Jerry Osteryoung: Use your existing customers as your marketing base

November 15, 2013 

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. ~ Sam Walton

There is an erroneous assumption among business owners that existing customers will promote your business if you provide great customer service. This is not entirely correct.

Customer service is important and necessary, of course, but you also must provide a strong incentive to encourage your existing customers to promote your company on a regular basis.

I think Dish is a great example of a company that uses their existing customers in their marketing plan. They offer a $50 incentive to both the referrer and the new customer so both have a compelling reason to act.

Recently I recommended Dish to a very special friend who ultimately took advantage of the offer. As a "thank you" for my referral, Dish unexpectedly sent me a large stuffed Joey (their trademark) and some free movie rentals in addition to the cash.

Clearly, Dish understands how to maximize referrals to help grow their customer base. They also provide outstanding customer service, which paired with a good referral incentive, encourages your customers to pass the company name along to their friends and family.

Any business can introduce a customer referral program by following these simple guidelines:

1. Understand that custom

er referrals are not automatic and you need to develop a plan to encourage them. Most of your customers really want to recommend you, but you are going to have to provide an incentive to make it happen.

2. If you ask customers to refer you, you must equip them with your selling points in an easy-to-use format they can use in their "pitch." Good options for this include a brochure or a website.

3. The incentive you offer must be something your customers value, otherwise, they are not likely to go out of their way to recommend you. Cash is a great one -- everybody likes cash -- but there are other options that may work well too. Depending on the type of business you are in, you could offer a complimentary product or service. If I have a heating and air conditioning business, for example, I might offer a free maintenance checkup, which is a service I would normally charge for.

4. Avoid putting so many limitations on how the incentive is earned as that turns the customer off.

5. Make the incentive the same for both the referrer and the new customer.

6. Try experimenting with a variety of incentive offers to different groups of customers and see what works best.

7. Communicate the details of the referral incentive frequently to make sure your customers know about it and do not forget.

A customer referral program is one of those things every business should consider. Now go out and see how you might use your existing customers to help grow your client base.

Jerry Osteryoung, a consultant to businesses, is the Jim Moran professor of entrepreneurship (emeritus) and professor of finance (emeritus) at Florida State University. He can be reached by email at jerry.osteryoung@gmail.com.

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