Mastering customer retention is key to the health of your business, but new customer acquisition is a big piece of that puzzle, too. Your colleagues in sales are hard at work prospecting to generate new business, but you have an opportunity to do that too -- by asking for customer referrals.
According to the Wharton School of Business, a referred customer costs a lot less to acquire and has a higher potential for retention and loyalty. In fact, a referred customer has a 16% higher lifetime value than a non-referred customer. What's more, these customers are free to acquire for your business -- a win-win.
But how do you go about breaking the ice with your customers to ask them for help? How do you encourage them to mine their network to help you without being pushy or awkward? Fear not -- in this blog post, you'll learn how to identify potential referral opportunities by asking for customer feedback, and how to ask for those referrals once you've identified good candidates.
How to Use Customer Feedback to Identify Referral Opportunities
1. Identify your advocates.
Identifying potential customer advocates can seem like a huge challenge, but using a simple Net Promoter Score® (NPS) survey can help make the process a little easier. Using an NPS survey can help you pinpoint potential advocates and turn this customer feedback channel into a referral growth engine.
NPS is a customer loyalty metric utilized across multiple industries to measure how happy a customer is with your product or service. NPS is determined by sending out a single-question survey to your customers that asks: How likely is it that you would recommend our company/product/service to a friend or colleague?
Respondents are asked to score their answer based on a 1-10 scale. Responses of 7 or 8 are labeled as "Passive", and scores of 0 to 6 are considered "Detractors." If a customer responds with a score of 9-10, they're labeled "Promoters" of your business. This group is most likely to provide referrals.
2. Follow up with your promoters.
Just sending out an NPS survey isn't enough. You need to follow up with potential advocates and keep the positive momentum rolling along. What's the use of seeing a set of data with people who selected 9 or 10 if you're not going to use it to your advantage?
You have to mobilize your promoters by engaging with them -- and your promoters are your advocates. They are the people who took the time to select an NPS response and raise their hands, saying, "I am willing to recommend you to my friends."
Once you have identified your promoters, you should formulate a plan to follow up and make it easy for them to refer your company or product to their professional network.
If you have an employee at your company who handles new business development or customer marketing, you can have them reach out personally and see if your promoter would be interested in referring you. The key here is to make it easy for your promoters to refer your services to their professional network. Referrals and recommendations from real customers will outperform any share button or social media campaign over the long-term.
3. Use promoter feedback for referrals and testimonials on your website.
People are more likely to trust your brand early on if they have social proof of your expertise, and testimonials and case studies are one of your most powerful assets. A great way to get testimonials for your company is simply by asking for customer feedback and turning that exact same feedback that you receive into a testimonial on your website.
There are two ways you can approach this: One is by analyzing all the comments you get from the NPS survey, and then personally emailing each respondent to ask for permission to use their comment as a testimonial. The second way would be to send out a short survey soliciting feedback from promoters.
Once you've identified these happy customers and they've indicated a willingness to speak on your company's behalf, it's time to actually ask them for a customer referral.
How to Ask for Referrals
- Don't expect immediate results.
- Build value first, then ask.
- Ask, "Who do you like?"
- Don't treat referrals like cold calls.
- Offer incentives for referrals.
- Get specific with your ask.
- Develop a referral mindset.
- Stay connected with customers.
- Share their work.
- Focus on your strongest relationships.
1. Don't expect immediate results.
Referrals can be an extremely effective way to grow a business, but they're a snowball strategy rather than an explosive one. Don't expect immediate results.
2. Build value first, then ask.
You can certainly ask for customer referrals immediately after closing the deal -- but we wouldn't recommend it. Wait until you've provided your customers with unparalleled service. They'll be more likely to share names of trusted colleagues with you once they know you haven't just been trying to get them to sign -- the value you've proven will make them want to tell their network about you.
Share relevant content with them and let them know when your company releases new products or features that would benefit them. Three to six months after their initial purchase, consider asking for referrals -- but only if you've delighted them thus far.
