Thursday, December 27, 2007

What Makes Referrals Work?

Referrals occur everyday, in every industry around the world. And, sure, excellent service typically results in a high level of referrals being generated over time. But what actually drives referrals in the consumer's context?

To answer this question, I am going to describe a common situation - the BBQ referral situation.

"Bill" informs "Bob" over a drink at a BBQ that he is planning to build the family dream home in 12 months. Bill asks Bob if he knows a good builder that he would recommend. Bill responses with the name of a building company and mentions that they used this company to build their home 5 years. Bob thanks Bill for the recommendation and the conversation changes direction.

This referral is based on trust. Bill trusts Bob's judgement. However, in a society which is becoming decreasingly trusting of others, this level of 'blind faith' is in rapid decline. If "Bill" was more sceptical (i.e. more representative of the modern day consumer), he would ask "Bob" a series of questions to delve further into the performance of the building company. Enter performance predictors...

Assuming the building company being recommended communicated a number of performance predictors, Bob could simply quote these as his justification. For example, they offer a 100% unconditional satisfaction guarantee (and in 23 years only one customer has ever asked for this to be envoked), you can visit their display home to see their craftsmanship for yourself, they only use quality products in their homes [list off the quality suppliers], etc.

Make it easy for your existing customers to lead you to your new customers (via referrals) by communicating your performance predictors to them. Performance predictors make referrals work.

No comments: