We all know referrals are great but do you truly know how powerful a customer or employee referral is for your store? How many sales one customer can generate for you? How many customers would refer for an incentive offer/reward? How many more customers would become brand advocates if you had a referral program in place?

And if you are aware of just even one of those, are you honestly leveraging the power of word of mouth marketing and your happy customers to help sell you more cars or are you too busy putting all of your eggs in your digital basket, full of SEO, social media, retargeting, electronic displays, PPC, and more?

Your website isn’t the center of your universe. Your Facebook page isn’t the center of your universe. Your mobile app isn’t the center of your universe. The customer is the center of your universe.  – Bruce Ernst

Here are 30 referral stats that will make you want to start your own referral program today:

1. People are 4 times more likely to buy when referred by a friend – Nielsen
    
2. The lifetime value of a new referral customer is 16% higher than your average customer. –  Wharton School of Business
    
3. More than 50% of people are likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program. –  Software Advice
    
4. Millennials ranked word-of-mouth as the #1 influencer in their purchasing decisions about clothes, packaged goods, big-ticket items (like travel and electronics), and financial products. Baby Boomers also ranked word-of-mouth as being most influential in their purchasing decisions about big-ticket items and financial products. - Radius Global
    
5. The Average Gross for a Dealership Referrals = $1,298, Fresh Ups = $817. - NADA
    
6. "Referral Marketing is the dark horse of marketing, a dark horse is a candidate or competitor about whom little is known but who unexpectedly wins or succeeds." - GIGAOM
    
7. Referrals have a 51% Service Usage, Fresh-Ups have just 29% service usage. - NADA
    
8. Word-of-mouth has been shown to improve marketing effectiveness by up to 54%. –  
   MarketShare
    
9. 77% of consumers are more likely to buy a new product when learning about it from friends or family. – Nielsen
    
10. "Word-of-mouth can prompt a consumer to consider a brand or product in a way that incremental advertising spending simply cannot." - McKinsey
     
11. 81% of U.S. online consumers’ purchase decisions are influenced by their friends’ social media posts versus 78% who are influenced by the posts of the brands they follow on social media. – Market Force
     
12. 74% of consumers identify word-of-mouth as a key influencer in their purchasing decision. – Ogilvy/Google/TNS
     
13. “And the trend toward word-of-mouth has been accelerating. According to Nielsen, the number of consumers who trust purchase recommendations from friends and family and online consumer opinions has grown rapidly since 2009, surpassing the number of those who trust TV and print media, which has plummeted.” - Boston Consulting Group
     
14. “WOM two times more effective than radio advertisements, four times more than personal selling, seven times more than print advertisements.” – Katz and Lazarsfeld
     
15. Referrals are 4x more valuable than a web lead. - Ken Krogue, President and co-founder of InsideSales.com
     
16. 1 offline word of mouth impression drives sales at least 5x more than 1 paid, and much more (as much as 100 times more) for higher-consideration categories. - WOMMA
     
17. 83% of consumers are willing to refer after a positive experience... but only 29% actually do. - Texas Tech

18. Referrals have a 96% CSI, Compared to 73% for Fresh-Ups. - NADA

19. 72% of marketers still do not recognize and leverage the value of customer referrals. - Loyalty360
     
20. 65% of consumers say that receiving rewards impacts their frequency of purchase. - Social Annex
     
21. 69% of consumers say that they’re more likely to try a brand if it gives rewards. - Social Annex
     
22. Customers acquired through referrals spend 200% more than the average customer.
     
23. Word of Mouth is STILL the most influential factor in driving purchases. - Nielsen
     
24. Costco's referral program led to sales of 398,875 new and used vehicles in 2014. - Automotive News
     
25. Referrals have a 61% Closing Rate; Fresh-ups have a 23% Closing Rate. - NADA
     
26. On social media, 58% of consumers share their positive experiences with a company, and ask family, colleagues, and friends for their opinions about brands. - SDL
     
27. When specific case studies were analyzed, researchers found a 10% increase in word-of-mouth (off and online) translated into a sales lifts between 0.2 – 1.5%. - MarketShare/ Keller Fay Group
     
28. 84% of consumers reported always or sometimes taking action based on personal recommendations. 70% said they did the same of online consumer opinions. [Nielsen]
     
29. The Word of Mouth Marketing Association reports that every day in the United States, there are approximately 2.4 billion brand-related conversations. People frequently talk about the products and services they enjoy, and the companies who offer them.
     

30. "As consumers overwhelmed by product choices tune out the ever-growing barrage of traditional marketing, word of mouth cuts through the noise quickly and effectively." - McKinsey

Worth Noting.