3. Ask, "Who do you like?"
Ask your customers "Who do you like?" to ensure you get referred to people customers have close working relationships with. When you receive referrals of people your customers have, at best, passing or lukewarm relationships with, they're not much better than cold calls. Ask for people they like, and you'll benefit from the closeness and trust that relationship already has.
4. Don't treat referrals like cold calls.
Because they're not. Enter into a conversation with a referral with a much friendlier tone. Play up the relationship you have with the referrer, and act like you're already in their inner circle -- because, in a way, you are.
When appropriate, ask your referrer if their referral has any interests or hobbies. When you place your first call, break the ice by saying, "Blair mentioned you know all the best restaurants in Chicago. I'm headed there for work next month and would love some recommendations." You'll make the referral relaxed, and you'll bridge the gap between you and the referrer.
5. Offer incentives for referrals.
You might be offering great customer service, but sometimes it's still not enough to get those referrals. It's time to incentivize your customers. Offer Amazon gift cards, a discount on next month's invoice, or a donation to the charity of their choice.
Send this incentive offer to a portion of your happiest customers, and tell them the first 10 to respond with a referral will receive the prize. You might be surprised at how fast those referrals suddenly come to your customers' minds.
6. Get specific with your ask.
If "Who do you like?" isn't garnering the qualified customers you need, dial in your request.
Once you've ascertained they're happy and there's nothing else you can do to improve their experience as a customer, you might ask, "Do you have any friends who are looking for a new software solution?" You might even joke with them a little by saying, "Or friends who need new software but just don't know it yet?"
7. Develop a referral mindset.
If you want to get referrals, you should also give referrals. This is what I call a "referral mindset." Help your contacts and acquaintances grow their businesses by hooking them up with people in your network, and they'll feel inclined to return the favor.
8. Stay connected with customers.
If you asked for a referral and your customer said no, or if you just haven't made the ask yet, stay in close contact with your customer. That way, when you eventually do ask them to refer you, the request won't seem out of the blue or desperate. Here are a few ways you can stay in touch in an authentic and human way that will keep the door open for future referrals:
- Set up Google Alerts for their name or business so you can drop them a quick "congratulations" email if they receive an award, another round of funding, open a new office, etc.
- Connect with them on LinkedIn, and follow their updates so you can like and comment on status updates, job changes, and blog posts.
- Follow them on Twitter so you can read their updates and chime in on conversations that are relevant to you.
- Subscribe to their personal or company blog, if they have one, and send them an email when one of the blogs is particularly resonant or well-written
- If they live in the same area as you, ask them out for a cup of coffee. If you don't live in the same area as your customer, offer to host them if they're ever in your city.
9. Share their work.
Proactively share their work, their business, or their ideas within your networks so you're passively -- but proactively -- referring them on a regular basis. It only takes a few clicks, but it can build a lot of goodwill to share their latest blog post, publicize their most recent product launch, or leave them a positive review.
If you do this on a regular basis, it won't be unreasonable to ask for referrals when the time comes, because you'll already have been singing their praises, too.
10. Focus on your strongest relationships.
As a general rule, you should focus your referral generation efforts on your strongest customer relationships. These are customers you've worked with before, helped achieve success, and have already indicated they might serve as good referral sources by filling out a positive customer review, giving you high marks in a feedback survey, or by otherwise indicating that they're happy with your work and like working with you.
Customer Referral Letter Templates
How to Ask for a Referral
Once a new customer is onboarded, let enough time pass to produce some results. You want the customer to decide whether they're pleased with your work or not. This could take a week, or it could be a few months, but when you're satisfied you've made an impression, follow up by asking directly for referrals using these templates our friend Rick Roberge shared:
Customer Success Manager: "You told me you're happy with my work thus far. Have you told anybody about what we've done together?"
CSM: "Is it because you're not pleased with the outcomes?"
Customer: "No, we're pretty happy."
CSM: "Well then, do you think what we do together would be beneficial to your clients, vendors, or competitors?"
Customer: "I don't want you working with my competitors, but maybe some of my vendors."
CSM: "Your vendors then -- do you have a favorite? Do they sell to other people you know?"
