In a recent survey by IT company Easynet Connect, 81% of the businesses who responded said that they regularly refer business to contacts, colleagues and friends. In fact the survey suggests that small and medium sized businesses make three referrals a month to an average value of £7,500.
For the b2b sector, this is great news. The thinking on referrals has generally been that individuals often make recommendations to friends and family, but businesses don’t do this. But with fierce competition across most industries, the time is ripe for businesses to make the most of referrals as a marketing tactic.
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Here are 5 ways that you can make referrals contribute towards your bottom line.
1. Reward customers who recommend your business
Rewarding customers for referrals can seem pointless - just like giving something extra to people who would have made the recommendation anyway. But there are good reasons to reward customers.
Firstly, it helps you to keep their trust and loyalty. People like to be recognised for doing something good, and your customers will like your business even more if you show appreciation for their efforts.
Secondly, a reward will likely make them double the effort they put into making referrals. So, instead of simply mentioning your business to a friend or colleague in passing they may actively go out and give your information to other businesses.
Thirdly, you will get an idea of how customers talk about your business because you’ll be able to see it happening. When you know which customers are more vocal and more likely to spread the word, you can start giving them more attention.
2. Get your acquisition costs right
Referrals are usually a free source of marketing for your business, so when you are considering types of reward, think about your usual acquisition costs and what an acceptable cost would be for a referral.
There is no point in spending more on rewards than you are likely to make on the referral. However you must look at the bigger picture. If your average acquisition cost is £50 per customer, then you simply need to get your referral cost down much lower to make it worthwhile.
3. Tracking is key
Before you launch a recommend-a-friend reward scheme, you should set up a good system for recording and tracking the referrals.
Ideally automated tracking and recording of the data would be best and easiest to maintain but for many smaller businesses the cost of this is prohibitive. The main considerations are how to collect the data (i.e. a referral form), how to verify the referral, and how to give the reward. You may need to implement a policy whereby only referrals made through your website or via a form are eligible for a reward - otherwise it will be difficult to track and could upset your relationship with your customers.
4. Sources of referrals
Your customers are an obvious source for referrals, but there are other ways to get new business through recommendations. Affiliate schemes are effectively paid referrals via other websites, and the cost of setting up an affiliate programme can be reasonable. This is an especially effective way of expanding your sales force if you do business online.
More indirectly, positive reviews of your business by customers on other websites can also generate new business. Many people (and especially business people) look online these days for service providers and product retailers and are beginning to expect to see reviews alongside those listings.
You can get started by encouraging your customers to leave reviews of your business on websites such as Yelp.
5. Be the best you can be
Nobody will recommend your business if they didn’t have a good experience with you. It therefore pays to strive to be the best in terms of product/service quality, value for money and essentially in customer service.
Even if your reward scheme ensures that people will make recommendations no matter what type of experience they had doing business with you, if you can’t prove it to the referee you won’t get the sale.
As Japanese businessman, Tak Kimoto of Sumitronics Inc, once said: “There’s a saying in the United States that the customer is king. But in Japan the customer is God.”