A study published by Harvard Business Review (HBR) looked at more than 10,000 accounts at one company over a 3-year period. Customers who were obtained through referrals were distinguished by two valuable traits. 1) They were 18% percent more loyal and likely to remain a customer than those who were not obtained by referral. 2) They generated 16% greater profits.
That means that the ROI on a referral program can pay significant, sustainable dividends. Plus, those returns can be compounded if referred clients start referring other clients to the business. In fact, that kind of client generation has the potential to offer exponentially increasing returns. The cost of client acquisition will likely pay for itself quickly, too, as the referred client contributes new revenues.
Treat Referrals Like a Marketing Campaign
Because referrals are so valuable, businesses should be as proactive and focused on soliciting them as they are in other marketing and branding efforts. Provide superior customer service and other unique value propositions to be referable. That’s paramount, because quality attracts quality. Then constantly ask for referrals. That sounds so simple. But despite being so easy and effective, learning to ask happens to be one of the most overlooked ways to generate referrals.
To Give is to Receive
Similarly, giving referrals to trusted, noncompeting partners and vendors is a key strategy. That’s because they will likely reciprocate with referrals of their own. When a business identifies a partner whose services and reputation are a good match for them, a referral arrangement should be implemented. That can be a dynamic way for both businesses to keep filling the inbound referral pipeline with high-quality clients. But a high number of referrals who are not a good fit won’t deliver the desired results, whereas referrals who are ideal clients are a gold mine. When reciprocating referrals B2B, make sure that the other business has clients who are a great match.
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Incentivize Quality Referrals
If there is a client loyalty program in place, add a referral incentive to it. Oftentimes that will be just enough extra motivation to prompt them to action to make a referral. One of the best tools to incentivize existing customers in exchange for referrals is a gift card. A business can brand it to make it uniquely theirs, and if the card is redeemable for their own products and services that automatically ensures repeat business. Electronic gift cards are inexpensive, easy to give, and make a memorable impact as a generous thank-you for referring friends, neighbors, and coworkers.
Leverage Referral Programs for Sustained Growth
Another HBR article cited customer enthusiasm to refer friends and colleagues as having a direct correlation to business growth. In fact, the article explained, “The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department.” That approach was validated by a Nielson report on consumer confidence in advertising. The study showed that more than 80% of respondents across 58 different countries ranked word-of-mouth from friends and family as the most trusted form of marketing.