1. Facebook: “People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising.” – Mark Zuckerberg, CEO
    
2. Zappos: “We take most of the money that we could have spent on paid advertising and instead put it back into the customer experience. Then we let the customers be our marketing. Historically, our number-one growth driver has been from repeat customers and word-of-mouth.” –  Tony Hsieh, CEO
    
3. PayPal: "By directly paying people to sign up and then paying them more to refer friends, we achieved extraordinary growth. This strategy cost us $20 per customer, but it also led to 7% daily growth, which meant that our base nearly doubled every 10 days." - Peter Thiel - Co-founder

Pretty compelling stuff huh?

1. Create a Wow Offer:

Why? Because being realistic is crucial when you are developing your referral program. Your customers are busy with lives of their own and unfortunately you are not the first thing they think about when they wake up nor before they go to sleep... unless they’re currently dealing with a nail lodged into their tire (hi there). Make your brand and store memorable with an offer that STICKS. A sticky/enticing offer lays the ground work for memory recall. Promote an attractive reward for referrals and the next time they overhear a co-worker or friend discussing that they "are in the market for a vehicle", your customer will do the work for you. The goal of a referral program is to turn your customers into your most powerful sales channel and simultaneously create a fun and gamified way to re-engage and retain with these customers.   

Don't think you need a motivating reward?

• 88% of Americans say they would like some sort of incentive (money, product or service, loyalty points, early access, swag) for sharing a product via social media or email. That number jumps to 95% among 18-to-34-year-olds.
• What’s the reward of choice? 77% of Americans say they prefer money.

Now that you’ve got your offer you need to make sure that it’s reaching your customers where they frequent. Think of the places you have the most engagement and traction with your customer base and start promoting there. Did you know that, in the 30-60 days after your customer has purchased their vehicle, they are going to show off their new vehicle to up to as many as 150 friends and family members? That is 150 potential leads you could have coming through your door, all thanks to 1 customer. How many salespeople do you have pulling in 150 potential leads in 60 days? Here are some more great touch points for promoting your referral program:

1. Service Waiting Area 
2. Your Website
3. Social Media Channels 
4. Email Campaigns
5. Review Sites 
6. Other Local Businesses
7. Schools 
8. Local Sport Groups
9. Mobile App

Pro-tip: A one sided offer is great but a double sided offer is twice as good, it can significantly raise your referral leads submissions. A double sided offer allows your brand advocate to feel confident that their friend or family member is receiving a great deal and the care they deserve. What’s a good starting point? Give a $25 test drive to your friend or family and we’ll send you $100 if they purchase! 
 

2. Make it Quick & Easy: 

So now that you’ve enticed your customers to refer with an attractive offer, how do you want them to send you these referrals? Which avenues are open for referral submission to your customers, how do they know about them and how are you going to track these submission methods? There are a ton of ways that your customer can submit their referrals information.. such as:

1. Call their Sales Rep
2. Call the Store
3. Email
4. Walk them in
5. Fill out a form
6. Have their referee mention their name.

You want to ensure your customer has to do as little as possible to submit their referral but you also need to create a unified method of referral submission for your own tracking purposes. A lack of direction on “how to refer" combined with too many “avenues” for referrals can easily deter even your most loyal customers from sending referrals. If they have to look around your website for 5+ seconds, they’re going to abort mission… why? because they’re busy and nobody enjoys being confused on the interweb.

A great way to capture referral leads efficiently is by creating a referral form, you’ll need to embed this form on a landing page (mobile friendly landing page that is!). This landing page should simply and quickly highlight:

1. Your Offer.
2. How Your Program Works.
3. Any tools for referring or other related offers and reminders. 
4. The submission form with required fields.

This landing page and form should be promoted and linked through all of the touch points mentioned in step one. Don’t forget to have a strong mobile focus. We’re busier than ever now and constantly on the go, (smartphone in tow) you’ll want to ensure your customers can refer from anywhere. Embedding this form into your smartphone app will allow your customer to do just that. 

Imagine, one of your customers, Sarah, is a waitress and she’s talking to a customer who mentions they are in the market for a new vehicle, Sarah had a great experience buying her car with you & knows that your store has an attractive incentive offer, so she definitely wants to refer him. The issue is that, she isn’t going to remember their name and information when she gets off work in 8 hours and sits down at her computer. Thankfully since your referral form is embedded in your mobile app, Sarah can send her customer’s information in 3 clicks right from her restaurant. 

Giving your customers easy to use “tools" like a landing page and mobile app with a referral form to make referring simple, efficient and engaging will make all the difference in our digital age. 
 

