Turning Your Customers (and Non-Sales Employees) into a Sales Force

In a day and age when acquiring a customer is getting more and more difficult due to increased competition and slashed sales budgets, customer referral programs can be utilized to generate significant sales growth in a very practical and effective manner.

You can download PDF version of this whitepaper here.

Word-of-mouth referrals have been looked at over the years as a key means by which to acquire new customers. The activity of promoting a given product or service to a friend or family member has a significant impact on that person’s likelihood of purchasing said product or service. Inversely, and logically, detraction has the opposite impact, leading to a loss of potential new customers.

A recent study examined the effect of customers who advocate or speak out against companies in the wireless GSM sector in the United States. The findings – customers who promote their wireless company attract a half new customer each on average, and, generate $1700 for the company. Those who speak against their provider cause the company to lose 1.3 potential new customers on average, and generate a net loss of $300 .

Clearly, referrals are an excellent means for generating new business . That said, companies need to proactively push their customers to generate these referrals, but rarely do. Few have successfully tapped into this ever-important lead generation mechanism.

A new and ever-burgeoning means of doing this is through the use of customer referral programs. These programs can be simple or rather complex, rewarding customers with prizes, products, cash, etc., for each referral / lead that turns into a sale. Some examples from different sectors include:

  • Bank of America – Rewards both the referrer and referred with up to $50 in cash for the referred opening a new checking account .
  • DIRECTV – Rewards both the referrer and referred with a $50 discount on their next bills for the referred subscribing to satellite television services .
  • Vonage – Rewards both the referred and referred with two months free Vonage services if the referred subscribes to their fixed line service.

A variation of this program involves opening up the referral program to the company’s own employees, turning all non-sales employees into lead generators. One company that excels at this is PNC Bank. Through their “Chairman’s Challenge” program, the company has brought in over $440 million in new demand deposits and generated $1 billion in deposit and loans balances. The program rewards employees with points for every account that is opened through a referral they submit, then, the points accumulate and can be turned into numerous different prizes .

Companies, particularly those in the service industry, stand to reap significant benefits from setting up a referral program of their own. Some critical principles that need to be adhered to when doing so:

  • Simplicity – The program should be easy to understand, easy to use, and easy to process, from both the customer and employee perspective. Over time the program can evolve but should start with a focus on the referral of one product or service, with one prize associated with said referral.
  • Financial Feasibility – The rewards provided to the referrer and referred should be financially in line with the profits to be generated from the acquisition. This may be secured through a requirement of some minimal commitment from the new customer (i.e. minimum 6 month contract). Otherwise, in the lack of a contract, the reward can be given out once a certain time requirement has been met by the customer.
  • Strategically Sound – The business activity being promoted should be among the company’s strategies, and, should not reward an activity which is likely going to happen anyway. For example, a bank could consider rewarding customers who refer others and set up online banking with their new account. By doing so, the bank would ensure a lower rate of churn (as online banking has a significant positive effect on retention), and would promote an activity they may have a hard time convincing customers of doing.
  • Cyclical – Such programs are more effective when they have time periods attached to them, a specific start and end date – thus driving customers and/or employees to take action and make referrals. Setting the program up to be cyclical additionally allows the company to make alterations to the program over time aimed at enhancing its attractiveness.

Certainly, these programs make sense, and will likely evolve and multiply over time across many sectors and countries. Through rewarding its employees, customers, and new customers, it’s the company itself that benefits the most in the end.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s