What is a customer recommendation worth?

It’s hard to keep track of all the places and channels where a customer can publicly talk about your brand. But often, tracking that information that can end up making or breaking your company.

Reviews, blogs, comments on articles, social media, and good old fashioned “offline” conversations are just a few examples. Not every comment is favorable, but every piece of feedback is valuable when it comes to building your brand and understanding your customers.

Customer Referral Facts

Think about all the times that someone raved about their experience with a brand or product today alone. You have probably experienced at least one positive or negative example while browsing or interacting with a friend or colleague. It’s simply part of human nature to share these experiences.

Customer Recommendations: Your unofficial marketing department

What’s the first thing you do when you are deciding to buy a book or other product on Amazon? Check the reviews of course and perhaps ask a friend (especially for big ticket items). Customer feedback and recommendations are often the best marketing you can have.

When someone is singing the praises of your business, they’re doing the sales work for you. On average, a business generates roughly 60% of its new customers from the recommendations of the existing customer base.

By understanding what drives customers to do this and engaging them to drive more recommendations, consistently every single day, you can drastically increase sales and gain new customers with little to no acquisition cost. Sounds great, doesn’t it?

Just imagine for a moment what your business model looks like if 65% of your new customers came from referrals? How about 75% or 85% of your business?

Compounding Benefits

Even so, most business owners vastly underestimate the value of customer feedback. In addition to recommending others to your brand, loyal customers have been shown to spend more over time, stay longer, and require less support and service. They are the most profitable customers.

This is where it starts to get interesting. Customers who choose your brand based on the referral of a trusted advisor show similar behavior to existing loyal customers, and therefore have a higher lifetime value to your business from the start. Better still, this increased loyalty comes to you from a customer that cost little to nothing to acquire in the first place. No need to spend the first 6 or sometimes as long as 12 months of a customer relationship just earning back the costs it took to bring them on.

Customer Loyalty NPS Leaders Growth

A referred customer is like a gift that keeps on giving. Remember, people like to spread the word about great experiences, which is why referred customers have a greater tendency to refer others too. And so the cycle continues.

Let your competitors scramble for celebrity endorsements. Odds are pretty good it won’t work as well as they hoped anyway. If you focus instead on getting your existing customers to share their positive experiences about your brand with someone who could become a customer in turn, you will be leading the pack in no time.

All you have to do is ask

Businesses that stay on the tips of their customers’ tongues can reap substantial rewards from customer referrals. Companies with the highest “Net Promoter Score” (NPS) in their industry (like Apple) have been shown to grow at 2-3x the rate of their closest competitors. Simply put, a high Net Promoter Score means there are more people saying positive things about a company and driving recommendations (Promoters) than there are people saying negative things (Detractors).

Ask For Referrals

Finding a way to capitalize on those casual conversations happening every day can make a huge difference for your business. Once you have identified your Promoters, tapping into business growth from customer referrals is easy. More often than not it’s simply a matter of asking them to recommend your business or product to their friends, family, and colleagues. Just like closing a sale, asking is the critical step most companies forget.

We are in an age where customers can and do share their recommendations freely, in person or online, for the entire world to see. Understanding your NPS and leveraging that information to encourage your most loyal customers to talk about your brand is one of the most impactful practices you can leverage to grow your business.

5 thoughts on “What is a customer recommendation worth?”

  1. Levent Cem Aydan

    Thanks for the great article. I will be launching a platform for finding new friends and connecting way easier than ever. What are your recommendations for such a platform? It will be mobile too.

    1. Hi Levent,

      I’m glad you found the article useful and I appreciate the comment! Once you’ve tested your concept with enough customers/users to ensure it’s valuable (typical lean startup stuff), you’ll want to proactively identify who your Promoters are, the users who would absolutely recommend your platform.

      Once you’ve done that, engage heavily with this group to drive recommendations and referrals within their circles where you can attract others with similar mindsets (towards the value of your service).

      Perhaps outside the scope of this discussion, but I’d also recommend identifying some big influencers who can help you spread the word about a new product.

      TL;DR: Ensure there is a “virality” component and identify the customers/users who can help you get that fire going.

  2. I really appreciate customer feedback, infact every venture I get into User feedback is a must. Pushconvert has an add suggestion feature whereby users can instantly suggest new features, request a bug fix or just plainly give feedback on the service. This helps the product evolve into something the users want which leads the product to be successful in the long run. I suggest everyone to do something similar and request client feedback on a regular basis.

    1. Collecting customer feedback and utilizing it in the proper way is absolutely critical to the long-term success of an organization. Unfortunately most companies don’t want to invest the time, even though it’s more impactful than any other activity. This is likely due to the lack of value perceived based on the way companies choose to interact with their customers.

      Collecting feature and product feedback consistently is great to keep the product fresh and inline with customer expectations. Now it’s like to take that to the next level and identify what parts of your product/service/brand are ultimately driving the most loyal customers. Those who are willing (or already) recommending your brand to others. Then you can engage those loyal promoters to attract more customers who find value in what you already do well.

      Compounding growth, like I mentioned 🙂 Good luck!

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