3. Track Your Leads:

Awesome, your customers are now sending you referrals because your offer rocks and it’s easy to refer but what are you doing with those leads once you receive them? If a referral lead is 4x more valuable than a web lead and 36x more valuable than a cold call, you want to ensure it’s being handled with the utmost care, in a timely manner. Making decisions on these types of questions ahead of time will ensure no leads can slip through the cracks:

1. Are you splitting these leads evenly between salespeople?
2. How are you informing a specific salesperson of the new lead? 
3. How should the salesperson follow up? email/call? what does the referee want?
4. How do you know the salespeople are following up?
5. How are these leads being tracked, are they being pushed into your CRM for optimization and comparison tracking?

It’s also important to note that the follow through should not be an internal only effort, this referral submission allows you to engage with your brand advocate (referrer) to:

1. Thank them for their referral. 
2. Promote more offers like downloading your smartphone app.

and to your new lead (the referee) to let them know that:

1. Their friend Bob Joe referred them.
2. A salesperson will be in touch shortly.
3. Give them contact information if they want to be proactive. 

Pro-tip: Once you are confident in your tracking methods and abilities, you can begin to review this data and optimize. Which salespeople are bringing in the most referral leads, who's closing the most? Which customers are sending you the highest quality referrals? These previously untrackable but extremely valuable data items can now be optimized on.

4. Reward Efficiently:

How many calls have you received from “Max”, an upset customer who’s been waiting 5 weeks for their referral check or reward? They referred Sue, and Sue bought a new vehicle 4 weeks ago!! Max has waited and waited for the promised reward but never received it. 

How did that happen though? Human error most likely...

1. Salesperson forgot to attach the internal referral form
2. Salesperson was excited about the sale - they forgot to mention the referral.
3. The referred customer didn’t know they needed to mention the referral…. which why should they? it’s not their job to remind your salesperson or your store of how they ended up there! 

This is the most excruciating mistake a dealership can make when they decide to run their own referral program because it can deter a customer completely. It’s also the point where a referral program can become a bit tumultuous for a dealership. Without a tracking platform, there will always be manual effort on the dealership’s end and unfortunately manual effort can and does involve mistakes and errors but it’s most definitely manageable! You’ll want to follow the below procedure:

1. Review your referral form submission.
2. Ensure the referral was submitted before the sale took place.
   1. This can be confirmed by reviewing the DMS data and matching it back to your referral lead form report.
3. Add stock and deal number information to your referral form submission sheet for your own records. 
4. Send out the Reward. 
5. Let the customer know their reward is on its way!
   1. The sooner the customer receives their reward, the sooner they feel appreciated and the sooner they’ll be willing to send you more referrals, because they know you hold up your side of the deal.
   2. This successful referral allows you to re-engage with your brand advocate (referrer) to:
      1. Thank them for their referral again.
      2. Give them the good news, their reward is on the way. 
      3. Promote more offers.
      4. Remind them to keep referring and earning.
   3. BONUS: you can also engage with your new customer (referee):
      1. Invite them to your referral program for their chance to refer and earn
      2. Promote more offers like downloading your smartphone app.

Pro-tip: Automate all of your engagement communication so that you don’t have to worry about if your salesperson or even you remembered to thank your brand advocates. 

5. Be Referable.

This seems so obvious that it’s silly that i’ve put it on this list, right? But it is important that you are first and foremost, worth referring. You can offer the most enticing reward and make referring easy than eating pie but if your product, employees, and process are less than satisfactory, nobody is going to put their friends and family members through a painful experience to earn a quick couple bucks. And if they would… they probably don’t have many friends left. I really love the idea of focusing on you culture and letting that show itself in improvements in general moral, attitudes and motivation which lead to more employee engagement & retention ... which THEN lead to - improved customer service experiences in all aspects of your store. Quality customer service and great employees are what your customers are ultimately referring, more than your brand and even your product in some cases. 

What do you guys think? Are you referable? And if you are, are you optimizing on referrals through a structured referral program or is your referral program still stuck in the stone age?

Curious to learn more about how to sell more vehicles through referrals? Email me at ktepper@incentivefox.com! 

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According to the New York Times, 65% of new business comes from referrals.

Wow, right? But what does that really mean? It means that all of your marketing efforts - radio, billboards, SEO, social media, emails, websites, ads, newspapers, and all your other campaigns COMBINED - are still not as powerful as a customer recommendation.

Your referring customers are your most effective sales force and advertisers. Yet majority of dealerships FAIL to put together a comprehensive marketing plan or utilize ANY type of system and tools that are focused on optimizing and driving more referral business.

Still not convinced your dealership needs a referral program? Here are a 6 more reasons for you.

1.) Word of Mouth is KING

McKinsey & Company explains, “As consumers overwhelmed by product choices tune out the ever-growing barrage of traditional marketing, word of mouth cuts through the noise quickly and effectively.” We see an average of 5,000 ads per day, and we successfully become unfazed by these types of traditional marketing attempts.

It's time to understand, optimize, and embrace our customers word of mouth, which is happening everywhere - in person, social media, and review sites. 

