With a Little Help from Your Friends

    Jan 24, 2019

    By Annie Tsai

    After a long day’s work, you sink onto the couch and turn on the television. As you flip through the channels, you see a commercial for a new local restaurant. Later, as you scroll through your Facebook newsfeed, you see that a friend has checked in at that same restaurant, posted a picture of his meal, and captioned it, “Delicious! Can’t wait to come back.” Which is more likely to prompt you to reserve a table: the commercial or your friend’s endorsement?

    If you’re like most Americans, you’re much more likely to be influenced by your friend’s recommendations (even if he/she is “just” an online friend) than by ads. In fact, a recent Nielsen report reveals that 92% of consumers trust recommendations from friends and family above all other types of advertisements. And they’re four times more likely to make a purchase when referred by a friend.

    If your company is delivering value to your customers, you probably already have active referrers—even if you aren’t aware of them. These people are posting positive reviews about your business on social media and bragging about you to their friends, simply because they love what you offer and/or how well you treat them.

    Harnessing that loyalty is a no-brainer. And, these active referrers often don’t expect or even want incentives for referring others. In fact, before you spend time designing a referral program based on monetary rewards, I suggest you first find out how willing your customers are to simply help spread the word.

    Here are six ways to encourage your most valuable customers to refer others to your business:
    1. Be an equal-opportunity rewarder. Reward the referrer and the referee. This should be an easy modification if you already have a new customer acquisition deal in place. Even if you don’t have a formal offer that rewards the existing customer for bringing in new business, find a way to say thank you. Put a note on that person’s account to give them a little something the next time they visit your website or location. The gift could be as small as a coupon for a purchase, a small freebie, or a gift card for a future service.

    2. Don’t stop playing after you score the first goal. Provide an incentive to get the referred customer back a second time. Building in a strategy that incentivizes a new customer to return provides you with additional leeway and a captive audience.

    3. Be magnanimous with merchandise. If you have a retail component to your business, find ways to leverage this channel. Offering retail items is a great way to increase perceived value due to the built-in mark up from cost. For instance at a salon, the retail price of a bottle of shampoo may be $22, but the wholesale price is half that at $11. Including the bottle of shampoo or another styling product with a 100% markup significantly increases the value of the service delivered to the customer without seriously impacting the bottom line.

    4. Harness the power of “In their own words.” Use existing customer recommendations and testimonials. If you have a recent customer review that emphasizes how amazing a product or service is, turn it into a referral engine, share the story and pitch your offer “customer approved.”

    5. Ask customers to bring a “plus one.” Offer “you-and-a-friend” discounts. This is a great approach for two reasons. First, it turns an existing customer into a returning customer. Secondly, it encourages an existing customer to bring someone completely new to the business. We’ve all heard the adage “the best customers are referrals”—and it’s true.

    6. Use gift cards to your advantage. Encourage your customers to purchase gift cards. This is a great way to broaden the scope of your actively referring customer base. For those customers who are evangelists for your business in the offline or online world, gift cards are an easy way for them to introduce your business to friends and family. For tracking purposes, you can add some internal coding to the cards to track cards as they are redeemed. This will allow you to track which promotions generate the highest new customer referral rate. You’ll also know exactly who is buying your gift cards, so make sure to say thank you with an extra something the next time that person returns.

    Remember, if you’re doing your job well, customers will want to tell their friends and family about your business. Choosing to spend a little time and energy actively converting those customer fans into active referrers is a no-brainer. Best of all, once you have a successful referral program in place, it will practically run itself. One referral will lead to the next, which will lead to the next, and so on. When you put in the effort to cultivate your active referrers, they can become one of the most profitable segments of your customer base.

    Here are two AMA seminars that will help you delight your customers: 
    Customer Service Excellence: How to Win and Keep Customers 

    Customer Retention

    About the Author(s)

    Annie Tsai is chief marketing officer at Demandforce, an Internet marketing and communication company that advises small- to medium-size businesses. She is the author of The Small Business Online Marketing Handbook: Converting Online Conversations to Offline Sales (Wiley, 2013).