Two Truths For Referral Marketing To Work Properly



It is well known that referral marketing is one of the most effective – and inexpensive – forms of marketing. According to the study “Referral Programs and Customer Value,” released by researchers at the Goethe University Frankfurt and the University of Pennsylvania, referred customers tend to have a higher initial contribution margin and tend to be more loyal than other customers, making them more valuable in both the short and long run.

But for referral marketing to work effectively, there are two essential factors to acknowledge:

1) Your customer must perceive your value.

2) You must establish a personal relationship.

Establish your value

Word-of-mouth recommendations are only asked for – and given – by people in your immediate social circle: friends, family members, etc. These are the people with whom you have close personal relationships, and therefore a vested interest in their lives. If you are going to recommend something to someone, you only do so if it is something you believe will help. What does this mean for businesses? It means presenting your value should be priority.

Prove to your existing customers that the service you provide is worthwhile and provides an easy solution for their problems. Surpass basic customer service to impress upon them that you provide service they cannot get elsewhere. Use every interaction as an opportunity to convince customers that what they are getting from you is useful and important. Establishing value with your existing customers is the first step toward a successful referral. When they have faith in you, they’ll be more eager to sign your praises to others.

Remember to:

  • Provide a quality product that encourages the customer to talk about it.
  • Offer solutions to problems.
  • Highlight how your services benefit your customer.
  • Show your commitment to customer service.

Establish a relationship

Although value will encourage a referral, a solid connection to a company representative will cement it. Fostering a one-on-one relationship with a customer cultivates a sense of trust and direct accountability. Not only will your customer feel more comfortable interacting with you, he or she will feel more confident recommending your services to a friend, which moves you from “talk to this guy” to “talk to my guy” territory.

Promote yourself as courteous, approachable, and eager to answer questions. Be sure to offer your help directly. During customer interactions, don’t forget to say: “Let me know if I can ever be of help to you or anyone else that you care about”. Emphasizing that “care about” will increase referrals as the person feels you are invested in their success, and will quickly identify others they know who may benefit from your services.

But that sense of personal connection should not be limited to one-on-one face time. Aim to build your relationships and promote yourself as the go-to person by being as visible  – and approachable — as possible, across all media platforms.

Remember to:

  • Be approachable: encourage personal relationships to make one-on-one connections.
  • Be visible: Use TV, Twitter, blogs, social networking sites, etc. to make you more familiar to a larger community.
  • Make personal connections.
  • Reiterate your value during interpersonal encounters, and let your customers know you’re happy to help anyone they know.

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