Articles
The Power of Customer Referrals
By: Patrick Galvin
When I co-owned office furniture retail stores, I spent a lot of time thinking of creative ways to advertise our products and services. For a long time, the search for the perfect radio or print ad was my “holy grail.” I was convinced that this ever-elusive perfect ad would bring in customer hoards.
Only when I started listening to our customers did I learn that I already owned the secret to getting new clients. Our salespeople conducted surveys when entering new orders indicating that existing customer referrals to friends and associates were the source of approximately 50% of our new business.
According to Emanuel Rosen in The Anatomy of Buzz (Doubleday, 2000), my experience was hardly unique:
- 65% of customers who bought a Palm organizer heard about it from another person, according to the manufacturer.
- 43% cited friends and family as a source of information for choosing places to visit or about flights, hotels, or rental cars, according to the Travel Industry Association.
- 57% of customers at one car dealership in California learned about the dealership by word of mouth.
This is not unusual,
said Jim Callahan who conducts surveys for about five hundred car dealerships around the country every year. - 53% of moviegoers rely on personal recommendations to choose what movie to see despite the millions of dollar that Hollywood pours into advertising. Great word of mouth made The Blair Witch Project a box-office smash in spite of almost no advertising.
- 70% of Americans rely on the advice of others when selecting a new doctor.
Len Short, executive vice president of advertising and brand management
of at Charles Schwab, summed it up this way: The idea that a
critical part of marketing is word of mouth and validation from
important personal relationships is absolutely key, and most marketers
ignore it.
Are you doing enough to ensure that your existing customers are your biggest source of new business referrals?