Every business owner knows that the key to generating referrals is creating a positive customer experience. When someone has a great interaction with your brand, they’re more likely to go and recommend you to their friends or colleagues.
One recommendation can mean a lot to your business, but what if you could turn that happy customer into a referral champion: someone who refers your business again and again?
It is possible to foster relationships with clients so that they become referral champions. Read on as I take a look at the steps to nurture these relationships and keep customers referring your business for years to come.
What is a Referral Champion?
Simply put, a referral champion is a happy customer who refers your business to more and more friends. Of course, there’s a bit more to it than that. A referral champion is likely someone who’s had more than one interaction with your business. A customer wouldn’t necessarily recommend a dry cleaner after visiting the shop just once, but if they take their shirts there each week to be cleaned and are consistently happy with the results, they’ll be more likely to suggest the business to a neighbor.
The other alternative is that it’s someone who had a truly remarkable experience with your business. Back to the dry cleaning example: a woman has a formal event this evening. She’s gotten a black ink stain on her cream wool dress, and it needs to be cleaned by that night! Her regular dry cleaner is way across town—she doesn’t have time to get there—so she turns to you. You’re able to remove the stain and have the dress ready to go by 5pm. That’s the kind of exceptional experience that may lead her to refer you based solely on that one interaction.
This is why you often hear me talk about the importance of creating an amazing customer experience. Whether someone is going to use your business just once or come back again and again, the experience must be high each time. It can be the first step to establishing a great referral champion relationship.
How Do You Find Them?
So now we understand what a great referral champion looks like, but how do you identify your potential referral champions from amongst all your customers? This is where calculating Customer Lifetime Value (CLV) comes in. The CLV represents what a customer will be worth to you over the entire lifetime of your interactions; this takes you beyond looking at a single transaction and helps you to see the bigger picture.
We’re able to take that formula a step further to include a customer’s referral value (CRV) as well. V. Kumar, a professor at Georgia State University’s J. Mack Robinson College of Business, and his colleagues offer a comprehensive approach to calculating CRV, which allows you to identify the number of referrals you can expect to get from each customer based on their prior behavior.
The formula also takes into account whether or not those referrals would have found you on their own without their friend’s recommendation. If that customer would have done business with your company anyway (which surveys showed was the case about half of the time), then the overall value of the referral is lessened.
Make it Easy to Become a Champion
Now that you understand the nature of your relationship with each customer, you can begin to get strategic about how to create the strongest referral champions possible. Some of your customers have a high CLV—they’re doing a lot of business with your company—but they haven’t yet become strong referral champions. Most happy customers say that they’d be willing to put in a good word for a business, but not all of them follow through.
In order to create referral champions, you want to make the referral process as simple as possible. Your customers are busy people and don’t have time to search for ways to refer you. You need to put that information front and center. Call to action buttons on your website, links to your Yelp or Facebook profiles in your email signature, and simple forms that ask for as little information as possible will all reduce friction in the referral and review capturing process and will drive your happy customers to share their positive feelings toward your brand.
Take Care of Your Existing Champions
There are some customers that already have a high CLV and CRV—they’re giving you a lot of their own business and are consistently referring you to friends. For customers like this, you want to be showing your appreciation for both their return business and steady referral stream.
There are a number of things you can do to thank them. Consider hosting an exclusive event for your best customers. Present them with a coupon to use on their next purchase, or with a gift card to their favorite local shop. Send them a free copy of your latest white paper or eBook on a topic they’d be interested in. Even a personalized phone call or email can go a long way.
The important thing here is to make sure you’re keeping the customer experience highly personalized. Your best customers don’t want to feel like they’re getting generic communications—they went out of their way to refer you, so you should go out of your way to send them a meaningful thank you.
Incentivize the Process
Whether someone is already a strong referral champion or is a happy customer with the potential to become one, instituting a referral program can be a good way to ensure that your customers continue referring your business well into the future.
There are a few tricks to creating an effective referral program. Make sure that the offer you’re making is one that customers will actually find beneficial, and create incentives for both the person doing the referring and for their friend. This will make it all the more likely that once that friend becomes one of your customers, they will turn around and refer one or two of their friends.
Referral champions are invaluable to your business. Each and every referral counts, so when you’re able to create a customer that generates multiple referrals over the years, that’s like striking gold. Keeping the customer experience high, making it easy to refer their friends, and going the extra mile to provide personalized service are the hallmarks of an effective referral champion program that will keep you in business for many, many years.
If you liked this post, check out our Small Business Guide to Referrals.