Referrals From Customers: Why Existing Customers Are Your Best Salespeople

Reaching out to contacts and prospects is a necessary evil for any small business. No company can ever get off the ground without learning how to sell their product, but calling, messaging, and visiting potential clients can be a huge time commitment. And it’s not even guaranteed to work. In fact, the sales research firm TOPO recently published a report showing that less than 24% of contact emails are ever opened and that call-back rates on cold calls are less than one percent. While recent technologies are helping many to automate their processes, cold contacting remains a necessary stumbling block in the path of sales teams. But cold calling is not the only way.

Experts have observed that contact success rates jump up to 40% when contacts come through a business referral. That’s forty times the rate you should expect from cold calls! It seems obvious that salespeople should be asking for a referral at every stage of a customer relationship. However, a Texas Tech study showed that 83% of satisfied customers are willing to refer others, but only 29% actually do. Simply put, too few salespeople are seeking referrals from their existing customers. Existing customers aren’t good salespeople just because they can connect you to people who are interested in your product or service. They actually bring value to the table when they introduce a friend that you couldn’t capture otherwise. Here are a few of the reasons why existing customers are the most valuable salespeople in your company:

What is Referral Marketing?

Referral marketing is a powerful form of word-of-mouth marketing that leverages the satisfaction of your existing customers to bring in new business. Essentially, it involves encouraging your happy customers to refer your business to their friends, family, and colleagues. This strategy builds trust, credibility, and loyalty, as people are more likely to trust recommendations from those they know personally.

Referral marketing can take various forms, including customer referral programs, referral agreements, and loyalty programs. The goal is to incentivize customers to share their positive experiences with others, which can lead to increased brand awareness, customer acquisition, and revenue growth. By implementing a well-structured referral marketing strategy, businesses can tap into the power of their existing customer base to drive new business and foster long-term loyalty.

They're Not Salespeople, They're Experts in Referral Marketing

This point might run contrary to everything that’s been said in this article thus far, but it’s true. Customers don’t work for your company. Sure, they might get a commission or some other form of kickback, but to the new contact, they’re a friend. Your salesperson, on the other hand, will always be treated with caution. According to Nielsen, the opinions of family, colleagues, and friends are the most trustworthy source of information about a company. 84% of consumers trust those recommendations, compared to just 68% of consumers who trust online reviews. No matter how good your salesperson is, they still represent your company, and thus, will not be completely trusted by potential customers. Referrals come with trust already built-in. Because someone they trust relies on you, they know they can too.

Referral marketing can take various forms, including customer referral programs, referral agreements, and loyalty programs. A business referral program serves as a structured approach to facilitate these endorsements, making it easier for customers to share their positive experiences and recommend the business to others, thereby enhancing trust and engagement.

The goal is to incentivize customers to share their positive experiences with others, which can lead to increased brand awareness, customer acquisition, and revenue growth. Customer referral agreements provide a formalized structure for rewarding clients who refer new business, fostering security and profitability for both parties involved.

They've Been Through It Before: The Power of Client Referrals

Companies are typically slow to adopt new products and services into their business. While cost is the primary barrier to making such changes, the difficulty of adopting a new product comes in second. The truth is, buying from your salespeople requires a leap of faith. If what you're selling doesn't work, their time and money is wasted. Business owners want stability in their decisions. One of the few ways that business owners can feel safe in adopting a new product or service is if they know how easy it is to use, and how it can help them be more successful. That's where referrals come in. Knowing someone who already uses the product is like a safety net; it allows them to feel confident in their purchase decision because they know someone that's already experienced all the positives (and pains) that come with the product.

Helping Others Builds Their Own Relationship with Your Company

Customers who give referrals aren't just giving you new business, they're building loyalty as well. When acting as a touch point for a potential client, your customer feels more involved and is more likely to offer referrals in the future. In fact, engaged customers refer 2.68 friends on average. If you can achieve the average 40% success rate on those referrals, you can expect to convert one referral per customer, effectively doubling your client base.If your sales team wants to reach its full potential, it's crucial that they utilize the best salesperson they have on their side. Current customers not only offer connections, but they also have a trusting relationship with their contacts in place and can act as additional support for the new customer. When your current customers see their referrals signing on, they'll feel motivated to sell more. The best part of all? Acquiring these customers is simple: just ask.

How to Build a Customer Referral Program

Creating a successful customer referral program requires careful planning and execution. Here are some essential steps to follow:

1. Identify Your Target Audience: Determine which of your customers are most likely to refer your business to others. These are typically your most satisfied and loyal customers.
2. Define Your Referral Program: Decide on the structure and incentives of your referral program. This could include discounts, rewards, or exclusive offers for both the referrer and the new customer.
3. Communicate with Your Customers: Inform your customers about your referral program and encourage them to participate. Use clear and engaging communication to explain the benefits of the program.
4. Make It Easy to Refer: Provide a simple and convenient way for customers to refer your business. This could be through a referral link, a referral form, or even a mobile app.
5. Track and Reward Referrals: Monitor referrals and ensure that customers are rewarded for successful referrals. This not only motivates them to continue referring but also shows that you value their efforts.

By following these steps, you can build a customer referral program that effectively leverages the power of your existing customers to drive new business.

Examples of Successful Customer Referral Programs

Many successful companies have implemented customer referral programs that have significantly contributed to their growth. Here are a few notable examples:

1. Swipesum: Swipesum's referral program rewards it's existing merchants with credits to their accounts.
2. Dropbox: Dropbox’s referral program rewards customers with free storage space for each friend they refer. This simple yet effective incentive has helped Dropbox grow its user base exponentially.
3. Airbnb: Airbnb offers travel credits to customers who refer friends. Both the referrer and the new user receive credits, making it a win-win situation that encourages more referrals.
4. Uber: Uber’s referral program provides free rides to customers who refer friends. This immediate and tangible reward has been a key factor in Uber’s rapid expansion.
5. Amazon: Amazon’s referral program offers discounts and rewards to customers who refer friends. This program not only drives new customer acquisition but also increases customer loyalty.

These examples demonstrate how well-designed referral programs can lead to significant business growth by leveraging the power of satisfied customers.

The Role of Technology in Enhancing a Customer Referral Program

Technology plays a crucial role in enhancing customer referral programs, making them more efficient and effective. Here are some ways technology can help:

1. Automation: Technology can automate the referral process, making it easier for customers to refer your business. Automated systems can handle everything from sending referral invitations to tracking referrals and rewards.
2. Tracking: Advanced tracking tools can monitor referrals in real-time, ensuring that every successful referral is accurately recorded and rewarded. This transparency builds trust and encourages more referrals.
3. Communication: Technology facilitates seamless communication between your business and your customers. Automated emails, notifications, and reminders can keep customers informed about the referral program and their referral status.
4. Incentives: Technology can streamline the delivery of incentives, such as discounts and rewards, making it easy for customers to receive and redeem their rewards.
5. Analytics: Data analytics tools provide valuable insights into the performance of your referral program. By analyzing referral data, businesses can identify trends, measure success, and optimize their referral marketing strategy for better results.

By leveraging technology, businesses can create a more efficient and effective customer referral program that drives growth and enhances customer loyalty.