Need Another Arrow in Your Marketing Quiver? Increase Customer Referrals!

Increase Customer Referrals and Improve your Marketing Strategy

Companies spend significant sums on customer acquisition strategies and less on customer retention strategies.  For example, a study conducted for Forbes Insights (Retentionomics: The Path to Profitable Growth) found that 44% of companies focus more on customer acquisition vs. 18% of companies that focus more on customer retention.  While this study is with B2C companies and agencies, I suspect the numbers are even more skewed toward acquisition in the B2B arena.   

There is marketing “gold” by re-balancing to increase the focus on customer retention!  Why?  The first reason is that customers who continue to buy from you make your company more profitable.  Sales expenses are lower because it costs less to serve existing customers.  The customer lifetime value (CLV) is more significant because they keep returning.  And put more icing on the cake so happy customers can tell others about it.  Our research found that around one-third of customers we interview have recommended a provider to a friend or colleague.  However, the most satisfied provide more than 90% of referrals.  

What Needs to Change to Increase Customer Referrals? 

• Redefine the role of marketing.  If you have not done so already, ensure marketing focuses on customer acquisition and retention.  Given the impact of satisfied customers, both arrows need to be in the marketing quiver.  
• Customer Experience is critical to retention.  Make it great!  The adage that the sales department makes the first sale, but service makes future sales is true.  An effective CX program makes it easier for customers to do business with you.   
• Marketers conceive of your job as managing a virtuous network.  You acquire new customers to become part of your network.  In this network, customers are so pleased with the products and services that they return and tell others.  These referrals, in turn, make your acquisition job easier because they received a referral from someone they trust.  That person who referred felt strongly enough about your company that they “co-branded” their reputation with your company to bring in a new customer.  This co-branding is why I call it a virtuous network.   

Why does the Marketer’s Role Need to Change Now?  

There are several reasons marketing’s role needs to change now. First, too little focus on retention leaves customer value on the table. If a third of your customers volunteered that they had referred your company, there is significant value.   

Second, plenty of information about products and services for companies and products is widely available now.  When a customer contacts you about purchasing, much research has been done, and it is mostly getting details worked out.   We also know from our work that even with all this information, what trusted friends say about a provider and one’s personal experience with the provider figure heavily into customers’ decisions (sometimes, the two most important factors).  Using your virtuous network to stay in front of customers is critical to helping you succeed in their decision-making process.   

Lastly, existing customers also need some love and attention from marketing.  While those working directly with customers provide this love and attention, the marketing team should also focus on those loyal customers.  Provide information to your customers to help them use your products more effectively (helps your company and the customer).  Recognize loyal customers.  Everybody loves positive attention.  

If you work in marketing in your company, send me an email and let me know what you are doing to show love and attention to your loyal customers.   

Read more on this topic: Customer Loyalty and Retention – It Takes Both.