Timely referrals can help companies drive ROI, according to experts who discussed in a topic a recent Loyalty 360-sponsored webinar, The Power of C2C Recommendations: Leveraging Timely Referrals to Drive ROI.
Search was once the stalwart of the marketing world, but with the growth of social networking sites and non-PC like devices has encouraged retailers to shift focus, said Alexandra Best, vice president of marketing for RewardStream, Vancouver, British Columbia, citing a study from Forrester Research. As a result, search’s market share of interactive spending dollars is expected to fall from 55 percent to 44 percent by 2016.
“Marketers need to be present where and when the consumer is,” Best said.
“North America overwhelmingly trusts impartial sources,” Best added. Ninety percent of consumers trust recommendations from people they know, consumer opinions and editorial content. Seventy percent trust consumer opinions posted online. By contrast, they are highly skeptical of brand-sponsored Web sites and e-mails.
Carrying the most influence with theses social networking messages is what the Kelly Fay Group, New Brunswick, N.J., terms as “conversation catalysts,” everyday consumers with large social networks. They are sought out by friends, family and neighbors for their advice and recommendations. So it’s important for companies to know and to engage with their conversation catalysts.
“The value of any one customer does not reside solely in what that person buys,” Best said. “What a person feels about you and what they tell others can influence your revenue and profits just as much as their purchase behavior.”
Ideally, a company that wants to know a customer’s full value will include a measure of that person’s ability to bring in profitable new customers, Best pointed out. Most companies want to understand the customer’s referral power.
Researchers who had polled 9900 telecom and 6700 financial institution customers found that 30 percent of telecom customers made referrals, and 12 percent of those referrals became new customers, 8 percent profitable new customers.
If companies can make it easy to make referrals and asking them to follow through on it, they will get improvements in customer totals, including the number of profitable customers, Best said. “Are you as a marketer focusing on what influences customers the most.”
Ninety two-percent of customers made recommendations. Ninety-three percent of those surveyed made a purchase made on a recommendation, Best said. “So [recommendations] are frequent and they are pervasive. Recommendations impact more purchases than any other source.”
According to the research, 40 percent of purchases were influenced by a personal recommendation and 32 percent by past experience. Face-to-face communication is the predominant way to make a recommendation, cited by 82 percent of respondents (15 percent cited over the phone recommendations).
She pointed to a McKinsey Quarterly finding that marketers spend millions of dollars on elaborately conceived advertising campaigns, yet often what really makes up a consumer’s mind is not only simple but also free: a Word of Mouth recommendation from a trusted source. A Word of Mouth recommendation is the primary factor behind 20 to 50 percent of all purchasing decisions.
Advertising becomes much less influential as the consumer moves along the purchase process, Best said. Advertising is very important at the beginning to promote product awareness, but much less influential when the customer actually buys.
Seventy-two percent of purchases are influenced by recommendations from family and friends, according to Best.
Among the organizations looking to build on this trend is First West Credit Union, Langley, B.C., with its newly launched RewardsPerks program.
The credit union seeks to “make a meaningful difference financial lives of members,” said Bryan Mavrow, senior vice president of marketing. Even with such a philosophy, the credit union finds it tough to find new members/customers.
“It’s tough to switch a customer, but therein lies the opportunity,” Mavrow said. One critical element in acquiring a new customer is to make it as easy as possible to for customers to make referrals and to be rewarded for them.
“The program had to stand alone,” Mavrow said. “A lot of programs come and go. We wanted something above staff referral programs. It had to be automated and simple.”
Members/customers can learn about the program through digital signage, statement stuffers and the financial institution’s Web site. Sign-up is simple and the RewardsPerks page is easy to navigate, Mavrow said.
To keep it simple, the credit union is offering a $50 prepaid Mastercard for qualified referrals. Members/customers can choose to donate the reward to one of the charities that the credit union supports.
The program was launched in early September, so it’s too early for any results, though Mavrow said he’s very encouraged by early interest in the program.
For a limited time, access playback to the webinar, The Power of C2C Recommendations: Leveraging Timely Referrals to Drive ROI presented by Alexandra Best: VP Marketing, Reward Stream and Bryan Mavrow: SVP Marketing, First West Credit Union. Click here to watch now.