Why are referred customers worth more?
You’ve heard it before, and you’ll hear it again… referrals are the very best way to win new customers. Referred customers are cheaper to win. They convert more quickly. And, they spend more.
In my book, Watertight Marketing, referrals comes under Leak #6 – No Proof in the Thirteen Touchpoint Leaks. People actively recommending your business is the ultimate proof for what you offer, and encouraging them to do so should form a clear part of your marketing strategy.
So, how do you get more referrals? In a series of posts over the coming weeks, I am going to answer exactly that question.
Three reasons that referred customers are worth more to your small business
1) They are cheaper
When a prospect comes to you via a referral they are typically mid-way through their buying decision. This means that they’ve not picked up the costs associated with awareness activity. It also means they already know they need what you offer. There’s no education job for you to do in explaining why they need what you do. This makes a referral route to your door a cheaper one in terms of marketing costs. And, because they’ve walked through a door held open to them by someone they already trust, part of the sales job is already done for you. Their trust is yours to lose, you don’t have to earn it. This often cuts costs associated with trust-building activities, like lengthy meetings, detailed proposals, etc.
2) They convert more quickly
They are also likely to buy more quickly than other prospects. Well, more quickly from the point at which you are introduced to them. They have, of course, been researching their decision before this, but not at your cost (i.e. not at your events, on your website, newsletter, etc.). They are already a few steps into their decision, with fewer to go before they part with their cash. As stated above, you also benefit from the trust they already have in the person who referred them. This typically means that they’ll spend less time evaluating and scrutinising your business.
3) They spend more
These factors all come together to mean that the engagement is usually higher value. Both in terms of average spend, and how long they stay with you. The trust factor means they’ll more readily accept higher prices, and they’re more likely to agree to a more complex proposal. They’ll also stay with you for longer. They’re on your side from the outset, expecting you to be good (after all, their trusted contact told them so). So, even if things go wrong, they’ll give you the benefit of the doubt (for a while, at least).
Don’t leave your referrals to chance
So, referrals are seriously good for business. But, it’s amazing how often this element of a marketing plan is left to Lady Luck. I’m a big believer in Commercial Karma, but not in chance! Perhaps, it’s time you got systematic about this key element of a Watertight Marketing operation.
To help you do that, I’m penning a series of posts, in which I’m going to cover:
- Developing a referral policy
- Identifying current referrers
- Finding look-a-like referrers
- Filling gaps in your referral network
- Communicating with your referrers
- Some creative referral-driving ideas
- Top tips from those with a wining referral strategy
I’m looking forward to sharing my ideas, and to hearing yours.
© Bryony Thomas – The Watertight Marketer
Drop me a line by leaving a comment below, or chatting over on Twitter: @bryonythomas