The saying goes that when you do what you love, you’ll never work a day in your life. But when your clients love what you do, you’ll find yourself in a position to unlock the most powerful form of marketing that exists: the word-of-mouth referral.
Word-of-mouth referrals can be difficult to generate, capture, and quantify, so perhaps it’s not surprising that most business owners aren’t focused on building up their word-of-mouth revenue streams.
But client referrals are a tremendously powerful source of leads and potential revenue. My partner and I built a successful digital agency exclusively through word-of-mouth referrals for years. And whether you manage a retailer or a service-based business, there are a number of compelling reasons that you should be leveraging referrals to grow your business as well.
Related: 3 Simple Steps to Grow Your Business Through Referrals
People overwhelmingly trust word-of-mouth referrals
According to Nielson, 83% of people trust word-of-mouth recommendations from friends and family while 92% of consumers trust word-of-mouth referrals more than all other forms of advertising.
Plus, data from Survey Monkey shows that consumers are five times more likely to make a big purchase on the basis of a trusted word-of-mouth recommendation than a paid ad.
John Wannamaker once famously said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” We’ve all been there. That’s why part of the beauty of word-of-mouth referrals is that you won’t spend a dime on them.
They net better customers and clients
In my experience, new clients that come from referrals advance through the sales process faster, have more forgiving negotiations, and lean towards greater loyalty because you come recommended. On average, your referred customers will also spend twice as much as your non-referred customers, making them an incredibly desirable source of business from an LTV standpoint.
They reveal the value-add levers that are most important to your customers
Over the years, I’ve learned that more than knowledge, more than a privilege, more than even money, people tend to protect their relationships. When clients are willing to talk about your service and refer you to someone new, that means you’re really doing a great job of serving them.
And whenever you are referred, it’s a great opportunity to reflect on what your clients love so much about working with you. Is it your turnaround time? Your collaborative process? The network of relationships you bring to the engagement?
If you can identify the reasons you’ve been recommended, you can reinvest in those aspects of your practice and improve your service offerings for all of your clients. Improving your service offerings will in turn help you earn more referrals, which will grow your business and produce more opportunities to impress and improve.
Ultimately, that virtuous cycle is the reason you should treat customer referrals as your number one metric of success. Unlike your conversion rate, your YOY revenue, or any other quantitative KPI, referrals give you a qualitative view of what you’re doing extremely well right now and help you chart what you should do next to compound your success.