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Referral Marketing

Always ask satisfied customers for referrals!

by Renée Ericsson

Your customers are happy. They’re highly satisfied with what your company is offering. So why aren’t they recommending you to their peers?

Research has shown that, even if many of your customers are satisfied enough to be willing to recommend your company or offerings to others in their networks, most of them do not follow through and actually make a referral.

Given how important customers who act as promoters are to company growth, reconciling customers’ willingness or intention to make a recommendation with the act of doing so is of great interest to companies facing competition in the market, making their way into a new market, or hoping to thrive in a mature market.

As it turns out, research has consistently shown that asking people about future behavior impacts the ensuing performance of that behavior.

What’s more, asking your customers to recommend your company or its offerings turns out to be a surefire way to increase the chances of a customer with favorable intentions actually following through and making a referral.

Don’t be afraid to start asking

Admittedly, the idea of asking your customers for a referral can, at first, seem awkward, risky, even needy. And that’s because asking for a favor—which is essentially what this is—isn’t always easy, either because of the guilt associated with asking someone to do something for you, the dread of possibly getting turned down, or the unease of not knowing how the person being asked will view you afterward.

But that needs to stop. Because there’s really nothing to fear in asking for a referral.

In an article published in the Journal of Retailing and Consumer Services in 2015, researchers Magnus Söderlund and Jan Mattsson were able to demonstrate that asking customers to make recommendations not only increases word of mouth engagement, but also positively impacts customer evaluations.

Let’s take a closer look at their findings.

Asking for referrals increases word-of-mouth activity

Starting out, the authors explain that, while word-of-mouth is often defined as informal communication between customers regarding commercial experiences, their focus is on explicit recommendation content in conversations between customers when measuring requests for word-of-mouth and word-of-mouth activity.

Studying customers of a financial services firm, the researchers asked the subjects whether, on a rising scale of 1 to 10, their personal adviser had explicitly asked them to recommend the firm’s private banking services to people they knew. This gave them information as to whether requests for word-of-mouth had taken place, as well as the extent to which they had occurred.

To measure the customers’ word-of-mouth activity, the researchers depended on self-reported data based on two questions regarding, first, how many persons they had recommended the firm’s private banking services to, and second, how likely it was that they would recommend these services to someone.

Employing correlational analysis on the data collected, Söderlund and Mattsson found that the relationship between the word-of-mouth request variable and the two word-of-mouth activity variables (behavior and intentions), respectively, were positive and statistically significant.

They went on to examine whether asking for word-of-mouth could have any adverse effects, but found that asking customers to engage in word-of-mouth marketing did not negatively impact their overall assessment of the person asking, and that asking could, in fact, contribute positively to the customers’ overall impression of the firm.

Thus, asking for referrals is not only a way to increase the odds of satisfied customers recommending your company or its offerings; it can also add favorably to customers’ overall experience.

The upside is significant

Incorporating the practice of asking customers to recommend your company, product, or service to others is a cost-effective way to increase growth. As the aforementioned study shows, asking for recommendations is not only harmless; it is also effectively costless. But, while the cost is negligible, the potential payoff is significant.

In my previous post about increasing the value of your existing customers, I argued that customer recommendations lead not only to more valuable customers, but also to spontaneous and truthful marketing to potential new customers. Existing customers become secondary marketing departments who bring in new customers free-of-charge.

There are no costs or strings attached as there are in similarly intentioned programs, such as referral reward programs, promotional giveaways, or profile-raising events. You are creating word-of-mouth involvement, rather than seeing it as an effect of other marketing efforts.

Starting by encouraging employees to ask customers for recommendations, getting over the initial awkwardness, the practice eventually becomes habitual.

Shaping word-of-mouth promotion

Word-of-mouth is not limited to face-to-face interaction between individuals regarding a company or its offerings. These days, a significant amount of social interaction and information spreading obviously occurs online—be it via news articles, videos, or life events. Whatever it may be people are generally not opposed to sharing with their networks things that have had an impact on them.

When it comes to soliciting recommendations from customers, the research has proposed several differently formulated questions to reach that end. The authors of the study mentioned above note that different ways of requesting customers to make recommendations could lead to diverse outcomes in terms of compliance and overall evaluations.

Requests that are specific in nature likely elicit different behavior than more general requests, and the spectrum here is quite extensive at the extremes. Worth noting, though, is that direct commands are less likely to stimulate positive behavioral effects, so “Recommend us!” may not be the best way to go.

The way you do it is up to you—the important thing is to ask

The question that is most appropriate for you depends on your particular context, and on the type of sharing behaviour your company hopes to achieve. Regardless, the takeaway is this: Asking for recommendations does not make your customers like you any less; in fact, the research implies that doing so is entirely beneficial.

Essentially, it’s a harmless way to pursue growth.

Ready for more? We have created a step-by-step guide about growing your customer base with referrals.

Renée Ericsson