Increase Profitability

Word of Mouth: Setting up a Thriving Referral Program

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Going head to head on marketing spending against larger competitors with greater budgets is a contest that few small businesses can win. To reach potential customers, small businesses must turn their nimbleness and smaller scale into a competitive advantage. Reaching top, existing customers on a personal level and inspiring them to refer friends, family and co-workers can give businesses an edge over larger competition.

According to a 2017 Alignable study of 7,500 businesses, 85 percent of business owners say the best way to acquire customers is word of mouth referral. Next on the list? Google/Facebook which is cited by only nine percent of respondents as the best way to acquire customers,1 a huge drop!

According to SunTrust research, 60 percent of sales come from existing customers.2 While you are engaging with your customers, you can use that time to establish a word of mouth referral program to get them marketing the value you provide and help you reach new customers.

Build on a strong customer service foundation

According to SunTrust Research, 84 percent of business owners rate their customer service as “good” or “superb”2. They rank customer service as their business’s #1 business skill and their ability to create new products and services as number two. Self-evaluation results like that suggest that customers should be getting a very positive and valuable experience with winning products.

Yet, these same businesses score themselves much lower on core sales and marketing skills. Prospecting for customers, networking for referrals and cross-selling customers see ratings drop 30 percent below customer service capabilities.

A word of mouth referral program can help convert customer service excellence to leads via referrals to new business. Here are three strategies that can help set up a word of mouth program to do just that and drive business growth.

1. Know what customers are going to say

Customers tend to make referrals when a business is sound and goes above and beyond to meet or exceed their needs and expectations. Most small businesses believe that they excel at customer service and have superior products and services. You need to validate that your business is achieving that goal from the customers’ perspective—and the easiest way to find out is to ask them directly.

Give customers an ongoing and easy opportunity to provide feedback. Create a simple survey that reaches customers where they already are, like on social media networks or relevant websites. Contacting customers directly via email or a friendly phone call is also a tactic that works. The survey can ask questions such as: “On a scale of 1 to 10, how likely are you to refer us to friends and family?” and “How did you find our company?” You will soon know what your customers are telling others about you.

2. Create a system for asking for referrals

A good way to begin asking for referrals is to have a system that makes the “ask” automatic. Start by looking for the best place and time to ask for the referral. These can vary by business and personal style. Some businesses ask for referrals when a product is successfully delivered or installed. Others prefer to bring it up when a bill is presented, or in the customer support center when a problem is resolved.

If asking directly for a referral is not preferred, find other, natural ways to make referral suggestions throughout sales, delivery, and customer service processes. Many business owners use invoices, follow-up email messages, or countertop signs to do the asking in a clear and professional manner. Tools like customer satisfaction surveys and automated tell-a-friend applications can make asking for referrals a standard part of doing business.

Immediately after product delivery or service onboarding may be the most fruitful time to ask for a referral. Happy customers should make better referrals and may be more willing to take the time to help your business.

3. Make referral more likely with better customer engagement

A good piece of advice for businesses is to find ways to reach out to their existing customers and remind them how much they like your business — customers will forget a business quickly. Unless it’s a highly transactional business, it is likely they do not get to speak with their most loyal customers very often.

There are many ways for businesses to stay top-of-mind and gently remind customers about their services:

  • LinkedIn. An easy, low/no cost mechanism to stay connected with customers, prospects and influencers.
  • Email marketing campaigns. Email campaign management programs allow you to build campaigns to stay top of mind with customers.
  • Facebook and Twitter. If your business’s customers use Facebook, securing likes and communicating with your customers is a great option. Twitter gives you access customers who appreciate short messaging bursts.

Newsletters, surveys, and user groups are all conventional ways of talking to your community and customers outside of the sales process. The key is building a longer list of happy customers, and engineering relevant and recurring reasons to contact them regularly.

Learn more strategies to help increase your business’s profitability in SunTrust’s Small Business Best Practices Guides.

1 Slagen, Dan “The Majority of Small-Business Owners Rely on Word-of-Mouth Referrals. Here Are 3 Ways to Get Them”, Alignable survey, Entrepreneur

2 SunTrust nationwide survey of 397 small business owners, 2017

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