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Increase your turnover with meaningful referrals

The best ROI of any marketing activity

Why are referrals the best source of business?

They get you more of the right type of customers

If you ask your best clients (the most valuable and the ones you most like to work with), for referrals the companies they refer you to are going to be similar. It’s important to do your homework here and truly work out which customers are your most valuable. Don’t just pick your favourite. If you really want to increase your turnover, analyse your customers, work out their value to you as a business, then get more of them!

Work out the Customer Lifetime Value (CLV) – the gross profit generated by the purchases made by that customer. Add up the profit across the whole time they’ve been a customer. Using CLV in your strategy will ensure you’re focusing on the customers that are most important.

They build trust and brand awareness

If customers are happy to refer clients to you it means they are true advocates of your brand. Every time they refer someone to you, they’re risking their own reputation so the fact they do this means you have a very strong relationship based on trust. And, in turn, this creates a strong relationship with the client they are referring you to.

People are 4 times more likely to buy when referred by a friend. - Nielson

They're cheap! If you compare what it costs you to acquire a new customer – the Customer Acquisition Cost (CAC), you’ll see what I mean. It costs from five to twenty-five times as much to acquire a new customer as it does to keep an existing one happy. It costs even less to ask an existing one for a referral, it could be free!

The Lifetime Value for new referral customers is 16% higher than non-referrals. - Sassquatch

There are loads of different ways to get referrals. Formal referrals can take the form of a contract that includes some kind of reciprocity. Informal can literally be asking over a drink. Every business and industry are different, but two things are the same across the board:

1 ASK!!!

Obvious but true. Don’t ask all the time. Just at the right time and in the right way. Ask the customers with the highest LTV. Ask when they are particularly pleased with their purchase, the deal you have done for them or they’ve enjoyed an event that you have hosted - when they’re at their height of customer satisfaction. Clients won’t actively offer so you need to ask.

2 Make it easy

If you make anything complicated, it won’t happen. Everyone is really busy so help them to help you by creating a template if that’s what it takes. Whether you’re asking through LinkedIn or email, these are easily created. Contact hannah@hoylandmarketing.com for more ideas.

83% of consumers are willing to refer after a positive experience—yet only 29% actually do. - Texas Tech University

Where are your referral opportunities?

i) Customers

Identify those you are going to ask:

  • Highest LTV
  • Highest customer satisfaction score

And if you haven’t conducted a customer satisfaction survey or calculated your NPS recently, get on it! This is vital for planning the strategy to increase turnover.

ii) Suppliers

Identify those that work with your potential customers. Look at whether there’s a way to include referrals in your supplier agreement. Asking suppliers has the added benefit of really engaging them in your business. Your whole business works better if they understand how what they supply helps you provide a great service to your customers.

iii) Influencers

Relationships with industry influencers can be a key source of referrals. Their PR machine may be larger than yours, and if they are a fan of your brand, you might be able to piggy back off it.

iv) Your team

If you’ve got the right and happy staff, not only will you save money (read How to Save £50K), but they will proactively promote your brand. They will refer friends and family to your business, both as potential employees and as customers.

What should you offer?

There’s a number of options, depending on your industry and your customers:

1 Nothing

Some customers will just be happy to spread the love and help others.

2 Discount

If you really feel that you need to offer a discount, I would approach this with caution, remembering that discounting may make a rod for your own back. If you do decide to go with this option, it’s important that you give a discount to both the referrer and the referee to maximise the likelihood of the referral happening.

3 Coffee?

It has been proven that actually the incentive doesn’t have to be big.

Offering a reward increases referral likelihood, but the size of the reward does not matter. - American Marketing Association

Whatever your analysis reveals as right for your business, make sure that it’s communicated regularly, the reward is given instantly and that you do a great job on the referred work. If it's not, all your work is in vain.

The Neilson report on trust and advertising found that word of mouth is the primary factor behind 20-50% of purchasing decisions and that B2B companies with referral have a 70% higher conversion rate. Now, how much difference would that make to your turnover?

For a free 30-minute consultation on where your referral opportunities are or for further information on any of the above, contact hannah@hoylandmarketing.co.uk.

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