Third Party Endorsement (Word of Mouth)
The saying goes that when you do what you love, you’ll never work a day in your life. But when your customers love what you do, you’ll find yourself in a position to unlock the most powerful form of marketing that exists: third party endorsement OR what some call the word-of-mouth referral. Third party endorsements can be difficult to generate, capture and quantify, so perhaps it’s not surprising that most business owners aren’t focused on building up their word-of-mouth revenue streams.
There are 6 major types/sources of TPE. Start by leveraging the sources you already have, and then work to acquire more.
- Customers: social proof from your existing customers or users (e.g. referrals or testimonials or case studies).
- Experts: social proof from credible and esteemed experts in your industry (e.g. experts who exhibit the same behaviors that you want our visitors to).
- Celebrities: social proof from celebrities or other influencers (e.g. celebrities who have bought your product, or visited your establishment).
- Crowds: large numbers of people who provide social proof (e.g. “300,000+ websites use the OptinMonster lead generation software to get more email subscribers”).
- Friends: people who are friends of your users/website visitors (e.g. “50 of your friends like OptinMonster”).
- Certifications: a credible, 3rd party entity that certifies that you are a knowledgeable, high-quality or trustworthy source (e.g. “USDA Certified Organic”).
But client referrals are a tremendously powerful source of leads and potential revenue. I built three very successful companies exclusively through third party endorsements (word-of-mouth referrals). Whether you manage a retail or a service-based business, there are a number of compelling reasons that you should be leveraging referrals to grow your business as well.
People overwhelmingly trust word-of-mouth referrals
According to Nielsen, 83% of people trust word-of-mouth recommendations from friends and family while 92% of consumers trust word-of-mouth referrals more than all other forms of advertising. Plus, data from Survey Monkey shows that consumers are five times more likely to make a big purchase on the basis of a trusted third party recommendation than a paid ad. Here are some research data on building trust thru third party endorsors:
- 87% of buying decisions begin with research conducted online before the purchase is made.
- 92% of consumers are more likely to trust non-paid recommendations than any other type of advertising.
- The average consumer reads 10 online reviews before making a purchase decision.
- 88% of consumers trust user reviews as much as personal recommendations.
- 82% of Americans say they seek recommendations from friends and family before making a purchase.
- 63% of consumers need to hear company claims 3-5x before they actually believe it.
- 70% of people will trust a recommendation from someone they don’t even know.
- 92% of people will trust a recommendation from a peer.
- Buyers require an average of 40 online reviews before believing a business’s star rating is accurate.
- Shoppers across all age ranges expect an average of 112 reviews per product when they search online.
- Shoppers in the 18- to 24-year-old range expect an average of 203 reviews per product page.
- 85% of consumers think that online reviews older than 3 months aren’t relevant.
Customer reviews and testimonials can be so crucial for sales. It’s hard to make buying decisions when the market is saturated with so many options. The number of options often put buyers into decision paralysis.Often times, reading reviews and testimonials are what push people towards the final buying decision.
They’re free (or at least low cost)
American merchant and religious, civic and political figure, considered by some to be a proponent of advertising and a “pioneer in marketing”, John Wanamaker once famously said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” We’ve all been there. That’s why part of the beauty of word-of-mouth referrals is that you won’t spend a dime on them.
The truth is it’s not really a question of whether or not to pay TPEs, but how. Compensation doesn’t always have to be in the form of cash. It could be the gift of a product, promotion of their platforms by your brand, exclusive access to an event or something else. It’s important to focus on ways to help the influencer. Help them build their brand. Help them reach a new audience. Help them gain access to insights and content for their audience.” The TPE wants to know what’s in it for them. Why should they work with your brand? As long as you are able to answer that question and come up with compensation that everyone is happy with, you’ll have a strongTPE partnership.
They net better customers and clients
In my experience, new clients that come from referrals advance through the sales process faster, have more forgiving negotiations and lean towards greater loyalty because the product/service comes recommended. On average, referred customers will also spend twice as much as non-referred customers, making them an incredibly desirable source of business.
They reveal the value-add levers that are most important to your customers
Over the years, I’ve learned that more than knowledge, more than a privilege, more than even money, people tend to protect their relationships. When clients are willing to talk about your product/service and refer you to someone new, that means you’re really doing a great job of serving them. And whenever you are referred, it’s a great opportunity to reflect on what your clients love so much about working with you. Is it: turnaround time; product quality; trustworthiness; collaborative process; relationships you bring to the engagement?
If you can identify the reasons you’ve been recommended, you can reinvest in those aspects of your marketing practice and improve your product/service offerings for all of your clients. Improving your product/service offerings will in turn help you earn more referrals, which will grow your business and produce more opportunities to impress and improve. Ultimately, that virtuous cycle is the reason you should treat customer referrals and third party endorsements as your number one metric of success. Unlike the conversion rate, the year-over-year revenue or any other quantitative KPI, referrals give a qualitative view of what you’re doing extremely well right now and help chart what you should do next to compound success.
