How can my small business get more referrals and repeat customers?

Referrals are powerful; approximately 60 percent of referrals result in sales, which is a staggering statistic.

Here’s another data point to consider: it costs 5 to 10 times less to keep a customer than to gain a new one.

While there may be some wiggle room in the precise numbers, no one will disagree that sales close at a higher percentage for referred prospects than they do for non-referred prospects, or that it’s more cost-effective (hence profitable) to keep a customer you already have than to go out and find new ones. This is precisely why both referrals and retention belong at the top of your list of priorities. Just good business sense.

Stages a Customer Goes Through

But WHY do referrals close so often? Well, for one thing, referred prospects are already further along in their decision to buy than non-referred prospects. Robert L. Jolles discusses this subject in a very helpful book called Customer Centered Selling, in which he lays out the different stages a customer goes through in making a buying decision. (His explanation is excellent, and worth walking you through.)

The first stage is Satisfaction. This is where the customer believes everything is perfect and nothing needs to be changed.

The second stage is Acknowledgement. This is where the customer realizes there’s a problem that your solution may be able to address, but they’re not ready to do anything about it yet.

The third stage is Decision. This is the stage when an event takes place that compels the customer to make a decision to either solve a problem, or fulfill a desire or need. Jolles calls this stage the ”flash point.” You will rarely get a customer here.

The fourth stage is Criteria. This stage naturally comes after the customer has made a decision, and where they figure out exactly what they want before starting the search process.

The fifth stage is Measurement. Not every customer consciously goes through this, but it’s where they start determining the specifics. What will it take to address this issue or satisfy this need?

The sixth stage is Investigation. That’s when the customer will usually go in search of a salesperson. What’s the key question they’re asking themselves here? Who can I trust?

The seventh stage is Selection. The customer has decided to make a commitment, and you have to demonstrate that your solution fits their every need.

The eighth stage is Reconsideration. Buyer’s remorse is all too common at this stage, but the key is to follow up with customers to address any issues. In most cases, the amount of remorse is minimal and easily corrected. Maybe they’re just nervous about operating new machinery, and more training would help.

Going back to referrals, referred prospects are virtually always past the Satisfaction, Acknowledgement and Decision stages, if not farther. In most cases they’re at the Measurement stage or beyond. In other words, they’ve already done half the work for you before you’ve even had a chance to meet them.

Customer Retention Is a Cheaper Strategy

Repeat business is worth the effort

When it comes to repeat business, take another look at the stages outlined above. Your customers are either in the Satisfaction stage again, or they’re ready to make another “Selection.” The thing is that they already trust that your solution meets their needs, so the trust stages are behind them.

It’s important to note here that if a customer hasn’t unsubscribed from your newsletter or email list, that does not mean that they’re “retained.” People who aren’t reordering are likely still in the Satisfaction stage. But even if your retained customers are in Satisfaction, there’s still plenty of work to do. They don’t just happen to order again. That’s why retention is all about the tactics you can employ to keep your current customers coming back.

One good thing about referrals and retention: they’re not mutually exclusive. Yes, yes, I know: it is possible to look for referrals while working to retain customers! (It sounds so silly when I word it that way.)

Ask for Referrals

So how do you maximize retention and referrals? On Inc.com, Stephanie Gruner answered the question of how to get referrals in one word: Ask. I don’t think it could be said any more succinctly or appropriately. Take Chorus Communications and their Referral and Retention Tuesday (or R&R Tuesday as they call it). Every Tuesday, many of their sales and service personnel take two hours to call on past customers to make sure they’re happy with their product or services, and to ask for referrals. Asking is a key part of that, but not the only one. Below are some more tips.

For starters, give an incentive for referrals. This usually means some kind of discount if the referral results in a sale.

The second tip is one that accomplishes both goals at once. It involves informing past customers about products and services they may not be aware of yet. It goes without saying that satisfied customers are likely to make repeat purchases when another need presents itself, so if you can catch them at that moment, you’re essentially further down the buying process already and the sale is more easily made. If they’re not interested at that particular moment, you can even turn that into a referral opportunity by asking if they know of anyone who might benefit from a particular product or service, turning a no into a referral opportunity.