I have yet to come across someone that disputes the effectiveness of referrals. In fact, referrals are often coined as the “key to the door of resistance” because they are so easily converted to sales. Yet most companies still do not have a clear picture of exactly how referrals work, or even where they come from. Most think of referrals as a natural byproduct of being good at what they do — that referred customers make their way to their doorstep by word-of-mouth somewhere in the clouds out of sight, out of mind. On the contrary, referrals are not created simply by people talking about a company or product. Rather, a referral is the bridge that connects a company to a new client by means of an existing customer. Because of this direct link between the company, customer, and prospect trust transfers. Therefore the barriers are broken down between the company and prospect. As the trust transfers the resistance is diminished and sales are much easier to obtain.
For companies that continue to implement traditional marketing tactics that reach outward for new business they often struggle realizing more sales. Even if they are successful at creating a buzz around their product or service, they encounter the same problem: there is no transfer of trust. Reeling in business from the masses is often frustrating and inefficient. This raises the question: why do more companies not look inward for new business? By nurturing relationships with their existing customers (specifically the happy and talkative ones) they could leverage a connection to new clients that already exists.
Science in the field of social network theory describes the pre-existing connection between current customers (A), companies (B), and prospects (C) as triadic closure. According to sociologist Georg Simmel “if a strong tie exists between A-B and A-C, there is a weak or strong tie between B-C”. In other words, a link between a company and prospects already exists via current customers. Common sense should tell companies to take the path or less resistance. Rather than shooting in the dark to collect leads, leverage current customers and push for introductions with prospects.
To make the most of this existing connection companies need to have a strategy to engage and nurture their relationships with their happy customers. They are, after all, the bridge to new business. If leveraged correctly, current happy customers could be a company’s best sales force.
Image Credit: New Journal of Physics