The value of referrals & references

Serendipity strikes again. I’m arranging a reference call between a prospect and a client, and then HBR alerts me to this article (subscription required) on the value of word of mouth (WOM) referrals. And then Brand Republic points me to a Robin Grant post on the latest Nielsen* research that shows, yet again, that people trust people more than anything else.

The HBR article is interesting not so much for the mathematics of referral value (yawn) but because it identifies a gap between those who say they’ll make a referral, and those that actually do so. Strangely, the higher value customers tend not to carry out the promise, whereas lower value customers are more inclined. Thus there’s a difference between a customers lifetime value and their referral value (which, the article states, could be significantly higher).

In the world of Influencer Marketing we often say that reference customers are the ultimate influencers. In the absence of direct experience of a product or supplier, a prospect will defer to a peer as a proxy for personal experience.

The Nielsen research and HBR article talk about referrals in a B2C context, whereas Influencer50’s focus is predominantly B2B, which typically involves references. The difference between a referral and a reference is timing, occurring at the beginning or the end of the decision process, respectively. But otherwise they are the same, a recommendation, with the same high impact.

In my experience, references in B2B are just as difficult to realise as referrals in B2C. Why is this?

• They’re generic: a reference is best if it maps closely to our own needs. That’s why banks like to get references from other banks. But most reference customers are used indiscriminately – case studies are notoriously bad for this approach.
• They get tired easily: the goodwill established in a reference client erodes quickly. You have to use them soon, and appropriately, or lose them.
• You don’t always have references: if you’re entering a new market, or have a new product to launch, you’re starting from scratch.

Understanding the whole ecosystem of influencers, not just customer references, is important for these reasons. You can use non-customer influencers to backfill your reference programs. This also means you keep your customer references fresh and focused for those situations where you really need them.

*The full Nielsen report is here.