1. Customer acquisition
Personal introductions are potent from a customer acquisition standpoint. When we hear about a company via a friend or a close connection, we are more likely to trust what is being offered. This is why referrals convert at a 4x higher rate than average. We inherently trust humans over numbers.
2. Customer retention
When customers enter the sales funnel via referrals and introductions, deals close at higher and faster rates. This creates less friction in handoffs to customer success teams. Sales is not forced to over promise to close a deal and customer success is given a better head start at the relationship. Retention rates, as a result, are 37% higher than non-referred customers.
3. Customer value
Referred customers also contribute most positively to the bottom line. Because referrals have been vetted by current customers as a good match for a particular offering, they tend to have higher levels of engagement. They also tend to be more likely to upsell. A study by the Wharton School of Business found that a referred customer has a 16% higher lifetime value than a non-referred customer.
Leveraging the referral
In order to scale your quantity of quality referrals, it is vital to leverage your existing customer base. According to research by Texas Tech University, 83% of consumers are willing to refer after a positive experience — but only 29% actually do.
Make a concerted effort to encourage investors, partners, and advisors for new referrals. Building an outside network of advocates by creating quality relationships that focus on the “give” more than the “take” is essential. Taking advantage of advancements in artificial intelligence and big data can help you light the path to an introduction to a new prospect.
It’s time we all adopt a people-based approach to marketing and sales. Build a business for humans, not numbers.