What is a customer worth to your business? The simplest calculation is your customer lifetime value (CLV), which is the profit you expect to earn from an average customer over the life of your business relationship with that customer. To simplify, suppose your average customer buys $10,000 in print annually and stays with you for an average of three years before leaving. Say your profit margin averages 33 percent. After three years, you will have earned an average of $10,000 in total profit from that customer ($30k revenue X 33%). Your average CLV is $10k, but the real value is much higher.
Your current customers are worth more to your business than the profit of the print they buy from you. They can sell for you as advocates for your brand if you implement a solid referral marketing program.
Let’s address referral marketing, a word-of-mouth initiative that encourages your customers to evangelize to their network to become new customers of your company.
Referrals generate your lowest-possible customer acquisition cost. Referrals from a current customer extend a sense of trust and credibility to the prospective future customer they tell about your brand. With that trust extended to you, you will likely close more sales at a higher value – and close them faster.
Referrals also tend to generate more referrals because your new happy customer may feel the responsibility to also tell their friends about your brand. The added beauty of referral marketing is that your customers reinforce your brand’s value proposition to their network. They are speaking on your behalf about what you do, why you’re great, and how you have added value to their business.
Imagine the impact on your print business if you were to gain more new customers through referrals instead of more expensive ways. Your incremental revenue and profit would rise, while your sales and marketing costs could remain flat or even decline.
In getting started with your referral marketing program, you should first identify your advocates. These are customers who are (1) likely to recommend you to a friend, and/or (2) willing to make a direct introduction to a prospect for you.
You can identify these potential brand advocates through surveys, CRM data-driven insights, and your own personal knowledge of your key customers.
Once you select your targeted customers, the next step is to personally contact them directly to ask for a referral. In-person outreach is ideal, but emails or personal phone calls to them may also work.
Your message should acknowledge and thank them for their trust in you. Depending on your style, you may choose to be direct with them and ask them if they would refer your brand to a friend. “Would you feel comfortable recommending my company to your colleagues so that they can also enjoy the success that you have had?”
Next critical step: Make it easy for them to refer you. Consider drafting an email script for them to send to their contacts. If all they need to do is copy/paste your language and template to their own email or talk track, you’ve made it easy. You have just removed a huge barrier to their participation.
Finally, be sure to send a thank-you note to them as a follow-up. Thoughtful thank you notes or modest gifts to the referrer can serve as their own incentive for them to repeat the action in the future.
Referrals from your customers to potential future customers are priceless. It’s essential to apply the practices of referral marketing to be a part of your overall marketing plan.
In parts 2 and 3 of this series, we will discuss the “why and how” of creating a customer reference program and a customer loyalty/rewards program.
David Murphy is the founder and CEO of Nvent Marketing, a marketing agency specializing in digital marketing for the print industry. David has 30+ years of experience in the graphics and document print production industry. He has served as a board member and advisor to print organizations and associations including Sustainable Green Printing Partnership (SGP), Print Industries of America (PIA), Association for Print Technologies (APTECH), and Electronic Document Scholarship Foundation (EDSF). David was also awarded the Idealliance Soderstrom Society Award for Print Industry Leadership.
David can be reached at firstname.lastname@example.org.