Rodrigo Noll, one of the leading specialists in referral sales in Brazil, explains the importance of referrals to attract new customers as follows: according to him, referral sales work as a cycle that generates more results as more clients enter this circle. That is, the consumer enters your strategy, becomes a customer and is an indicator, generating exponentially more sales.
This shows, a little, the power of sales by indications in Brazil and in the world. According to a survey by the QualiBest Institute, at least 52% of national consumers have already purchased some category of product on someone’s recommendation. In practice, this makes this a powerful weapon for companies in all segments to close more sales.
Do you want to understand the importance of indication to capture new customers? Then read the article below carefully!
What this article covers:
The importance of referral to attract new customers in 3 points.
1. The power of the statement.
The first point to understand on the subject is to fully understand what power referral has in a marketing strategy. When you understand this, it’s much easier to understand why it’s important to use it to get new customers.
You can understand the most theories, but the easiest way to understand the power of the referral is to try to remember the last time someone recommended a TV series, a movie, a diner or pizza place to you. What did you do after that when you had the opportunity to watch something or eat somewhere? Probably followed the recommendation. If not soon after, sometime after.
This anecdotal example shows the power that referral has in a company’s marketing context. When we receive an indication of a product or service from someone (especially someone we trust), our tendency is to want to buy that product or service.
This happens due to a mental trigger called Social Proof. A mental trigger is a kind of command that activates a very strong unconscious response in our body. For example, hearing someone shout “Help” activates a very strong adrenaline and danger response in our body (which is why we get so angry when someone does this as a “joke”).
There are many other mental triggers and many of them have a practical effect when making the decision to buy a product. Social Proof is one of the strongest of them.
Basically, this trigger is activated when we see someone approve of a product or service. This brings us confidence that it’s good (on a subconscious level) and we get closer to buying too.
This is the power of the referral: on a subconscious level, whoever receives the referral is much closer to closing the deal. It’s the most powerful marketing category there is!
2. An exponential strategy.
The gains in having a referral strategy to capture new customers are exponential and highly scalable. In fact, in some cases, it might even force you to scale the business to handle so many referrals.
It works like this: imagine a monthly cycle where 50 people join and 5 leave as customers. It’s 10% conversion in the month. This means that in six months you will have 30 customers.
Now imagine that you set up a system in which 10% of customers make new referrals. In six months, it will have 3 new indications: there are already 33 clients. In 7 months, 38 clients. In 8 months, there will be 43 clients + 1 referral, totaling 44. In 10 months, 55 clients (5 each month plus one referral). In 12 months, 66 clients.
In one year, you’ve gained 6 more customers — and they cycle too and can exponentially bring in new customers. After gaining 10 customers, these extras bring 1 more. And so on.
This in a low conversion cycle. Imagine the impact that such a strategy would have if you converted a lot more and had a lot more people join it?
3. Best value for money.
Finally, it is worth mentioning the great cost-benefit ratio of referral actions in the market. This is because, in practice, a referral system has the only cost of a slight drop in the profit margin offered as a reward to those who made the referral. Considering the objective gain of this action (being at least one new customer), the cost-effectiveness of this strategy is enormous and very attractive for companies of all types and sizes.
Ready! Now that you understand the importance of referrals to capture new customers by explaining the Rodrigo Noll, you can put this strategy into practice in your business. Of course, not every company needs or will live exclusively on referrals, but every company can and should explore at least a little the power of this tool to gain more customers.
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