Most of us are pleased with receiving a referral and stop there, but interestingly the bigger effect can be on the client who made the introduction.
If you run a UK services business, you’ll in all likelihood have a client list with a traffic light system on it. And somewhere on that list is a client who causes no concerns. The work goes out to them on time, the invoices get paid without argument, and nobody has had a difficult conversation in three years. It’s marked green, and it gets about forty seconds of attention, because two accounts further down the list are on fire.
There’s a column missing from that list, and it isn’t satisfaction. It’s whether that client has ever recommended you to anyone.
The half we all count
When a client introduces you to a peer, most of us treat it as a lead, and quite right too.
Schmitt, Skiera and Van den Bulte tracked around 10,000 customers of a bank for 33 months, comparing those who arrived through a recommendation with those arriving by other routes. The two groups were matched on age, income and joining date. The clients who arrived on a recommendation were around 25% more profitable per day. That margin gap did narrow as the relationship continued, but these were the more profitable clients for the best part of three years. They were also 18% less likely to leave. Put the two together and they were worth at least 16% more than the comparison group. So that is three years of better margin from clients who are also less likely to leave all because they joined on the basis of a recommendation. A follow-up study attributed that retention difference to the continuing connection between the person who made the introduction and the one who accepted it.
In B2B services, people tend to recommend where they believe the fit is right, and the services good, so the new client arrives better matched to what you actually do, and knowing what to expect.
The half almost nobody counts
Now look at the other person in that exchange, the client who made the introduction. Most of us treat them as the source of the lead and nothing else. We send a bottle of something, with thanks and move on.
Garnefeld, Eggert, Helm and Tax looked at what actually happens to that person. Using customer data from a global mobile telecoms provider, they compared people who had made a recommendation with a matched group who hadn’t. The people who made recommendations became measurably better customers.
Recommenders’ defection rates fell from 19% to 7% within a year, and their average monthly revenue grew by 11.4% against the comparison group.
The authors name the explanation themselves. It’s Cialdini’s commitment and consistency principle. Once your client has told a peer you’re worth using, they have a position to be consistent with, and leaving later would mean their own judgement was off in front of someone whose opinion matters to them.
That introduction did three jobs therefore. It brought in a client who’ll stay longer than average, it made the client who gave it stay longer too, and it put the new client with a supplier that suits them. Everyone wins, including the supplier – who should have a more profitable income stream for longer, an enhanced reputation and a stronger network.
One note on the evidence. This is consumer research and we can’t find anything equivalent in B2B services. We think it transfers, because the psychology is broadly relevant and engagement effects have been found to be stronger in B2B services than in consumer markets, but that’s reasoning rather than proof.
Who to ask, how to ask, and how often
Both studies found the loyalty effect strongest in newer relationships, so your instinct to contact the client you’ve looked after for a decade may be the wrong one.
Read that carefully though, because it isn’t an instruction to go after clients who haven’t made their minds up about you. The finding applies only to those who went on to recommend. What it says is that when a newer client speaks up for you, it cements things, precisely because they had less of a settled view to start with. There’s a risk in that, because a “no” weakens the relationship, though the conversation it opens up is an opportunity too.
Which brings us to frequency, and the answer is less often than you think. If you ask a client to recommend you and they say no, they have actively decided not to put their reputation behind you, and that leaves the relationship in a weaker position than for a client you never asked. Asking repeatedly won’t wear a client into agreeing; it just makes the position worse each time you do it.
And the sequence matters. Ask a newer client, but of course ask after something has visibly gone well. Then design the request. “Would you be willing to refer us?” forces a yes or no with no dignified way out. “We’re talking to an organisation in much the same position you were in eighteen months ago, would you be willing to have a quick chat with them?” is easier to say yes to and easy to put off without refusing. It’s relevant and may be useful to both the existing client and the potential new one.
It is worth noting that to get the best outcomes, you need to proactively manage the process. Ask explicitly, choose the moment and frame appropriately. Plenty of clients who would happily introduce you never have, for the unglamorous reason that nobody has asked. Which is an argument for a system rather than a burst of enthusiasm every October. Knowing who to ask, when, what to ask for, by whom and knowing what has happened in the past, is the difference between a haphazard process and introductions arriving because you built something that produces them.
When they say yes
Note that a “yes” is a handover, not a result, and it’s where value can get lost. Agree the mechanics there and then: how, what, who and by when. And remember to close the loop and tell your existing client how the recommendation went afterwards. Did you start working with the new client?
Put a date in the calendar for three months later and talk to the client who made the introduction about their business not yours, this is good to do because the goodwill is real and recent, so you’ll get a more open conversation than you would from a standing start. And as Bolton, Lemon and Verhoef found, when a B2B client decides to spend more with a supplier, the decision isn’t made at the point of asking. It forms out of the accumulated experience of the relationship.
What to do with this on Monday
Add the column. Mark each client on whether they have actually introduced you to someone, spoken to a prospect for you, acted as a reference or put their name to a case study. Not whether they said they would, but whether they did.
Pick your next three invitations from the newer end of that list, time them to follow something that has gone well, and make each one easy to say yes to, not least because you know who you want to use the referral for. For anyone who has already recommended you, put a date in the calendar and go to see them.
Then treat an introduction as three gains rather than one. You’ve gained a prospect more likely to become a client and stay, you’ve just strengthened the relationship with the client who made it, the new client has ended up somewhere that suits them and you!
About the author
Symbioss helps B2B services companies optimise their client relationships by bringing a systematic commercial capability to the management of client relationships, which they view as being valuable assets. Symbioss delivers these improvements using a tailored programme, incorporating the RelaValue System. www.symbioss.co.uk
If you’d like to talk about applying a more systematic approach to all your client relationships and what benefits this brings, get in touch.
Liz Ashton, Director
Sources
Garnefeld, I., Eggert, A., Helm, S. V. and Tax, S. S. (2013): Growing Existing Customers’ Revenue Streams through Customer Referral Programs. Journal of Marketing, vol. 77, issue 4, pp. 17-32. Recommenders’ defection rates fell from 19% to 7% within a year and average monthly revenue grew by 11.4% against a matched control group. The effect was more pronounced in newer customer relationships.
Garnefeld, I., Helm, S. and Eggert, A. (2011): Walk Your Talk: An Experimental Investigation of the Relationship Between Word of Mouth and Communicators’ Loyalty. Journal of Service Research, vol. 14, issue 1, pp. 93-107.
Schmitt, P., Skiera, B. and Van den Bulte, C. (2011): Referral Programs and Customer Value. Journal of Marketing, vol. 75, issue 1, pp. 46-59.
Van den Bulte, C., Bayer, E., Skiera, B. and Schmitt, P. (2018): How Customer Referral Programs Turn Social Capital into Economic Capital. Journal of Marketing Research, vol. 55, issue 1, pp. 132-146.
Bolton, R. N., Lemon, K. N. and Verhoef, P. C. (2008): Expanding Business-to-Business Customer Relationships: Modeling the Customer’s Upgrade Decision. Journal of Marketing, vol. 72, issue 1, pp. 46-64.
Kumar, V. and Pansari, A. (2016): Competitive Advantage Through Engagement. Journal of Marketing Research, vol. 53, issue 4, pp. 497-514.
Cialdini, R. (1984, updated 2021): Influence: The Psychology of Persuasion.
