Customer Referrals 101

This one came out of the Journal of Marketing, and I have to say it jars with me a little bit. So in this 2 minute read let’s work this one through.

The fact that a referred customer will hold a longer lifetime value is likely, but because you looked after that customer in the same way you did the referrer — after all, you’d never have gotten the referral in the first place without having delivered a great experience. Or look at it another way, if you do a bad job of looking after a customer are they likely to stay with you for longer just because someone else recommended them to you? Of course not.

But it opens up the debate about referred customers and how we look after them, because I fear there exists this opinion that you don’t have to work as hard to look after a referred customer simply because that initial recommendation will carry the relationship somehow. And that’s a huge mistake for two key reasons:

1. Not looking after your customers is insane anyway irrespective of how you won them.

2. You are risking the reputation of the person who gave you that referral in the first place.

That second point is probably the most important one. If someone has the good nature put someone they know in front of you, they are putting their reputation on the line at the same time — and often the company that benefits can fail to realise that fact. Not only did this individual put someone else in front of you, they can probably put others in front of you as well, so the worst thing you could do is let that person down. In fact, there’s an argument to say the people you should look after best are the ones that were referred to you, because they’ll go back and thank their acquaintance for having made that introduction, and everybody wins that way.

What do you think?

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