Four tips to build your business through referrals
By now you get it — referrals are more effective than ads, totally free, yield more valuable clients and provide you with actionable data that will help you improve your entire organization. But how do you get them? If you’re in direct-to-consumer retail, establish an online-referral program and re-market it to your bottom-of-funnel audience with email, SMS, ads, website modals and a top-nav link. You can build your own referral program from scratch or enlist a technology partner that specializes in online-loyalty programs, like Stamped.io, Yotpo or ReferralCandy. For instance, if you offer a B2B service like digital marketing, earning referrals from existing clients will require time and finesse, but there are a number of things you can do to maximize your odds of netting more. Check out these four surefire tactics that will help you pull in more referral business:
- Adopt a human-first business philosophy. Business is essentially a human enterprise. Transactions are a function of trust, but trust can never be maintained over the long term if you treat people transactionally. To be worthy of referral, you must understand that your success is fundamentally intertwined with your clients’ success. That means being an honest communicator, taking maximum ownership when things go wrong and, above all, creating a work environment that fosters team success so that you can deliver that “wow” moment when it counts.
- Over-serve your clients/customers. Make “above and beyond” part of your business’ everyday practice. Encourage a philosophy that whenever a new client/customer is found they should be represented by the whole company. Allow your team to over-serve when necessary. Bring the full range of interdisciplinary resources to bear on client/customer service issues. Anticipate and address their needs before they ask. By being a true partner to your client/customer on all levels, you cultivate the kind of appreciation that turns into word-of-mouth referrals down the road.
- Turn wins into action with an NPS Survey. No matter how great your work is, most people won’t formalize their feedback without a nudge. The New Promoter Score (NPS metric) can provide both quantitative and qualitative data to help you understand whether you are successfully serving your customers and how likely they are to refer you. There are two kinds of NPS: the transactional NPS, which asks your customers how likely they are to recommend your product or service to a peer, and the relational NPS, which asks customers how satisfied they are overall with your product or service. As an example, if you run an online retailer, you can implement a transactional NPS in a strategic place, like your post-purchase page or email flow. If you run a service business with a roster of long-term clients, administer a quarterly relational NPS survey to keep a beat on the health of your client relationships. Because the NPS consists of a single question, you’ll net more participation than you would with a more time-intensive feedback request. Plus, taking steps to improve your NPS score will help you keep your clients happier and cause them to reflect on your value. And all of that will come into play the next time they’re asked to recommend a business in your niche.
- Don’t solicit, elicit. Generally speaking, it’s not a wise practice to ask for referrals directly. NPS feedback? Yes. Testimonials? Sure — as long as the client is happy. But asking a current client/customer to broker a new relationship on your behalf smacks of desperation, and you’ll quickly alienate your customers by treating them as stepping stones to new prospects. Still, the reality is that most of your clients are tightly networked with other people from their social groups or industries who will need the services/products that you offer down the road. And when they develop that need, they’ll ask a trusted friend for a recommendation. So how can you make sure that the next time that happens, your name is the one that gets dropped? The answer is to look for acts of generosity that bring high value to your customer’s lives. These simple acts will help keep your business top of mind when someone asks for a recommendation. There are all kinds of generous acts and low-investment favors, but some of my favorites are: brokering a useful introduction, reaching out with useful insights or offering free beta access to a new business unit or service. Over-serve your clients by demonstrating that you are thinking of new ways to add value to their business above and beyond your scope of work. Keep in mind that the key to this approach is to perform favors without expecting a quid pro quo. They’re about building cumulative goodwill and trust, not about cashing in. No, you won’t find accurate attribution statistics for this form of business building. And you probably won’t see immediate results the way you’d expect with a pay-per-click (PPC) campaign. But if you’re serious about growing a business that can distinguish itself among a sea of competitors, turn customers into evangelists and net the kinds of clients you want to work with, you’ll align those goals with your day-to-day by treating client referrals as an essential metric of organizational health.
For more thoughts on marketing, view the free video entitled Marketing For Business Owners sessions 1.
Copyright ©John Trenary 1984-2021
2 responses to “Power of Third Party Endorsement”
[…] Customer loyalty has become a necessity for the growth and longevity of a business. However, many businesses today have adopted a transactional rather than a relational experience for their customers. Companies seem to have forgotten that without customers, there is no business. Over the years, I have learned from professional experience what it takes to create a strong foundation of customer loyalty. It’s about checking your perceptions and engaging with customers to develop long-standing relationships. It’s the promise of a personal experience that draws a customer in. It’s the relationship that keeps them coming back, and it’s the experience that motivates them to act as a “third-party” endorsor (see the blog entitled Power of Third Party Endorsement). […]
[…] using social media advertising to spread the business word? This is just another application of third-party endorsement. Give potential new prospects a reason to share their contact information with the […]