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Tips for Converting Happy Customers into Referral Sources

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High-growth businesses view customer satisfaction as their leading competency and a key to obtaining a competitive advantage. According to SunTrust Business Owner Research, 59 percent of business owners agree that delivering excellent customer service is the best way to generate word-of-mouth referrals. Yet, most businesses do not actively manage referrals.

SunTrust research also indicates most business owners feel they deliver superior customer service, but fewer feel successful in generating referrals. To aid in that effort, consider three ways to transfer good customer service into active referrals:

1. Build “asking for the referral” into your business practices

If asking directly for a referral does not suit your business style, you should find other natural ways to plant referral “seeds” throughout your sales, delivery and service process. Many business owners use invoices, envelopes or countertop signs to ask for referrals in a clear, professional manner. Take advantage of inexpensive tools, such as customer-satisfaction surveys and tell-a-friend campaigns via e-mail and Facebook.

2. Create formal customer referral programs and incentives

Give customers an incentive for referring your business and a clear process for doing so. Business owner research shows very few organizations — less than five percent — have formal programs for requesting referrals and rewarding customers who provide them.

A referral program should include a clear process for how you handle referrals, including whether you reward the referring customer, the prospective customer, or both. Rewards can be formal incentives or discounts. Informal rewards, such as a personal thank-you note, a dinner or a gift card, can be effective, especially in high-touch service businesses. Clear guidelines and consistent follow-up are the key elements of any program.

3. Identify and track your net promoters

Many of your customers are net promoters who want to refer your company. These customers are loyal enthusiasts who keep buying from your company and urge their friends to do the same. Organizations serious about generating word-of- mouth referrals should also be serious about measuring and tracking their most passionate customers. An analysis of large, high-growth corporations in the book The Ultimate Question by Fred Reichheld and Rob Markey found that 19 percent of customers typically are considered strong advocates.

Your Net Promoter Score (NPS) counts your promoters — enthusiastic advocates — subtracts detractors – angry customers — and ignores the passives — bored customers. You calculate your NPS by asking your customers “How likely is it that you would recommend our company to a friend or colleague?” On a 10-point scale with 10 being extremely likely, promoters will respond with 9(s) or 10(s), passives with 7(s) or 8(s), and detractors with 6(s) or lower.

About SunTrust Business Owner Research: SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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