It happens here almost every day. Someone calls up and says they heard about us from a friend or colleague and they want to find out more about our custom printed labels. These referrals are becoming a bigger and bigger part of our business – and so I have been doing some thinking lately about referral marketing.
Many businesses are built on referrals. Professionals such as lawyers, accountants, and realtors typically grow their business in this way. But there are also several high profile businesses that have grown their business primarily through referral marketing.
Fortune 500 Success Stories
Google has become one of the most successful companies in history without doing much advertising or marketing at all. This is a classic case of a company growing by referral marketing. Before they were in the news on a regular basis Google relied on referrals to grow their business. I first found out about Google in this way – a friend suggested I give them a try because he thought they were much better than Altavista & Yahoo – the two search leaders at the time. I, in turn, told several people and so it went. Google built up what was to become the most successful internet business ever by relying on the referrals of others.
Another successful company that has grown in a similar way but in a very different industry is Starbucks. Can you recall seeing an ad for Starbucks on TV? Starbucks spent just $95 million on advertising last year; by comparison Coke spent $2.5 billion. Starbucks has passionate customers. Before there was a Starbucks on almost every corner, before nearly everyone had tried their coffee, they grew their business through referrals. Their customers raved about the coffee and told their friends how good it was. So, even though it was very expensive people kept trying their coffee and loving it and telling more people. This is how Starbucks has grown to over 13,000 locations worldwide, which is about 25 times as large as its closest competitor, Gloria Jean’s with around 500 locations.
Three Keys to Achieving Success in Referral Marketing
Both Google and Starbucks have grown their business very quickly without the use of much traditional advertising. There is a lot we can learn from two of the most successful companies in history. How did they do it? Well it is not the only factor but an important factor in their success was referral marketing. The way I see it there are three essential factors that have to be in place if you are going to generate a lot of referrals:
1. Exceed Expectations
In today’s world consumers have high expectations, but in some ways this can work for you. If you can exceed these already high expectations then you can easily become memorable in the eye of your customer. Before Google came along, searching on the internet was a hit or miss endeavor. Suddenly with Google you would most likely find
what you were looking for, they exceeded the expectations of their customers. You can exceed expectations with the quality of your product, with your customer service, or preferably both. Do that and you will very likely be able to build your business through referrals.
2. Consistently Execute Well
Starbucks is the king of execution. You can go into any one of their over 13,000 stores anywhere in the world and get the same triple grande sugar free vanilla latte. They have somewhere around 20,000 possible drink combinations, so you can get your coffee exactly the way you like it. You couldn’t possibly have that many drink combinations across 13,000 stores without executing well. Starbucks executes well over and over again, so their customers develop a very strong brand loyalty, and they feel confident telling their friends about it.
3. Make it Easy to do Business
Even if you have consistently great customer service and a product that exceeds everyone’s expectation you are not going to get many referrals if you don’t make it easy to do business with you. If your online ordering process takes 15 minutes, or if when people phone your business they have to go through several levels of phone menus before speaking to a live person, it doesn’t matter how great your product or service is. People are not going to want to subject their friends to that kind of frustration, and so there will be few referrals. Make it easy for your customers to do business with you and you will increase the number of referrals you receive.
The beautiful part of today’s high tech world is that giving referrals is easier than ever. Just send a quick email with a link and you have given a referral. And it is almost as easy to refer 20 people as it is to refer one person, so today information (and referrals) can spread very rapidly. So the opportunity is definitely there for any business to build their customer base through referral marketing.
A Referral Marketing Program
Ok, if you have mastered the three ingredients that will maximize your referrals what next? You can just sit back and wait for the referrals to come in or you can help the process along by creating a formal referral marketing program.
In my last company we encouraged people to give referrals by offering a free gift (to the person giving the referral) every time someone provided us with a referral. We generated a large number of referrals in this way, even though only a small percentage ever ordered. But the program still paid for itself which is the main thing.
One the best referral marketing programs I have heard of was created by a wedding photographer. When she shoots a wedding, she makes sure she takes photos of the cake, flowers, dresses, hair dos, and reception rooms. Then she visits the vendors involved with the wedding and presents them with a framed photograph (with her logo and web site displayed) showing off their services.
If you are serious about creating your own referral program here are a couple of resources that will help you. John Jantsch, one the nation’s leading small business marketing experts, in his book Duct Tape Marketing devotes an entire 30 page chapter to creating a referral program. There are plenty of great examples (including the photographer one I mentioned here) and ideas for generating referrals.
Referral marketing is a subset of Word of Mouth marketing which is becoming a marketing discipline in its own right. If you want to get people talking about your company then I encourage your to read Word of Mouth Marketing by Andy Sernovitz. He is one of the leading authorities on this topic and this book is an easy and enjoyable read.