The Power of Incentivising Customer Referrals

Study after study has shown that directly referred customers have a significantly higher lifetime value than customers that come to a brand through other means. Getting existing customers to sing your praises on online review sites can be difficult enough, how do you get them so enthused that they take their friends and family by the hand and lead them through your door?

It’s long been known that word of mouth is one of the most important aspects of building a positive reputation. The rise of the internet and enhanced data analysis has made communication easier and easier and they’ve had significant, mostly positive, ramifications for businesses of all hues.

Despite all the digital distractions though, the value of personal recommendations is undiminished. According to a recent study by Extole, referred customers have a 25% higher lifetime value than a client or customer that reaches a business any other way. That’s an impressive statistic whether you are selling hair wax, cars and ethically sourced coffee or financial services.

In a world where we are bombarded with marketing messages, a personal recommendation cuts through the noise straight to a potential client. It can also have a knock on effect as the person receiving the recommendation spreads the word.

But is there anything that a business can do to attract these referrals?

Build enthusiasm, encourage passion

As we’ve discussed previously, the best way to get a recommendation of any kind is to be superlative in every customer interaction, to engage with and learn from negativity, to make it easy for customers to express their views in public forums and have enthusiastic, passionate staff. Simple enough…

Personal recommendations differ from online ones however. As the #noreceiptnoreview social media campaign shows, offering incentives for an online review may seem a little opaque and potentially morally murky. You can be far more transparent when putting a “tell a friend” strategy in place.

Simple to implement

While the basic principle of telling a friend hasn’t changed, the way that a business can encourage and extract maximum benefit from it has been supercharged.

There have been a number of ways that refer a friend techniques have been put to good use recently; including helping fill shops and restaurants during relatively quiet times, as part of promotional activity by mobile phone providers or by utility companies to encourage tariff referrals via their app.

It’s an approach that can be set-up relatively quickly and easily. Spreadsheets and databases of clients and their interrelationships are now simple to manage and amend. And it’s this ability to amend that is key, because businesses need to ensure that it’s a scheme responsive to constantly changing conditions and has the ability to enhance the strategy once they’ve seen how it works in practice.

Beware the pitfalls

A word of caution however, just because something is relatively easy to set up doesn’t mean that you should skip the bit where you put some serious thought into what your strategy looks like in practice, not just from your own perspective but also from the perspective of your customers and potential customers.

There’s always a risk that you can put a referral strategy in place that comes across as too pushy, which can end up doing more harm than good. The key, as ever, is to think about how it would feel to be on the receiving end and to discuss it with experts who may be able to highlight areas where you can improve your approach.

Reward strategies can really help businesses to improve customer recommendations. Find out more here.