Referrals are infectious. That’s right, by their very nature they are propagated by person-to-person contact. This is an easy concept for anyone to grasp. When a satisfied customer recommends a friend or family member to your company, this direct contact has thus spread positive word of your services; from A to B. But referrals are much more contagious than your common cold. Positive word of mouth does not need direct contact to make its way into the minds of thousands of prospects. Referrals, like thoughts and beliefs, are able to be transmitted through information and mediums that reach a wide group of people all at once. Therefore, when developing a referral strategy consider the benefits of both person-to-person contact and their effect on a much broader scale.
First let’s take a look at why referred customers are so valuable and how they spread from person to person. In his book The Ultimate Question 2.0, Fred Reichheld continually stresses the value of referred customers. He quotes “Referred customers usually have superior economics themselves; they also have a higher propensity to become promoters, which accelerates the positive spiral of referrals.” Basically the belief here is that if a client came to your business by the way of referral, they are more valuable than the average customer in that they’re much more likely to refer themselves. There are several reasons why this is the case. Referred customers have already been screened by your initial referral source. Therefore they’re much more likely to be a fit for your company and value your service. This more readily translates into happy customers (promoters) and thus fosters the trend of more referrals. Infected! In addition, your referred clients already understand that word of mouth is important and expected in your business; they are likely to follow the trend and refer their friends and family. Therefore over time, one endorsement will rocket into many more person-to-person referrals via direct transmission.
Contrary to popular belief, referrals are also made without direct word of mouth. Here’s how. People are connected in many ways beyond direct and close relationships with one another. Everyone has their friends, colleagues, and family. But we are also connected to thousands of people via social and professional groups. We like to identify these people as 2nd tier relationships. Here are individuals who we connect with that share a common interest or connection. For example acquaintances in a church, members of a chamber of commerce, or fans of a group on Facebook. Especially today with the expansion of social media the world has become much smaller, and people are able to connect with each other much easier. But what does this mean with referrals? The answer is lies in the idea of how individuals are part of different networks. By infecting several people in a network you will indirectly reach many other people who share a common interest.
To better grasp this concept you need to have an understanding of the weapon of influence “social proof” outlined in Robert Cialdini’s book Influence: The Psychology of Persuasion. In a nutshell social proof states that people have the tendency to see an action as favorable when other people are doing it. More importantly we connect with people that are similar to ourselves. Cialdini quotes “The principle of social proof operates most powerfully when we are observing the behavior of people just like us. It’s the conduct of such people that gives us the greatest insight into what constitutes correct behavior for ourselves.” This concept deals with both our social decisions and our buying trends. If several people I relate to have made the same decision, then I’m certainly going to take a closer look.
Back to how this relates to referrals on a wide scale. Word of mouth always starts small, from person-to-person as discussed above. But over time it will make a leap and reach your client’s 2nd tier relationships. Friends and family that have been referred to a company will inevitably also be connected in other social or professional groups. As the referrals grow within these groups it will, over time, develop small pockets of promoters for your company. These pockets of promoters will grow in strength and begin to gain steam in particular groups. All of a sudden other members of the same group will take notice and ask what all the buzz is about. Because everyone in the network is already connected to one another, the power of social proof comes into play. All of a sudden they are also infected and your business continues to grow. For example, imagine a Facebook fan page with 100 members that all support a local candidate for mayor in a city. All of the members share common beliefs and express so publicly. One member of the group is very satisfied with ABC Insurance and tells his brother and friend, who are also members of the same Facebook fan page. The word of mouth spreads more over time via direct contact, and now there are 10 promoters in the same group on Facebook. Your promoters continue to talk about you using social media and now the other members start to pay attention to the buzz. As this small pocket of promoters grew their influence strengthened. They are now able to reach their 2nd tier relationships and their influence is powerful because of social proof. Poof! People are infected without direct transmission, thus proving that not all referrals need to be via direct contact.