How to Reward Customers for Recommending You to Their Friends

By Roy H. Williams, The Wizard of Ads

American retailers learned some interesting things last year. Although consumer confidence was higher during Christmas 2013 than it was during Christmas 2010, ShopperTrak tells us that in-store, holiday foot traffic declined by almost half during those three years. But don't assume sales volume declined by half for those retailers or that half their customers bought online. A 50% decline in foot traffic simply means that we're making half as many trips to the store.

We no longer feel that we have to visit the store to learn what we need to know.

A 2013 Harris Poll reports that 46% of us have shopped a brick-and-mortar store for information, then gone online to find a better price. But that same Harris Poll says that a far higher number of us - 69% - have done exactly the opposite; researched online, then bought from a local brick-and-mortar.

If the result of our online research is that we visit just one store instead of two, a 50% decline in foot traffic will be the direct result.

"In many instances, customers have access to more information online than when talking to an in-store sales associate. Online reviews and price comparisons enable them to feel more confident in their buying decisions..."
- Jeremy Bogaisky, Forbes, Feb. 12, 2014

A 2013 McKinsey & Company report echoes those findings. “Our research shows that for the average consumer, peer recommendations carry ten times more weight than recommendations from salespeople."

Of course you want your customers to recommend you to their friends; a friend has 10 times the influence of a salesperson. But before you get all excited about creating a rewards program for customers who send you their friends, please know that such schemes are almost always counterproductive.

Here's an example of why:

A client told me that a buddy of his invested in a particular company and then said to him, "It's going to skyrocket. I invested $250,000. You really ought to get in on this." My client took his buddy's advice and likewise invested $250,000. My client would probably have recommended that investment to everyone in his inner circle, but a disturbing betrayal made any such recommendation impossible. As he handed over the check for his investment to the financial officer of the company, the man said, "If you know anyone else who might want to invest, just keep in mind that we're paying 10 percent to whoever sends them in."

When my client realized that his buddy had made $25,000 by "recommending" the investment to him, he felt a lot less good about the investment.

And a lot less good about the buddy.

My client immediately knew that if he recommended the investment to any of his friends, they would be made the same offer that he had just been made. There's just no way that he was going to risk that.

Let me say this plainly: If you try to bribe your customers, they'll think less of you.

Friendship is built on trust. A friend makes a recommendation because they believe it will be good for their friend. They don't do it to benefit themselves or the company they're recommending.

That wouldn't be a friend at all.

That would be a salesman.

To win the recommendations of customers, you must impress those customers with your performance. Focus your efforts on being consistently and truly remarkable. It's the most effective thing you can do.

Word of mouth isn't new; it's as old as the human race. Friendship isn't new. Integrity isn't new.

What's new is digital technology and the way it amplifies and accelerates everything you say. But if you look closely, you'll see this digital knife cuts both ways. People are losing their jobs, their friends and their freedom because of things they tweet and put on FaceBook.

The amplification and acceleration of digital technology is not something you can directly control. The best you can do is try - very hard - to make sure your customers have good things to say.

The only reward your customers want for recommending you to their friends is for you to make those friends happy.

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