The Definitive Guide to Referral Marketing

Why You Get Less Than Half Of The Referrals You Should Be Getting

Why You Get Less Than Half Of The Referrals You Should Be Getting

"In the age of technology there is constant access to vast amounts of information. The basket overflows; people get overwhelmed. The eye of the storm is not so much what goes on in the world, it is the confusion of how to think, feel, digest, and react to what goes on." ― Criss Jami, Venus in Arms

Here's a grim fact. Even after you've built a great product and brand, even after you've made some customers very, very, happy…

You're still probably getting less than half of the referrals that you should be getting.

According to a Advisor Impact study, 83% of your satisfied customers are willing to refer you to their friends, but only 29% actually do.

Why are almost 2 in 3 satisfied customers not making the referrals that they said they're willing to make?

Because while people are wired to make referrals, we're not wired for our present circumstances. We are overwhelmed on multiple counts.

Consider the following story, which is played out in different ways all over the world every day:

  1. You had a great experience with Jane, an insurance agent who answered all your questions and helped you set up a comprehensive plan. When she asks, "Would you refer your friends to me?", you answer "Yes, of course!"
  2. Your agent's hope is that you'll now tell all your friends about her. But right after you met your agent, you were overwhelmed with work and family commitments. Within hours, your agent's name is completely out of your mind. If a friend happens to ask you outright, "Hey, do you know who I should get insurance from?", you think "Uhh… I had a good experience with this person… but I can't remember her name!"
  3. Suppose you do remember Jane. It's still very unlikely that a friend will approach you saying "Help, I need insurance advice!" Sometimes your friend doesn't know he needs help. Sometimes his signal for help is so subtle that you miss it entirely. Your friend Robin might gripe about the parent-teacher meeting he was at earlier. He confides that he's not sure how he's going to pay for his kids' college tuition. In the midst of a lively conversation, you fail to recognize that your friend would've benefited from Jane's insurance planning.
  4. Suppose you remember Jane AND you recognize that Robin would benefit from her services. You still need to know how to talk about Jane in a way that persuades Robin to consider using her services. You'll have to avoid coming across as preachy or salesy. If you're not quite sure how to bring it up, the likeliest outcome is that you don't talk about it all. And the conversation moves along.

There are three things that prevent a successful referral from happening.

1. Recall: Your advocate failed to remember you at all.

"Always remember: a brand is the most valuable piece of real estate in the world; a corner of someone's mind." ― John Hegarty, Hegarty on Advertising

Consumers are bombarded with marketing messages today, now more than ever.

We're not evolved to handle so much information. We have all sorts of cognitive biases (such as the Availibility heuristic , and Recency bias ) that make it very difficult for us to manage this overload effectively.

As Contour co-founder Marc Barros put it in his essay " To The Creators ", your brand will never be as important to your customers as it is to you.

If you want to get more referrals, you're going to have to take significant measures to ensure that your brand stays top-of-mind for your customers. (And you're going to have to do it without being spammy.)

2. Context: Your advocate remembers you, but failed to recognize that she's in a situation where a referral is appropriate.

"Advisors are often taught to ask for referrals and ask often. The data suggest that a better approach is to help clients to spot a good referral opportunity so that they recognize the opportunity to share your name." – Advisor Impact

In his powerful SlideShare The Real Life Social Network v2 , Intercom's Paul Adams pointed out that we don't actually have a single basket of "Friends". Rather, we live in a world of many overlapping contexts. For example:

We all wear many different hats and play many different roles across many different groups and contexts. It can get very complex.

And this is actually very, very new to us. There's substantial scientific evidence that suggests that the average person's brain is only capable of sustaining stable social relations with about 150 people– and all in the same group.

In a small, tightly-knit community of 150 people, making a referral is easy. Everybody knows everyone, everybody shares the same problems, everybody goes through the same practices and routines- the differences are minor.

In today's world, 500 friends probably means 500 (or more!) different contexts. And nobody can remember everything all the time. (It gets even more complex when you remember that people's needs are periodical rather than constant.)

And here's the final kicker– oftentimes we don't even realize when someone is talking about something that we could help them with, because they're describing their need in such a nuanced way that it's difficult for us to recognize off-hand.

So if you want more referrals, you're going to have to teach your advocates to recognize what referable moments look like.

3. Your advocate was unable to effectively convey your product's value to her friend.

The easier you make it for people to talk about your brand, the likelier it is that they will, and the more impactful it will be.

"I know you think you understand what you thought I said, but I'm not sure you realize that what you heard is not what I meant." – Alan Greenspan

Suppose your advocate remember your brand, and she recognize a situation in which she can help a friend by making a referral. You're all set, right?

Not exactly. Your advocate still needs to be able to communicate the value of your product effectively, or risk coming across as unhelpful or even pushy.

If you want more referrals, you're going to have to guide your advocates and help them figure out their messaging. You want the messaging to be natural, and you want it to focus on the benefit to the advocate's friend.

The idea is to have your advocate convince his friend that your product is worth checking out. It would be such a shame if your advocate both remembered your brand + recognized an opportunity to make a referral, but ultimately fell short because his friend wasn't convinced!

Conclusion: Even your best customers could use a little help in figuring out When and How to make referrals.

As social beings, we're all wired to make referrals. But we're not wired for the fast-paced, high-octane lifestyles that we live today.

This means that your business is missing out on word-of-mouth sales and referrals from happy customers.

Imagine what your business would look like with passionate customers making tonnes of appropriate referrals to the right people, at the right time, with the right message!

In the next chapter…

Buckle up– we're going to start digging into the actual mechanisms of referral marketing!

We'll start by focusing on the referral conversion event– the specific customer behavior that you want to encourage. It's the single most important thing you need to understand before you start running your referral program.

ReferralCandy can increase your sales with a customer referral program.




Why You Get Less Than Half Of The Referrals You Should Be Getting

Building a referral program

Anatomy of a referral program
Using incentives effectively
Communicating your offer well
Measuring success with analytics

Running a referral program

Multiple ways to run a referral program
All the ways things can go wrong
Play the long game - give it time