Customer: "Yeah, we have a good relationship."
CSM: "And are any of your favorite vendors trying to grow their businesses?"
Customer: "Yes, a few in particular."
CSM: "Okay. In that case, if you called or sent an email and said ‘I've been working with [Name] for six months, and we're starting to do some pretty interesting stuff. I know you're growing your business, so I thought I'd put you two together,' would they like you for that or not like you?"
If your customer thinks that would be fine to do, send out the email template below.
If your customer is on the fence, work to reframe the situation to assure them they'd be helping the referred party, not setting a money-hungry sales rep on their trail. Emphasize your purpose is to grow businesses -- or whatever your company's mission may be -- and not to be a hard-pitching nuisance.
How to Email About a Referral
When requesting a referral, you want to keep the focus on your customer and their happiness. You don't want to appear like a lead-hungry sales rep who's done with them and ready to move on to their friends -- you want to seem like a helpful CSM who's invested in your relationship.
Instead, only ask for a referral after first ensuring they're happy with your product or service and can think of no way in which their experience could be improved. Then, gently ask if they have a friend or industry colleague you might be able to achieve similar results with. Here's an example:
Hello [Customer name],
I'm so glad to hear you're happy with the results of working with [Your company name] so far. I knew we could help, and I'm pleased you're seeing results so quickly.
Since things are going so well, I found myself wondering if you have any colleagues at similar companies who would benefit from our [product/service]. I would love to help them achieve similar growth.
This is friendly, focuses on your customer's success, and is hopeful you can help one of their friends at another company achieve the same results. Who could say no to that?
If you have a favorable response to the email above, reply with, "Great, I have an easy email template I'll share with you. All you have to do is press send!" Provide them with the email template below, and you'll make it simple for customers to refer you:
I don't know if I've mentioned it before, but I've been working with [CSM name] for a few months. The other day, I was talking with her about some of the things she and I have done, and I realized I should put you two together. So...
[Referral], meet [CSM, with a LinkedIn profile URL].
[CSM], meet [Referral, with a LinkedIn profile URL].
Can I leave the rest to you guys?
Talk to you both later.
The customer isn't asked to explain what the CSM does. It's not their job to sell the referral -- it's yours. From there, you can take it away, or connect them with a salesperson at your company.
Phrasing it in this manner builds on the mutual respect between customer and referral by implying the referral can give the CSM the benefit of the doubt. Also, because both the customer and the CSM are on the email, it would be appropriate for either to follow up.
After sending this referral template, check in a week or two later with your customer and ask -- gently -- if they sent it out. If they haven't, reply that it's no problem, and don't ask again.
If, on the other hand, they have sent it, and you hadn't been included on a reply, ask if the customer got a "No, thank you" from the referral. If that's the case, cross that referral off your list. If there was no reply at all, ask if they would like you to reach out directly.
How to Thank a Referral Source
The key step to maintaining positive customer relationships after you connect with their referrals is to say thank you. Your customer connected you with a valuable member of their professional network, vouched for your professionalism and the value of your product or service, and conducted outreach on your behalf.
To show your appreciation, send an email or letter promptly after the point in the referral process -- usually after the referral has made their first purchase. Send a short, sincere, and personalized thank you letter to show your referral source how much you appreciate them contributing to your success.
If you can, offer them a reward for referring a new customer to you. Even if it's something small, the gesture can go a long way.
Here's a template you can use as the basis of your thank you letter:
Dear [Referral Source],
Thank you for referring [Referral Name] to me for [Your Product/Service Offering]. [Referral Company] is a big organization, and I sincerely appreciate your vote of confidence in my abilities by referring them to [Your Company]. We're going to work together on [Services/Project/Initiative] over the next several months, and hopefully [Product/Service Offering] will be as helpful for them as it has been for you.
As a token of my appreciation, here's a promo code for 10% off your next purchase from us.
Thank you again for connecting me with [Referral Name], and I look forward to talking again soon.
To learn more, read about how to build a customer referral program next.
Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
Originally published Nov 7, 2018 5:59:00 PM, updated August 27 2019