How to Get More Customer Referrals

How to Get More Customer Referrals

In last week’s blog, I made a distinction between “likely to recommend” and “actually recommend.” I also suggested that from my vantage point the Net Promoter Score® (which is calculated using a single question about likelihood to recommend) has greater predictive value for customer loyalty (return business and future spend) than it does about advocacy (referrals).

Also in last week’s blog, I indicated that customers have a variety of reasons why they don’t recommend brands even though they are otherwise loyal (e.g. wanting not to have their favorite places overrun with new customers). Finally, I promised this week I would offer tips on how to convert loyal customers into referral sources.

So without further ado, here are some broad approaches to activating promoter behavior in your loyal customer base:
 

1. Remind them you operate from referrals. This may seem obvious but few businesses formalize this utterance. Any time you determine a customer is highly satisfied or strongly emotionally engaged with your brand (e.g. direct feedback from them, a 9 or 10 on the NPS®, or you receive stellar results on a satisfaction inventory), you have an opportunity to let your customer know that your ability to serve them is fueled by their referrals.

2. Thank those that make referrals. By asking customers how they heard about your business you can track how much of your new customer acquisition comes from “word of mouth.” This calculation is not only an important KPI of customer experience excellence (happy customers sending their friends) but also it is foundational to an important follow-up question, “Who may I thank for referring you?” A personal thank you note or small unexpected thank you gift goes a long way to sustaining referral behavior.

3. Make it easy to make referrals. One of the great things about social media is the ease with which customers can make what I refer to as “passive” referrals through the power of “social shares” or “likes.” Making it easy to socially share their positive moments with your brand allows customers to gently let their community of friends know that they are brand advocates.

In addition to social sharing strategies, consider providing other collateral materials to loyal customers. For example, a marketing collateral that thanks loyal customers for their business can give them a discount for a future purchase based on their loyalty and it can also be constructed to allow them to “gift” a discount to a friend that they want to introduce to your brand.

4. Assure existing customers that you have a long-term commitment to their personal care. Every time a customer refers someone to your business they run the risk that the person they referred will get their needs met instead of the customer making the referral. Subtly, great brands signal an enduring commitment to personal care for loyal customers which implies that as your business grows, you will respond in ways that don’t exploit loyalty. If that message isn’t communicated or if actions don’t support that communication, loyal customers will not only stop referring; worse yet, they will abandon you.

5. Don’t forget the WIIFM. Customer’s need to know “what’s in it for me” when they make a referral. That has to be more than the, “Don’t worry no matter how much we grow, we will take care of you.” message recommended above.

You have to answer the question, “What does a person get for putting their reputation out on behalf of your brand’s reputation?” Often companies take a very instrumental or mercenary approach to this question and reflexively create a “referral incentive.” While monetary referral rewards can be appropriate in certain situations, they can also backfire. Many customers want to refer you because they have strong intrinsic connections to their friends and to your brand. They want to connect the people they care about with the brands that care about them. Being a resource and networker of people and experiences is an intrinsic “what’s in it for me.”

Often by creating incentive programs for referrals, you get people seeking extrinsic incentives (e.g. money) by sending people who may not be closely similar to the very people who are likely to be loyal to you. Inadvertently, you can acquire commodity buyers by attempting to purchase referrals.

Ultimately, your loyal customers want you to be around to serve them. They appreciate the way your business meets their needs, engages them emotionally, and fits their lifestyle. Most of those customers want to share your name with friends but often they need just a little reassurance, a gentle reminder, and an invitation to make referrals a reality.

Joseph Michelli
Insights
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Joseph A. Michelli, Ph.D., is an internationally sought-after speaker, author, and organizational consultant who transfers his knowledge of exceptional business practices in w ... Click for full bio

An Advisor's Guide to Helping Women Become Savvy Investors

An Advisor's Guide to Helping Women Become Savvy Investors

Today, more women than ever are involved in managing their personal and household finances. In a recent study, nearly half of the women surveyed (44%) stated that they are solely responsible for their household financial decisions, compared to 35% of men1. But the study wasn’t all good news. While women may be taking the lead when it comes to their finances, they also reported that they are not confident in doing so. In fact, in every financial category included in the survey, men reported much greater confidence than women. Where was the biggest gap? You guessed it: investing.

