According to Harvard Business Review, acquiring a new customer can be anywhere from 5 to 25 times more expensive than keeping an existing one. It makes sense, therefore, that if your existing customers can bring you new customers, your costs will be greatly decreased. Referrals can be a very cheap and effective way to acquire new business – sometimes even free!
Here’s what John Davies has to say:
Remember your lowest cost of new sales will be from existing customers. The second lowest cost will be from the customers they know. So make sure you have a proper reliable customer-get-customer scheme inside your business.
So how can you encourage your customers to refer other people to you? Well, first of all, do a good enough job that they’ll want to recommend you. If you’re looking after your customers, they’ll often be happy to recommend you even without prompting. Sometimes, however, it doesn’t hurt to give a little nudge. You can incentivize referrals by offering a coupon or discount for each referral (or every 5 or 10 referrals, for example). If you sell online, you may even want to automate the process and offer an affiliate scheme. This kind of offer not only brings you new business, but also keeps your existing clients happy and gives them another reason to keep coming back to you. Everyone wins!