header image of the blog title "Find Out How to Nurture Your Business Though Customer Referrals" with a background image of buildings
header image of the blog title "Find Out How to Nurture Your Business Though Customer Referrals" with a background image of buildings

Zero-Cost Advertising: How to Leverage Customer Referral to 2X Your Sales

July 19, 2018 Customer Referrals, Marketing, Marketing Automation, Marketing Tips, Online Marketing 0 Comments

Getting consistent customer referral is not an easy task to accomplish. And you might be asking, why should you focus on customer referrals when it is easier to just pay for advertisement?

Well … because a solid recommendation from a trusted friend, means an easy close, and frequently higher initial purchase amount! That’s zero-cost advertising at its best …

Get this, Nielsen survey found out that business who engage in a customer referral program have an increase of 70% in their conversion rate. And businesses that sell to a referred customer have 69% faster close time.

How To Leverage Customer Referral to Grow Your Business

Customer referral can help your business achieve more sales. And not only that you will find out as we go through this article the following key points about customer referral:

  • Why getting consistent referrals is essential to your thriving businesses
  • Why businesses fail in attempts to get referrals (so you don’t make the same mistake)
  • Learn the psychology behind referrals
  • How most other businesses in Singapore do their referrals
  • How building a systemized customer referral business can help your business
  • Discover the current trends in the market
  • Read examples of success stories of businesses doing customer referral

Why should customer referrals be an essential strategy for your business?

over-the-shoulder shot of 2 persons shaking hands
Customer Referral as an Essential Strategy – Leverage Customer Referral To 2x Your Sales

For all business, Trust is the most expensive commodity. Without trust, it is impossible for your customers to refer you to someone else.  

Through customer referral,  you get free advertising. It has been widely known that customer referral and referral marketing brings about 3 to 5 times higher conversion rates than any of your marketing channels. So, if your customers refer you to someone they know, it only means you have earned their trust. You have earned the most expensive resource. You can spend thousands of dollars on product advertising, but the most effective way of advertising through word-of-mouth and customer referrals.

According to Neilsen, 77% of your customers are more likely to buy your product, if their friends and family recommend it. This is because customers who get referred by their friends and family, already have a connection with the person who referred them to you. And because of this trust, these people have a perception that your products and services have high quality.

Customer who refer your brand to someone they know, statistics show that 74% of your customers classify that the word-of-mouth they hear determines their purchasing decision. This means what people say about you, and your product has an impact on whether or not they will buy your product.

Another thing, customers who refer your brand to someone they know are most likely to buy from you again. In addition to that, a survey from Marketing Metrics says that first-time customers have at least a 60%  chance to buy from your brand, again.

Neilsen also stated that 92% of your customers trust recommendations and referrals from their family, friends, and people they know. A Zero Cost Per Acquisition (CPA) technique that can help your business grow.

Why are businesses failing in getting regular, quality Customer Referrals?

over-the-shoulder shot of a man looking directly to a sun setting down, this is an example how business fail in leveraging customer referral
Businessess Failing in Getting Quality Customer Referrals – Leverage Customer Referral To 2x Your Sales

Customer referral is not a new idea to the industry; it has been around for ages. And for sure, at one point in a company’s life business owners have tried using customer referral. But, shockingly only 30% of the companies today have a systemized customer referral program. Referral marketing is tricky, and making a wrong move can end up with you losing customers instead of gaining them.

One of the leading causes of why businesses fail in their customer referral is “Lack of mindset”. Businesses that have the mindset that they are only a transaction based business will never put effort into doing customer referral correctly. Take for example a business whose customers are tourist will not care about customer referral because they will only see that person once. But, think about it, don’t tourist give recommendations to their relatives and friends? The first thing you should do to get better customer referral is changing your mindset! Stop thinking of customer referral as an unnecessary thing but as a money making machine. Customers who have been referred by a friend or a family member buy 4X more than an average customer’s gotten through ads. 4 times, let that number sink in if you are having second doubts about changing your business mindset.

Another reason why businesses do not have the correct mindset is they fail to grasp LTV or Lifetime Value of a client. When they see a customer, all they care about is making a sale. But, if you care about making long-term customers, then you focus on creating strategies aimed at turning normal customers into lifetime buyers. And you can do this by customer referral because referred customers have 16% higher LTV compared to regular customers.

The second reason for failing in customer referral is the “Lack of skills” to do referrals correctly. Business owners and their management teams dive into referral marketing without the slightest clue what it is about. The key to getting customer referral is a three-step process similar to tree planting. First, you need to learn how to plant the seeds of referral. Once you have planted the seed, you water it and nurture it so it will grow. And lastly, you learn to harvest your referral fruits.

What these three steps mean is:

  1. You encourage your existing customers to do customer referrals. (Don’t just ask them outright! We’ll discuss more about this later)
  2. Give rewards and incentives to your customers who referred others to you. And nurture those referred customers.
  3. And seal the deal with those referred customers, and make a sale.

Lack of a system.
This is the third pitfall of businesses when it comes to getting customer referral. You shouldn’t be lax in checking the referrals you get on a day to day basis. If you want to grow your business, then monitor the referrals you get. Having a system allows you to have consistency and dependability in your referral program. The lack of a system will end in your customer referral failing.

