedback?
You can put this in place by completing the three Net Promoter questions at the end of each customer purchase. Then, record the customer’s responses in their customer contact record.
This is much easier to do if you use a customer relationship management (CRM) tool such as Pipedrive. It allows you to record each customer’s response by creating custom fields on each customer contact record and updating them each time you complete a fresh survey. Visit their website today to get started with a free trial.
3. Ensure Your Sales Reps Follow Up With Promoters
As a sales management best practice, customers who score a nine or 10 out of 10 should be passed to reps, who should then follow up within 24 hours—preferably in person, but if that is not possible, then via video conference or phone is fine.
The purpose is to thank them for their feedback and to discuss it in more depth—especially the single thing to improve. You should also ask them to provide referrals to other potential customers such as themselves.
This can be phrased in the following way:
The beauty of this is that you already know that they want to refer others to your business—you just need to give them the opportunity to do so. In fact, the highest-performing sales reps consistently ask promoters for referrals.
4. Get Account Managers to Follow Up With Passives
Pass customers who score seven or eight out of 10 to account managers who can follow up with them and seek further feedback on how to move this score closer to 10. Pay attention to any consistently noted drawbacks in your customer experience, e.g., I’ve often had to wait on hold for customer service for a very long time.
The things that multiple customers consistently repeat as an issue are worth fixing. By fixing systematic glitches that upset the most customers, and communicating improvements to your service back to them, you will be able to move more customers into becoming promoters who are willing to make customer referrals.
5. Have Business Owners Follow Up With Detractors
For customers who score six or less out of 10, I recommend following up personally if you are the business owner. The things to improve here are likely to be more serious issues. The customer has had a bad experience and, as the owner of the business, you need to learn more about this so that you can address the root cause and ensure it is not repeated. This will reduce the risk of earning a poor reputation in your industry.
While the primary purpose of this action is to ensure that your reputation is positive and does not get in the way of future sales activity, it also gives you the opportunity to flip detractors straight into promoters.
For example, I once had a poor experience with a malfunctioning security system and could not get into my house via my door pad. Even after a long phone call and waiting outside in the cold, the company was unable to assist. Finally, I was told I needed to call a locksmith and that they would reimburse me for charges. They did not reimburse me and said I should not have been told reimbursement was covered.
However, the next day someone reached out to me from the company to ask about my experience. I relayed my frustration and an executive immediately agreed to compensate me for the locksmith charges and let me out of my contract if I wanted. I was pleased with the rapid follow-up, decided to stay with the service, and shared my positive experience with my network.
How Brand Experience Influences Referral Likelihood
While the Net Promoter methodology is great for identifying the customers most likely to leave you a positive referral after a one-off interaction with your company, on-going experiences also influence how likely they are to refer others to your business. The sum of all of these collective experiences is often referred to as their brand experience.
The three possible kinds of interactions with your company can have the following impact your referral chances:
Exceptionally Good
When compared to their experience of other brands, they will be likely to share it with friends and colleagues. The more standout the experience, the more likely they are to share it—which organically generates more leads.
For example, I purchase my glasses from Warby Parker. I’ve always had an excellent customer experience from trying on frames, being able to return them easily with free shipping, their virtual try-on feature in the app, and even having them call my eye doctor to get my prescription. Even though there are less expensive competitors, I always buy from Warby Parker because I have an excellent experience and often recommend them to my friends and colleagues.
Average
When compared to their experience with other brands, customers quickly forget your business as they go about their daily lives. An average experience isn’t memorable enough to prompt a referral.
For instance, imagine you try a new restaurant. The meal and service were good, but nothing really stood out. It was average. If someone asked you what you thought about the experience, you’d probably say, “It was OK, nothing bad happened.” But then again, nothing really stood out either. Plus, you wouldn’t be likely to bring it up if no one asked.
Brand experiences are also forgettable when there’s a caveat to your recommendation. For instance, “It was a great dinner, but a little overpriced” is not going to get your friends to take up your recommendation. Not only does the experience have to be memorable, it also needs to be absent of any “buts.”
Exceptionally Poor
Brand experiences that are memorable because of how poor they were are often shared with friends. The impact of this on future business can be devastating.
For instance, I had a horrible experience with an auto insurance agency. I had canceled my policy to move to another company. Several months later, I realized they were still charging me every month.
It took about four phone calls with multiple different staff members over several days at the agency and over a month to get all my money back, even though I was able to provide my cancellation letter. After that, any time auto insurance has come up in a conversation, I tell people never to use them.
6 Ways to Improve Your Chances for Customer Referrals
While following up with customers after every sale and quickly acting on feedback that indicates a less than favorable brand experience is a vital component of any referral program, there are a few additional things you can do to increase the likelihood that a customer becomes an active promoter of your brand. Some of the most effective things you can do are:
1. Improve Your Products & Services
The better your products and services are, the more likely they are to stand out and stimulate spontaneous word-of-mouth referral. This will get customers talking and referring more of their friends and colleagues your way.
2. Create Complimentary Referral Partners
Referral partners are also often called channel partners. For example, if you run a design agency, a complimentary partner would be a social media agency or advertising agency. They deal with the same target customer group and they provide a complimentary service.
This provides the potential for both of you to recommend each other to your customers when the opportunity arises, which will help both businesses to boost sales.
3. Incentivize Giving Customer Referrals
Incentives can be used to leverage people who want to refer anyway. This can be done so that your customers can profit without it being at the expense of their friends. For example, you could tell a customer:
“Refer four of your friends to our gym and we’ll give you all a 20% discount on your next three months’ membership fees.” This works particularly well for new businesses in an industry that are trying to build a strong customer base.
4. Surprise Your Customers by Over Delivering
If people have already signed up to pay and then you surprise them by adding in something for free that they were not expecting, it will stand out as memorable. For instance, in some fine dining restaurants, servers provide a small taster dish before your starter arrives.
It tends to be the same for everyone: very tasty and unexpected. I come away remembering this, and how it was unexpected and made me feel more valued as a customer.
5. Gift Your Customer’s Friends
One great way to get more referrals is to gift your customer’s friends and colleagues. You have to figure out the best way to do this for your business. For instance, if you sell business computers, you could offer to run a free computer software training workshop for your customer and their friends.
6. Recognize & Thank Referral Sources
When a customer refers you, make sure to thank them for the referral and provide them with feedback on how well things are going for the colleague they referred. This allows them to positively validate their own decision to recommend you to a friend and will motivate them to make more introductions.
Bottom Line
Word-of-mouth referral is the most powerful way to be introduced to new prospects. Customers sourced via referral tend to be converted quicker, are less price-sensitive, and are also likely to become loyal customers. I recommend adopting a simple referral strategy that you can build into your business processes to manage referrals and generate more customer introductions.