Word of mouth is still the most powerful purchasing influencer with an astounding 92% of people saying they trust a recommendation over any other form of advertising and it is still the leading factor in auto purchases. 

2.) Referral Programs are More Cost Effective than Almost Every Other Form of Advertising

The average advertising expenses per dealership? (NADA 2014, PG. 17)

• $73,771 on newspaper ads
• $78,125 on radio ads
• $114,145 on TV
• $53,040 on Direct Mail
• $130,324 on Internet

Yet no defined budget for a referral program? Referral Programs are proven to generate more new business with lower customer acquisition costs and higher closing rates than any other form of advertising. So, why are we so unwilling to budget for a referral program? The most common answer? Referrals will happen no matter what. “What do we need to pay for a program for, I get a few referrals a month!” Valid & Awesome… but since when is generating more business, bad business? What that person is saying is... "A few people a month make it to my store and utilize our services due to recommendations!" but could this person call his/her current customers, brand advocates and spokespeople for his dealership/brand? Probably not. Why? Without the tools, incentives, and analytics that a referral program provides for a business, keeping track and optimizing your businesses referrals will be more of a hassle than the return is worth and we all know what a customer who fails to receive their deserving reward is like. 

3.) Referral Marketing is Hailed as the Dark Horse of the Marketing World

Dark Horse Definition: noun - a candidate or competitor about whom little is known but who unexpectedly wins or succeeds. 

Have you been trying to get a leg up on your competition, your own custom referral program is the place to start... according to GIGAOM - majority of marketers are NOT utilizing referral marketing and a whopping 35% haven’t even bothered to try it. 

4.) Incentivizing Puts You At the Top of Your Customer's Mind.

Sometimes people question if incentivizing for referrals really works? The answer, yes but of course you can't expect incentivizing to work if you have a terrible product, poor customer service, etc.  Quality products, quality employees, and quality customer care must come first but once you have that, an incentivize offer will work wonders. Just ask Dropbox, Airbnb, & PayPal. 

Peter Thiel, co-founder of PayPal had this to say in his book, Zero to One: Notes on Startups, or How to Build the Future, “At PayPal, our initial user base was 24 people, all of whom worked at PayPal. Acquiring customers through banner advertising proved too expensive. However, by directly paying people to sign up and then paying them more to refer friends, we achieved extraordinary growth. This strategy cost us $20 per customer, but it also led to 7% daily growth, which meant that our user base nearly doubled every 10 days. After four or five months, we had hundreds of thousands of users and a viable opportunity to build a great company by servicing money transfers for small fees that ended up greatly exceeding our customer acquisition cost.”

So, that's that - incentivizing can and does work.

5.) Your Sales Team can say Goodbye to Feeling Awkward.

A Texas Tech Study found that “83% of people are willing to refer if they receive quality service yet only 29% do… why? Maybe it has to do with the fact that only 15% of salespeople are asking for referrals.

Creating a referral program means creating user-friendly tools for referral submission as well as promotional reminders and incentive offers. This allows your employee to feel confident in explaining the processes, tools, and the offer which alleviates the awkwardness most employees usually feel when asking for a referral.

Focusing on the benefit for the customer makes the referral program explanation easy and painless for your salespeople; it can be as simple as... “Would you be interested in joining our advocacy referral program? Here are the benefits:

1. You’ll earn money for every qualifying/successful referral
2. Your referral will receive they quality care and service they deserve as well as XXX offer!”

And referrals make closing a sale even easier for your salespeople; a referral lead is 4x more likely to end in a purchase than a fresh-up.

Salespeople should be chomping at the bit to ask for referrals, not shying away because they feel awkward. A referral program gives them to tools and incentives to start chomping. A handy tool that your referral program should have is the analytics to tell you which salespeople are utilizing the program best, a great way to create some healthy competition! And speaking of analytics…

6.) Analytics Exist!

Not too long ago and for some businesses still today… it was and is, extremely difficult to keep track of and tabs on all your referring customers, whom exactly they referred, and what kind of profit you made off of your referred customer. Thankfully, those days are long gone. Referrals are a form of socialization, which nowadays (if you haven't noticed) is everywhere thanks to the internet and it’s trackablity + optimization capabilities. Your referral program should allow you track your top employees, top referring customers, and more. You should be able discover if your referral focused Facebook post or your referral focused tweet created more buzz aka referral submissions and shares. You should be able to easily promote your program across all of your platforms. Your referral program should also come with a dedicated team that can train you and your employees on the best in-person referral promotional tactics as well as how to utilize your tools and understand your analytics.

What does everyone think, are you current customer referrals impressive enough, as is? or is there value in implementing a program focused purely on driving more referral business by utilizing your currrent customer base, employee network base, and business network?