If you’re in business, then you know about the importance of lead generation through customer recommendations, also known as the word of mouth effect. The cost of acquiring a referred new customer is much lower than the cost of acquiring a new customer through other marketing efforts. Also, the conversion rate for prospects who have been recommended by current or past customers is much higher than for those who find you through other channels. The reason for this is very simple. When somebody outside of our company recommends our product or service, the prospect is more likely to consider the recommendation “impartial,” since we are not the ones promoting ourselves. The power of lead generation through customer referrals or recommendations is huge! This is the same business model behind powerhouse direct sales companies like Avon, Amway and Mary Kay.
Word of mouth is so powerful because it can happen anytime, anywhere. I recently heard a story about a business coach who got a lead that turned into a new customer during a sky diving outing. While on the plane, Richard (the client) was talking with Joseph about his business and the coaching methodology that was helping him to grow and increase profits. Joseph, also a business owner, was intrigued, and eventually hired the services of the company Richard had recommended.
It can be hard to predict when someone will recommend your product or services. One marketing strategy that will boost the likelihood of receiving referrals is to create a customer experience that is so unique and so outstanding that your customers will feel compelled to talk about it. How can you stand out from the competition in a big way? What can you do that your customers will care about enough to talk about?
It is also important to mention that if you stand out in a negative way, word will spread quickly about that as well. If you have customers who are dissatisfied or angry, they will often say bad things about your company. If you want an example of this, view the viral video “United Broke My Guitar,” produced by an angry musician who was frustrated with United Airlines.
One simple way of measuring customer satisfaction and the probability that they will promote your business, or the opposite, is to use the NER (Net Promoter Rate) – NPS (Net Promoter Score) technique. When you survey your customers, make sure you ask the following question: On a scale of 1 to 10, with 10 being the highest, how likely are you to recommend our product or services to a family member or friend?” If the answer is 9 or 10, that customer is a promoter, if it is 7 or 8, they are neutral and if your score is 6 or below, that person is a detractor. Focus your energy on making your “promoters” happy, and the referrals will keep coming in!