I’ve been thinking about referral marketing recently due to my own experience giving referrals to friends and family for Blue Apron, the meal kit delivery service. Clearly Blue Apron is using referral marketing to drive lead generation. But does this type of B2C referral marketing translate to B2B marketing?
The classic referral marketing program
Blue Apron’s is the classic referral marketing program where the customer is encouraged to get others to try the service via various incentives. Initially the incentive was being able to give free meals worth $60 to my friends and family. More recently the incentive was upped to include savings for me if the person continued the service. But anyone connected to me on Facebook knows I’m a raving fan of the service, with or without the incentives, frequently posting pictures of the awesome meals we make. So this got me thinking about how this type of program translates to the B2B world.
Referred leads are better leads
Of course for any referral program to work the company must be retaining customers and keeping them happy. So why bother at all with referral marketing? The most recent Hubspot survey report, the State of Inbound 2017, respondents rated referrals as the highest quality leads. The report concluded this was likely because respondents thought these leads are more likely to convert, but the report also acknowledged the challenge most organizations face scaling referral programs to get more leads into the sales funnel. Similarly, according to the Journal of Marketing, a referred customer has a 16% higher lifetime value than customers acquired through other methods. Intuitively this makes sense because we trust our professional peers who may recommend a company’s product or service via word of mouth, social media, or online review. The thing I wrestle with is how a B2B marketing team can make this a formal program for lead generation.
A lead generation referral program?
Retention marketing focuses on strategies and programs designed to retain your existing customers and optimize lifetime customer value. In my previous post, B2B Retention Marketing: The First Thing You Must Do, I discussed why retention marketing is worth doing and where to begin. Now let’s talk about some strategies B2B marketers can use to keep their existing customers and gain additional revenues throughout the relationship.
Strategies for retaining customers
At a fundamental level retaining your customers boils down to keeping them happy enough to continue doing business with you. Many customers, though of course it varies by industry and product/service, will maintain the status quo because change involves perceived risk of an unknown provider. Changing providers also involves switching costs. Switching costs are actual costs the customer incurs (financial fees for early termination) or personal costs (career risks, time required to research providers and negotiate an agreement) to stop buying your product or service and begin with a new provider.
Create “sticky” customer relationships
To prevent your customers from defecting to competitors who will eventually upset the Continue reading
Have you ever found yourself writing copy for your B2B marketing efforts with fingers crossed, hoping your company could actually deliver? You know the copy I’m talking about where you describe how great your product and the customer experience is – our product has the “lowest total cost of ownership”, we deliver “premium customer support”, “easy payments with detailed monthly reporting”, “quick spare parts delivery and expert troubleshooting”, “product/service reviews to ensure you get the most value”, etc.
As a marketer you should be confident making promises like these to prospective customers. After all, the messages marketing and sales communicate to the customer during the sales cycle sets customer expectations. However, if expectations don’t match reality, then you’ve likely got low customer retention rates. And what marketer wants to work hard acquiring new leads and working with sales to close the deal, only to learn your customers defect to the competition after a short time.
Losing customers isn’t only frustrating for marketers, it’s really bad for sustaining business growth. Consider the following data:
- From Bain & Company:
- Increasing customer retention by 5% can increase profits 25 – 95%
- The likelihood of selling to an existing customer is 60 – 70%, versus 5 – 20% to a new lead
- It costs five times as much to attract a new customer as it does to keep an existing one according to Lee Resource Inc., though I’ve seen numbers as high as 10 times depending on your product/service and industry.
Check out this infographic Customer Acquisition Vs.Retention Costs Statistics and Trends for even more data.
The point is, if your customer retention is low, don’t just assume that a retention marketing program will improve your numbers. Before you start a retention marketing program, Continue reading