Referral Programmes are a Measure of Customer Loyalty

Studies show that referred customers prefer your company over others – that’s a fact worth noting, especially if you are in sales! When you stop for a minute and think, it's actually one of the most powerful sales strategies that can help you grow your business. Given B2B purchases are usually larger and have a longer sales cycle, a trusted recommendation carries a lot of weight. It can be argued that referral marketing is even more important in the B2B space.

Now that’s got your attention, let's dive a bit deeper...

Why are referrals so valuable?

They get your name out there, instil trust in first-time customers, and cost very little compared with other, more drastic marketing efforts. They’re also evidence that you’re doing something right, and having a profound effect on your existing customers.

With the help of the internet, it’s not hard to give your brand exposure. Think of all the brands you would recognise, even though you’ve never shopped with them before, or even visited their site.

What does this mean? That simply ‘being seen and heard’ isn’t the key. You could invest significant resources into making yourself more visible and becoming a household name, but it may never translate into a strong, loyal customer base. Plenty of businesses are guilty of making this mistake, and some may never realise quite how big of a mistake it is.

This all boils down to the psychology of trust. People are significantly more likely to trust a referral from someone they know, than they are a billboard or an ad that pops up on their social media timeline, for instance. Estimates vary, but this LinkedIn article suggests it could be as high as 92%.


It’s important to remember that referrals don’t come with zero investment. To see consistent (and scalable) results, you’ve got to invest into the right loyalty programme to generate customers who want to spread the word on your behalf. But, in the long-term, referrals are a much more cost-effective way of growing business – far more than any short-lived marketing campaign or attention-grabbing promotion for new customers.

They’re also one of the building blocks for high B2B retention. A customer who came to you as a result of a personal recommendation made by a friend is likely to have a greater emotional connection with your brand than a customer who found you just by clicking an ad or taking an interest in a short-lived promotion.

The Psychology

There is no one way of explaining why most people hold recommendations from friends to such high regard. In fact, there are a lot of different psychological quirks that many of us share that predispose us to a certain amount of imitation.

This article from Greater Good, which is based at UC Berkeley no less, discusses a wide range of benefits to imitation, from fostering a sense of cultural affiliation to establishing social rapport.

Similarly, if you’ve spent any amount of time in the world of digital marketing, you’ll probably know at least the basics of the Social Proof principle, which refers to times when an individual will assume the people around them know how to behave, or what to do, in certain situations.

Think of the newcomer to fine dining, who side-eyes the other people at their table to know which of the seven pieces of cutlery they should be using, whether they should tuck their napkin into their shirt or lay it flat on their lap, and whether or not it’s okay to shun the Cabernet Sauvignon in favour of Pepsi with their Wagyu steak.

Referrals and recommendations appeal to this principle. It’s natural for us to want to know what other people are doing, what other people are buying, and what other people are signed-up to, because doing what they do offers a high chance of success.


How do you get more referrals?

For the most part, by creating a strong, loyal customer base whose interactions with your business (and its incentive programme) are positive and memorable enough that they want to spread the word, tell their close contacts about you, and generate a reliable stream of new business that will, in time, grow just as loyal as the customers who referred them in the first place.

In short, by creating and maintaining loyalty. You don’t generate referrals in a vacuum. If you want an omelette, you need to get eggs; if you want referrals, you need to create loyal customers.

And how do you do that? By rewarding return customers through a two-sided referral programme – not one that only rewards the new sign-up. If you’re investing all of your incentives into the new customers, your ability to build loyalty will only ever take you so far. For the most part, you’ll be stuck with the mercenaries – not the evangelistic customers who want to get your name out there, and help you to gain more loyal, enthusiastic customers.

We’re here to help you understand how to build this with your customer base. Having done it for over 14 years; why not use our experience to help guide your thinking?


Want to find out more?

Have a chat with Matt to see Incentivesmart in action and learn how we can help improve your customer loyalty.

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