Welcome to Success Strategies | May 2024

Measure Your Customer Referrals for Maximum Impact in Three Easy Steps Now!

“The purpose of business is to create a customer who creates customers.”

This phrase from Shiv Singh, a noted marketing practitioner and advisor, perfectly describes a key outcome of better customer experiences. You want customers to find their experiences with your company are so positive that they keep returning, AND they tell others.

The Value of Customer Referrals

We all, at least implicitly, know the value of customer referrals. This Forbes article neatly describes some of the benefits of a business referral. In our business, referrals are our best marketing source since over 90% of our new business has come from referrals over the past twenty years. Yet, for too many companies, referral activity is not measured. Yet, it is one of the most valuable and practical components for business development.

In this issue of Success Strategies, I share an interview with Fred Reichheld, the developer of the Net Promoter System, Bain Fellow, and best-selling author. Fred discusses Earned Growth Rate (EGR), a metric to gauge a company’s customer referral business, or as he calls it, growth earned from the referral activity of loyal, pleased customers.

The Daniel Group Research

From our research, we know there is more customer referral activity than we expected. Several years ago, we conducted research to determine just how much referral activity was happening among the customers of some of our clients. Depending on the market, it ranged between 30 and 40% of these customers actively referred. We also learned that over 90% of the referring customers were also Promoters (gave 9 or 10 on the likelihood to recommend).

If you want to learn more about Earned Growth Rate, below are several articles worth reading:

  1. Fred Reichheld and several colleagues wrote this Harvard Business Review article, which thoroughly explains the rationale for this metric.
  2. An article from Forrester provides more details about EGR here.
  3. Let me know if you want a how-to guide to start with EGR. I have prepared a short paper on how to get started. Send me an email, and I will send it to you.

While numerous studies have linked NPS to improved financial performance, we like EGR because it is a practical, real-time way to measure the business impact of your loyal customers. Let us know what you think.

All the best for a great summer!

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