This One Question Tells You Everything You Need to Know About Referrals

We all love referrals… they don’t cost anything, and they are much easier to get onboard.  So how would you like to predict how many referrals you’ll get next year?  Knowing this can help you in a couple of ways… first, how much you should be marketing… and secondly, whether you need to work on your ability to generate referrals.

One of the world’s foremost experts on Loyalty, Fred Reicheld, has spent 10 years analyzing the actual referring behavior, of tens of thousands of customers. To determine how many referrals you’ll get next year.

Here’s what he found out.  You have a calling service call your clients and ask just one question:

“On a scale of 1 to 10… 10 being absolutely… and one being no way…
How likely are you to recommend [ABC Financial Services] to
a friend, neighbor or relative?”

The reason for the calling service is so that the clients are comfortable answering with a 3rd party and anonymity.

Break down the answers given into the following groups:

  • Promoter’s—give answers of 9 and 10
  • Satisfied’s—give answers of 7 or 8
  • Detractor’s—give answers of 6 and below

Now, ignore the Satisfied’s… and substract the percentage of Detractors from the percentage of Promoters.  What do you end up with?  The companies with highly loyal clients score higher than 50%.  Companies with poor customer loyalty score in the 5% to 10% range.

Where does your firm stack up?  Guess how accurate companies were at predicting client loyalty?  Over 80% of companies believed they would be in the 50% or higher range… fewer than 10% of companies actually were.

You should only be counting on referrals from the people that answered 9 or 10… And you should be aware that you are in danger of losing anyone that answered 8 or below, because they will leave you when they find something better.

About Mike Kaselnak

Michael Kaselnak is considered one of the top marketing and sales experts in the financial services industry. He has personally mentored over 300 financial advisors in the past 10 years. These financial advisors saw their average production increase by 62%. Many saw increases of over 300 percent. He writes articles that have appeared in many mainstream magazines and has written the popular report 300 Financial Headlines that sell.
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