4 Steps to Maximizing Customer Referrals You can spend all you want on marketing, but the single-best new customer is still a referred new customer.

By Shaun Buck

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Hero Images | Getty Images

You can throw all the money you want at your marketing campaign -- spend tens of thousands of dollars on branding, landing pages, funnels, Facebook, sales letters and postcards -- but the single-best new customer is still a referred new customer. According to a study conducted by The New York Times, 65 percent of companies' new business 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.

Shaun Buck

Entrepreneur, Speaker, Author, & CEO of The Newsletter Pro

Shaun Buck is the co-author of No B.S. Guide to Maximum Referrals and Customer Retention (Entrepreneur Press, March 2016) as well as CEO of Boise, Idaho-based The Newsletter Pro, the largest custom print newsletter company in the world—printing and mailing millions of newsletters annually for diverse industries all over the globe.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Business News

Grads From This Midwestern School Are More Likely to Start a Billion Dollar Company Than Founders Who Went To Stanford, Harvard, or MIT: Study

Some surprising schools outranked Ivy League universities with the likelihood that their grads would found a unicorn.

Business News

Bumble Is Laying Off Over 30% of Workforce as Gen Z Moves Away From Dating Apps

The company revealed its restructuring plans during a Q4 2023 earnings report.

Marketing

7 Ways to Create a Seamless Marketing Campaign Across All Platforms

Achieving cross-platform harmony requires strategic goal-setting, customized content optimization, and a mix of paid and organic efforts.

Starting a Business

How Can You Make Sure Your Business Will Survive Anything? Try These 3 Proven Strategies

No matter how uncertain the economy is, you can survive anything as long as you prepare. Here are a few strategies to consider.

Business Ideas

55 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.