Last is the Lack of tools. It is important to have the right tools, without the right tools your customer referral program will fail. Business who implemented their programs on customer referral failed to use the following tools:

  • Customer Relationship Management (CRM) Software
  • Marketing automation Software
  • Survey, Review & Rating Apps
  • Viral Referral Marketing Software

First of all, a CRM Singapore is where you keep a one-view of your customer’s demographic data, transaction history and communication history. The information allows you to decide which customers to engage. Identify your top 20% customers, by frequency and value of orders, and build them into loyal customers. Test and track what would encourage them to refer.  

Marketing Automation tools like Infusionsoft CRM or Marketo, is used to launch targeted communications at different segments of customers, based on their engagement level or behavior. Marketing Automation automates & track customer touchpoints like email opens, link clicks, videos watched, blog articles read, ads responded, and so on… We could launch an ad campaign or an email campaign at customers who are engaged, and then ask them to share articles or directly refer a friend. The referral campaign can be embedded as a loyalty coupon offer, a facebook testimonial request or a customer survey.

referral campaign embedded as loyalty coupon offer

Survey, Review & Rating tools are useful to get a feel of how well you “deserve” referrals. When you run surveys with a favorable reply, you could immediately ask the customer to share their review with their facebook friends, record a testimonial or even refer a friend. That can be then boosted with viral referral marketing tools.

Recommended tools:

Survey software: Surveymonkey, Surveygizmo

Review/rating software: Grade.us, FiveStarReivewSystem

Viral Referral Software: Referralcandy and InviteReferrals

And sadly, many companies fail to capitalise on such tools in their customer referral program.

What is the Psychology that goes within a Customer Referral system?

overhead shot of scattered puzzle pieces, this is an example of what is the psychology within customer referral system
Psychology Behind Customer Referral System – Leverage Customer Referral To 2x Your Sales

To understand the psychology that goes on inside a customer referral, you must dive into the heads of the one giving the referral and the person asking for a referral.

Person giving the referral

Most consumers don’t mind sharing their great experiences to someone close to them. Naturally, if they had a blast at a certain place, they will recommend spontaneously go to their relatives and friends. Sharing a good experience is natural to consumers because sharing is caring.  But, do note the word we used “great experience”. In today’s standard, a good experience is not enough. As stated by our guest expert Mr. Chris Chan, author of the book Referral Revolution, “Good is not good enough.” If you want your customers to promote and refer your business voluntarily, then give them a great experience. And by great we mean a 4 out of 5. By creating great, quality experience for your customer, you can ask them to give referrals without much resistance or hesitance on your part.

Person asking for the referral

A person asking for a customer referral is very different, in terms of mindset and reaction, to one that is giving the referral. According to Chris, a customer referral expert, the person asking for a referral usually feels very uncomfortable doing it. Why? Because the act of asking makes a person vulnerable and they feel unsuccessful. It hurts the ego because many people asking for referrals see the action as begging. But, this is where things should change. If you want to be successful in customer referral, then you should view it as helping others.

Making referrals is not begging but helping, with a mindset like this, you can ask for referrals naturally and not feel like begging or guilty about it.

What are the common practices in getting customer referrals in Asia? Are they working?

The common practice for getting customer referral for businesses today is outright asking customers to refer their products to someone they know. If you go back to understanding the psychology of customer referral, you know that doing this is ineffective. You will not succeed in getting referred customers, but you will succeed in making your customers and sales team feel awkward. This bad practice should be avoided if you want to end up with a failed customer referral program.

Here’s what Chris suggested that you as a business owner do. He calls it the 3 Whys of Customer referral:

  • Why does the customer want to help you?
  • Why help others?
  • Why now?

What can compel the customer to help you?

According to Steven Covey’s principle of emotional bank, everyone has an emotional bank. Every time you do something for someone you bank into their emotional bank. In simpler words, people will help you because you help. This help comes in the form of giving them an exceptional customer experience. The more you deposit into the emotional bank, the more you can “withdraw”.

Why should they tell others?

Back to the great experience, you can bank on the fact that you gave them a great service. This will encourage them to recommend your product to others because your product or service helps. And you have explained to them that by referring your product, they are actually helping their loved ones, friends and colleagues.

Why must it be now?

You must emphasise urgency, take for example a time-limited promotional offer. Urgency by scarcity or time, sometimes is needed to move your referrals to make a recommendation. Example: “Our company is having a unique 25% first year discount for the first 100 new customers this month. “ By setting goals and providing reasons to help achieve those goals you are answering the question “why now?”.

Referrals Before and After

With the explosion of mobile and the internet, people can now reach their family and friends anywhere they are in the world within a minute. Before, Word-of-Mouth was spread offline via human to human interaction, but now it has gone online.

According to statistics, 55% of people share their latest purchases on Social Media (e.g. Twitter, Instagram, Pinterest, Facebook, and other Social Media Sites) where their friends can see it, and a surprising 71% of these people make their purchase through Social Media for Referral Marketing.

So businesses who adapt to the latest trends, are able to generate more traffic that may lead to getting more leads. Using various tools, you can nurture your leads and prepare them to become loyal.

One good example of this is the owner of Breadtalk and Food Paradise. Because of their excellent customer service, people were able to spread the word-of-mouth quickly, and since then, the business has done so well that they have expanded across different parts of China.


Growing a business is easy if done systematically, it takes time, money and a whole lot of patience, but the joy and satisfaction you get out of helping others while your business grows in the process are priceless. Are you ready to implement a customer referral system to help grow your business?

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