Sometimes businesses fail to realize the importance of good word-of-mouth advertising and referral business.  These are key components in a successful marketing plan.

Word-of-mouth advertising is generated when your company provides an excellent product and service.  The customer’s experience is such that they start to tell others about it.  This happens when consistent, exceptional customer service that exceeds customer’s expectations and quality products are delivered.  You may have a great product, but without excellent customer service you won’t be receiving good word-of-mouth advertising.  It is also important to know that up to 44% of unhappy customers will tell as many as 20 other people about a poor service experience.  The impact of this negative word-of-mouth advertising greatly decreases the effectiveness of other costly advertising.

Another way to generate new business is with referral marketing.  Referral marketing is promoting programs that produce referrals from existing customers or other business power partners. 

Don’t under estimate the power of thank you.  Recently, I gave a new PR firm a first time referral.  One of my clients needed some heavy-hitting local and national PR.  To my surprise about a month later I received a thank you card and gift package in the mail.  It was a modest gift, nothing extravagant, but just right to say thank you.  I don’t expect gifts when I provide referrals to someone, but since it was unexpected it made a great impression on me and I will remember this gesture for a long time.

On the other hand, don’t ignore receiving a referral.  Not acknowledging receiving a referral can be detrimental.  Two months ago I sent someone a referral via her voice mail and email.  It was a significant referral that turned into business.  Surprisingly, I did not even receive an acknowledgement of the referral.  I thought – How rude!  It made me think that maybe the person I sent their way would not be treated well.  Taking the time to simply say thank you to someone who has provided you a referral is critical – whether it is a customer or a business power partner.  If you have someone who regularly gives you referrals, go the extra mile every now and then to do more than say “thank you”.  Acknowledge every referral you receive, whether it turns into business or not.

Working on these two areas within your business can greatly increase customer retention and generate new customers with very little expense.  Remember it is 6-7 times more costly to acquire a new customer than it is to retain an existing one.