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Inside Marketing: Rally Those Referrers!

April 2014 – Vol: 37 No. 4

Why praise from 'friends' is worth its weight in gold

April 17, 2014

word of mouth, referrals
Photo credit: Dollar Photo Club/eyeidea

Credit Union Management’s online-only “Inside Marketing” column runs the third Thursday of the month.

Picture this: After a long day’s work, you sink onto the couch and turn on the television. As you flip through the channels, you see a commercial for a new local restaurant. Later, as you scroll through your Facebook newsfeed, you see that a friend has checked in at that same restaurant, posted a picture of his meal, and captioned it, “Delicious! Can’t wait to come back.” Which is more likely to make you reserve a table: the commercial or your friend’s endorsement?

If you’re like most people, you’re much more likely to be influenced by your friends’ recommendations (even if they’re “just” online friends) than by ads. In fact, a recent Nielsen report reveals that 92 percent of consumers trust recommendations from friends and family above all other types of advertisements. And they’re four times more likely to make a purchase when referred by a friend.

Here’s the takeaway for businesspeople, says Annie Tsai: Referrals are a huge, sparkly, tied-up-with-a-bow gift—and if you aren’t already working to harness and maximize their power, it’s past time you started.

“Businesses are so busy focusing their energy on acquiring new customers that they often neglect one of their most valuable resources: active referrers,” says Annie Tsai, author of The Small Business Online Marketing Handbook: Converting Online Conversations to Offline Sales (Wiley, 2013, ISBN: 978-1-118-61538-6, $25.00). “Though this may be a small percentage of your overall customer segment, setting up a basic program to support them and encourage their activity is well worth your time and resources.”

In fact, if your company is delivering value to your customers, you probably already have active referrers—even if you aren’t aware of them, Tsai says. These people are posting positive reviews about your business all over the social media landscape and bragging on you to their friends simply because they love what you offer and/or how well you treat them—in other words, because you’ve earned their loyalty.

“Harnessing that loyalty is a no-brainer,” says Tsai. “And here’s the thing: These active referrers often don’t expect or even want incentives for referring others. Sure, you can offer incentives, but don’t think you have to break the bank in order to get referrals from current customers. In fact, I advise that before you spend the time designing a referral program based on monetary rewards, test out how willing your customers are to simply help spread the word.”

If you’re ready to harness the power of active referrers, read on for five of Tsai’s tips on designing offers that continue to nurture your most valuable customers:

Be an Equal-Opportunity Rewarder

Reward the referrer and the referee. This should be an easy modification if you already have a new customer acquisition deal in place. “Even if you don’t have a formal offer that rewards the existing customer for bringing in new business, find a way to say thank you,” suggests Tsai. “Put a note on that person’s account to give them a little something the next time they come in” such as a small freebie or  gift card for a local merchant.

Don’t Stop Playing After you Score the First Goal

Provide an incentive to get the referred customer back a second time as a part of the referral program. “It’s the same as when you’re designing deal site promotions or any other new customer acquisition program,” explains Tsai. “Building in a strategy that incentivizes that new customer to return a second time provides you with additional leeway and a captive audience. New customer acquisition through your referral channel is no exception to this rule.”

Go Old School—Distribute Business Cards!

Don’t discount the power of handing out some business cards to your favorite customers. Asking for the referral is often the most difficult part of building a referral program; however, you need to educate your customers on how they can help support your business—especially in the beginning.

“Even if you don’t establish a formal referral program, you can use business cards as an easy conversation starter here,” says Tsai. “Simply hand the customer three business cards at the point of sale and say, ‘I’d really appreciate it if you could let a few friends know about the great service you received today.’

”Harness the Power of “In Their Own Words”

Use existing customer recommendations and testimonials. “If you have a recent customer review that emphasizes how amazing a product or service is, turn that recommendation into a referral engine by pitching your offer as ‘customer approved’ and share their story,” notes Tsai. “You can go several directions here. Including a customer video testimonial, a before and after photo, or a snapshot of their post-visit review are all effective ways to draw new business from your current fans.”

Ask Customers to Bring a “Plus One”

Create referrers using “you and a friend” deals. This is a great approach for businesses for two reasons. First, it turns an existing customer into a returning customer. Secondly, it encourages that existing customer to bring someone completely new to the business.

“Remember, if you’re doing your job well, customers will want to tell their friends and family about the great new store, restaurant, service, etc. that they’ve found,” Tsai concludes. “Choosing to spend a little time and energy actively converting those customer fans into active referrers is a no-brainer. And the best news of all is that once you have a successful referral program in place, it will practically run itself. One referral will lead to the next, which will lead to the next, and so on. When you put in the effort to cultivate your active referrers, they can become one of the most profitable segments of your customer base.”

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