4 Steps to Maximizing Customer Referrals

4 Steps to Maximizing Customer Referrals
Image credit: Hero Images | Getty Images

Free Book Preview Ultimate Guide to Social Media Marketing

This book takes readers through a 360-degree perspective of social media marketing in businesses.
Entrepreneur, Speaker, Author, & CEO of The Newsletter Pro
4 min read
Opinions expressed by Entrepreneur contributors are their own.

You can throw all the you want at your campaign -- spend tens of thousands of dollars on branding, landing pages, funnels, , letters and postcards -- but the single-best new customer is still a referred new customer. According to a study conducted by The , 65 percent of companies’ new comes from referrals.

One of the best parts about getting a referral is that referred customers spend more than customers gained via cold media. A study done in 2011 by The American Marketing Association, involving over 10,000 customers at a well-known German bank, discovered that referred customers spend more on their first visit, stay customers longer, and have an overall 16 percent higher lifetime value than non-referred customers.

Related: How to Increase Your Customer Referrals

How to generate more referrals.

Referrals can come in a few different forms -- the two most popular forms of referrals are word-of-mouth referrals and partner referrals.

Word-of-mouth referrals are the most basic referrals, where one person simply tells another person about your business, product, or service. Partner referrals come when an entity with a list or audience promotes your business, product, or service. For the purposes of this article, let’s focus on word-of-mouth referrals. To successfully get a mass number of word-of-mouth referrals, you need to:

  • Serve
  • Motivate
  • Recognize
  • Remind

1. Serve your customers.

Referrals all start with how well you or your product serve the needs of your customers. This may seem obvious, but I can’t tell you how many times I’ve gotten great service from the owner, only to have Battle-Ax Bertha at the front desk ruin any chance of a referral from me.

2. Motivate your customers.

Step two is to motivate your customer to refer. Typically this is done via a monetary reward, but it has to make an impact. Companies fail at this when they don’t provide a reward with a high enough value to encourage their customers to sing their praises. If you want more referrals, now is not the time to be cheap.

Related: 2 Biggest Hurdles to Winning the Referral and Retention Race

I’m often amazed that companies will pay hundreds of dollars for new leads via cold traffic but want to offer a $25 gas gift card for a referral. That’s crazy. Contrary to popular belief, if you want to generate more referrals, it will require a significant investment of money on your part.

3. Recognize your customers.

If you really want to kick the referrals into overdrive, find ways to recognize publicly those customers who have sent you the most referrals. Facebook, the office, and your newsletter are all good places to start.

Write an article about how amazing this person is and thank them for their referrals in your newsletter. Give them an award at your next customer appreciation event. Giving your best referral sources a way to share their success with others while promoting you is a great way to get more referrals.

Related: Good Customer Service Alone Doesn't Win Referrals

4. Remind your customers.

Finally, if you really want referrals, you have to remind people who you are, all that you do, and that you’re still in business. Studies have found you have no more than three days of top-of-mind awareness after a positive interaction with a customer, and that it is during those three days that customers are most likely to refer. Using an item like a newsletter, greeting card, or individual note to create an additional positive interaction with your customers will increase referrals.

If you want to know more about growing a business with referrals, download a free chapter of my book, “The No B.S. Guide to Maximum Customer Referrals and Retention” co-authored by myself and Dan Kennedy.

More from Entrepreneur

We created the SYOB course to help you get started on your entrepreneurial journey. You can now sign up for just $99, plus receive a 7-day free trial. Just use promo code SYOB99 to claim your offer.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Entrepreneur Store scours the web for the newest software, gadgets & web services. Explore our giveaways, bundles, "Pay What You Want" deals & more.

Latest on Entrepreneur