Category Archives: Referrals

Referral potential – where does it come from?

A large number of online/digital marketers or social media marketers aim to generate “customer referrals” for their products or services. A referral offered by one satisfied customer to another, creates a strong lead and usually more likely to convert. The potential of a referral in generating a sale cannot be emphasized enough and it applies universally. The products or may be sold online or offline. The domain of operation may be business to business (For instance Eloqua) or business to consumer (Axe) or business to business to consumer (Intel).

Every marketer worth his name knows that a happy customer is the best sales person he can have. The best marketing strategy is to get your customer sell your products; it works most of the times and needs a very low marketing budget. That is because it is an emotional and a social occurrence.

But a larger question that marketers often find difficult to answer is “What creates a referral?”

Where does the potential to refer come from? Where is it built? I think it is not only for the marketers but for the enterprise as a whole to answer this question. This question should not only be posed to the marketing team (who will often say that they can figure it out, but never admit that it is challenging), but to operations, finance, strategy and sales as well.

Let me make a modest attempt to answer this question: Where does the “referral potential” for a product or a service come from?

Before I start, let me define referral potential in simple words – Referral potential is the ability of a product or service to exceed customer expectations, offer value for money, create a remarkable experience and as a result, be worthy of a voluntary recommendation.

There are three primary areas in which the referral potential is built in, i.e. product, customer service and price.

Referral Potential

Referral Potential

Take a look at the above figure.

Product excellence – Nothing can beat this. If you have an excellent product, it is bound to be referred. Talk of iPod, iPhone and iPad of Apple. They are excellent products. People line up in front of stores, before they are launched. Such is the expectation from Apple. They have a cult following. Sure, there are excellent products from other companies as well. Some of the most popular are Microsoft Windows and Office. They are essentials and have a mass following. I should say that they have risen far beyond the referral level but that is how they started. So having an excellent product is absolutely essential.

Fine Customer Service – If your company has a commoditised product, why would customer pay you? One strong reason can be that your company offers a fine customer service. Customers tell their friends about you because they are pleased with the way you treat them. Indeed they are happy to offer a voluntary referral because their association with you improves their social value when they refer you. Dell, at least it the US is supposed to have a great customer service, so is Home Depot.

Price attractiveness – This is a no brainer and it works rather well during the times of recession. Great prices are hard to resist. Wal-Mart offers great prices.  This is also often called as low cost leadership. An entire industry is emerging around our desire to save, socialise and get wholesale prices. This new industry, Social Commerce, is being pioneered by Groupon.

Surely, you can have any combination of the above to generate a referral. So the game is either you have a great product, or you have a great customer service or you have an attractive price. Needless to say, either of the two or all the three will offer excellent results. Interestingly, availability of one and lack of other two will still get you customer referrals but they will be limited. Having two at a time amplifies the possibility of creating referrals. Combination of all the three is killer combination.

The next question is how does a company achieve the above three? Let me put it very shortly.

  • Product excellence is a result of innovation
  • Fine customer service is a result of well configured process and hiring people with a service mentality
  • Price attractiveness is a result of efficiently managing operations that improve productivity and reduce costs

Any activity at an enterprise level should be aimed at improving either of the three. In fact, ideally, all the activities should be aligned towards achieving the killer combination i.e. each and every employee should be working towards either making great products or delivering fine customer service or reducing costs.

The above strategy will not fail, but the challenge lies in the execution. Where do you think leadership comes into play?