For advisors, this presents a challenge and an opportunity. There is a 90% likelihood that a woman will be financially self-reliant at some point in her life due to divorce, becoming a widow, or choosing to marry later in life or not at all2. By taking steps to help your female clients become confident, savvy investors, you’ll not only be more effective at serving in the best interests of these women and their families, but you’ll also be able to build much stronger, more trusted relationships to help ensure each family’s assets remain in your care for decades to come.

Follow these five steps to help your female clients invest with greater confidence:


1. Urge every woman to put her financial needs first. 


Women do have a weakness when it comes to planning for the future, but it has nothing to do with a lack of knowledge, skill, or smarts. Their primary weakness is a willingness to put others’ needs first. This is a huge mistake when it comes to planning for the future. Investing for retirement simply can’t wait until the kids are grown or aging parents no longer need care. In fact, based on average life expectancies, women should plan to accumulate enough funds to last at least 20 years after retirement. The following chart illustrates the power of compounding based on an 8% rate of return to help bring that point home:

This hypothetical example assumes an annual 8% rate of return and does not take into account income taxes or investment fees and expenses. This example is for illustrative purposes only and does not represent the performance of any specific investment. An investor’s actual return is not likely to be consistent from year to year, and there is no guarantee that a specific rate of return will be achieved.

2. Educate women about the power of investing.


Security about any topic is rooted in confidence and knowledge. Educating your female clients about investment basics can help drive more confident decisions and more positive long-term outcomes. From the basics of compounding to the nuts and bolts of researching options and understanding the pros and cons of different asset classes, make it your job to help every client understand what she is buying—and why.

3. Dive into the details of asset allocation.


Asset allocation is by far the largest determinant of a portfolio’s success—even more important than the individual securities selected and timing of an investment. This is critical information for your client to understand as she pursues her financial goals.

Related: Need More Referrals? 5 Steps to Building Stronger Word-Of-Mouth Influence

4. Discuss how her investment strategy needs to evolve over time.


Part of every client’s financial education should be to understand how financial needs and goals change with each stage of life stage. Because a shorter investment time horizon creates greater vulnerability to market volatility, she needs to understand the impact of shifting a portion of her investment portfolio to more income-oriented investments as she moves closer to retirement. This Life Stages Guide can help you paint a clear picture of how allocation strategies need to evolve to fit her changing needs.

5. Be sure she’s covering all the financial bases.


Smart investing is vital, but missteps in other areas of financial planning can thwart even the best investment plan. Offer every client a basic planning checklist that includes these three important steps:

  • Focus on the big picture. Organize your important financial papers and schedule an annual review of your investment strategy with your advisor. Regularly monitor your net worth—including your assets (all investments and savings) and liabilities (mortgage, credit cards, and other debts) to be sure you’re always moving toward your end goal of a secure retirement.
  • Pay down any outstanding debt. Debt reduces your net worth, threatens your financial security today, and reduces your ability to invest for the future. Do whatever you can to minimize debt, and build an emergency fund to help pay for any unexpected expenses.
  • Make estate planning a priority. Once a year, review your will and your beneficiary designations for every account to be sure they continue to reflect your wishes. If you have children under 18, work with your advisor or estate planner to establish a trust and select a trustee to ensure your assets are managed for the benefit of your children.
     

As a trusted advisor, make it your mission to provide your female clients with the education and guidance they need to become savvy investors and make the smart, educated financial decisions. By doing so, you can help every woman you work with not only enhance her financial security, but also gain the confidence to take greater control of every aspect of her financial life.

Click here to learn more about IndexIQ.

[1] Survey conducted by Regions Financial Corp. in partnership with Vanderbilt University, 2015.

[2] The Simple Dollar, “Guide to Financial Independence for Women,” 2014. 

Disclosure: The information and opinions herein are for general information use only. The opinions reflect those of the writers but not necessarily those of New York Life Investment Management LLC (NYLIM). NYLIM does not guarantee their accuracy or completeness, nor does New York Life Investment Management LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are not intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice. 
Laura McCarron
Building Smarter Portfolios
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Laura joined New York Life & MainStay Investments in 2009, and is currently the Director of Value Add Marketing. She is responsible for the development of investor educati ... Click for full bio