MARKETING STRATEGIES: Using reference groups and referrals

We all tend to relate to people just like us. So when we buy a product or service, we are much more likely to be influenced by someone similar to us or someone who has a similar situation with which they are dealing.

Example – personal trainer

If I am retired, I would much rather have a personal trainer my own age who has a set of clients around my own age. In the mind of the customer, they might find it hard to believe that a young personal trainer could appreciate the aches and pains of the older person or that suddenly doing repetitions with weights is more likely to end in tendinitis than larger muscles.

Example – inventory control

As a specialty chemical manufacturer, I would have little faith in an inventory control system installed in a retail environment as I would see my requirements differently – whether in practice they were or not.

Example – stain remover

The fact that an all purpose cleaner removes stains off carpet may not convince me that it would remove stains off cement.

Example – first apartment

An apartment designed for a young couple may suit an older couple but they are more likely to be put off by the description.

Referrals reduce risk perceptions on the part of the customer. The more I can be convinced that people who are like me, or firms like mine, value the product, the more likely I am to rate the product higher in my evaluation.

I need to aggressively use ideal customer descriptions in my marketing so that an information search results in a prospect finding a customer profile which fits them. If this can then be supported by testimonials, case studies and user stories, the impact will be even better. At the same time, we need to recognise that the lack of information on a specific type of user will reduce that group’s interest. Remember, what you are doing is setting expectations. If the result of the customer search is that a belief is created that “this will work for me”, this can be a very successful self screening technique.

Referral selling can be passive or proactive. By providing information which can be found in a customer search, I am making it easy for the customer to find products or services which are likely to meet their requirements. Examples of your ideal customer who received great outcomes is what is required and these need to be put in places where the typical customer can find them, whether that is on Facebook, your website, blogs or in your marketing material.

The proactive referral approach is to take the information to the prospect. That is, you need to have a campaign which gets in front of the prospect. To do this you need to have an understanding of his or her referral groups, what they read, where they shop and what their interests might be. The message needs to be “people like you or firms like yours use our product or services to solve the following problem or need”.

We should never neglect the fact that the customer is likely to tell others in their referral group of their experience – good or bad. Where trust is high within the referral group – whether it be family, friends, members of an association or people working in the same activity or sector, this is a strong referral. Others interested in solving the same problem or who have the same need will take note of the information and will use this in their own evaluation. A strong positive referral can significantly reduce search time for a customer especially where satisfying is the objective. This is perhaps the most powerful marketing tool in your armory and certainly more cost-effective than marketing campaigns.

The key to getting the right message to the right customer is to have both the right message and understand clearly who the ideal customer is.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.