It is said that if you do what you love, you will never have to work a day in your life. However, if your customers like what you do, you'll be able to tap into the most effective type of marketing available: word-of-mouth referrals.

Because word-of-mouth referrals are difficult to originate, collect, and measure, it's no surprise that most company owners aren't concentrating on increasing their word-of-mouth income sources.

Client recommendations, on the other hand, are a very effective source of leads and prospective income. For years, my partner and I developed a profitable digital firm solely on word-of-mouth referrals.

There are a lot of compelling reasons why you should use recommendations to develop your company, whether you run a shop or a service-based organization.

1. People place a high value on word-of-mouth referrals

According to Nielson, 83 percent of people trust friends and family recommendations, and 92 percent of customers prefer word-of-mouth referrals above all other types of promotion.

Furthermore, according to Survey Monkey, customers are five times more likely to make a large purchase based on a trusted WOM suggestion than on a sponsored ad.

2. They're costless

"Half the money I spend on advertising is wasted; the trouble is I don't know which half," John Wannamaker famously quipped. We've all been in that situation. That's why one of the best things about WOM recommendations is that you won't have to pay for them.

3. They bring in more customers and clients

New customers that arrive via recommendations, in my experience, go through the sales process quicker, have more forgiving discussions, and are more loyal since they were suggested. Your recommended clients will spend twice as much as your non-referred customers on average, making them a very desired source of business in terms of LTV.

4. They disclose the most important value-add levers to your customers

People prefer to preserve their connections more than they defend their knowledge, privileges, or even money, I've observed throughout the years. When a customer is willing to brag about your service and recommend you to someone else, you're doing a fantastic job of servicing them.

And anytime you're suggested, it's a terrific time to think about why your customers like working with you so much. Is it a matter of your turnaround time? How do you collaborate? What is your network of connections that you bring to the engagement?

You may reinvest in those parts of your practice and enhance your service offerings for all of your customers if you can discover the reasons you've been recommended. Improving your service offerings will lead to more recommendations, which will help you develop your company and provide you with additional opportunity to impress and improve.

In the end, that virtuous circle is why you should prioritize customer referrals as a gauge of success. Referrals, unlike conversion rates, year-over-year sales, or any other quantitative KPI, provide a qualitative assessment of what you're doing exceptionally well right now and help you plan what you should do next to compound your success.

4 guaranteed ways to increase business through referrals

You already know that referrals are more successful than advertisements, are completely free, result in more valued customers, and offer you with actionable data that can help you improve your whole business. But how do you go about getting them?

Establish an online referral program and remarket it to your bottom-of-funnel audience through email, SMS, advertisements, website modals, and a top-nav link if you're in direct-to-consumer retail. You may start from scratch or hire a technology partner that specializes in online loyalty programs like Stamped.io, Yotpo, or ReferralCandy to help you.

Earning recommendations from current customers will take time and finesse if you provide a B2B service like digital marketing, but there are a few things you can do to increase your chances of getting more. Check out these four tried-and-true methods for generating more referral business:

1. Adopt a Human-First Approach to Business – Business is fundamentally a humanist endeavor. Transactions are based on trust, yet trust cannot be sustained over time if individuals are treated transactionally.

To be deserving of a reference, you must recognize that your success is inextricably linked to that of your customers. That includes being an open and honest communicator, accepting full responsibility when things go wrong, and, most importantly, building a work climate that encourages team success so you can deliver that "wow" moment when it matters.

Setting The Table, by restaurateur Danny Meyer, provides excellent insight into the business-boosting implications of treating your coworkers as key stakeholders.

2. Provide Extra Service to Your Customers – If you're curious in how CAA came to represent so much of Hollywood's greatest talent, read on. By incorporating "above and beyond" into their daily routine. When they bring on a new customer, their idea is that the client is represented by the whole agency.

CAA also has a history of enhancing their services through out-of-the-box value additions, such as sponsoring causes that are important to its clientele. Working with a client's favorite nonprofit organization isn't an everyday occurrence. It's an activity that gives CAA a sense of being more than just a company.

Adopt a comprehensive, charitable approach to interacting with clients, like CAA has done: When necessary, allow your employees to over-serve them. Bring all of your multidisciplinary skills to bear on client problems. Before they ask, anticipate and satisfy their needs.

You develop the type of gratitude that leads to future word-of-mouth referrals by being a real partner to your customers on all levels.

3. Use an NPS survey to put wins into action – Without prompting, most individuals will not formalize their comments, no matter how good your work is. The NPS measure may give both quantitative and qualitative data to assist you determine if you are effectively servicing your clients and how likely they are to recommend you out.

There are two types of NPS: transactional and relational. Transactional NPS asks your consumers how likely they are to refer your product or service to a peer, whereas relational NPS asks them how pleased they are with your product or service overall.

You may use a transactional NPS in a strategic location, such as your post-purchase page or email flow, if you own an online shop. If you manage a service company with a large number of long-term customers, do a quarterly relational NPS survey to keep track of how well your client relationships are doing.

Because the NPS is a one-question survey, you'll get more responses than you would with a more time-consuming feedback request. Taking actions to raise your NPS score will also help you keep your customers pleased and make them think about your worth. And it'll all come into play the next time they're asked to suggest a company in your field.

4. Don't Solicit, Elicit– It's generally not a good idea to ask for references directly. What's your Net Promoter Score? Yes. Testimonials? Sure, as long as the customer is satisfied. However, asking an existing client to negotiate a new connection on your behalf stinks of desperation, and utilizing your clients as stepping stones to new possibilities can swiftly alienate them.

Even yet, the fact is that most of your customers are strongly connected with others in their businesses who will want the services you provide in the future. And when they have that desire, they will seek advice from a trustworthy buddy. So, how can you ensure that your name is the one that is dropped the next time this happens?

Look for acts of kindness that add significant value to your customers' lives. When someone asks for a referral, these little gestures can help keep your company front of mind. There are many types of generous actions and low-cost favors, but some of my favorites include brokering a good introduction, reaching out with important insights, or providing free beta access to a new business unit or service.

Overserve your customers by proving that you are always brainstorming new ways to provide value to their company outside of your normal area of work.

Remember that the key to this strategy is to do favors without expecting anything in return. It's not about making a quick buck; it's about developing long-term goodwill and trust.

Final thoughts

No, precise attribution numbers for this kind of company development aren't available. And, unlike with a PPC campaign, you're unlikely to see rapid results.

However, if you're serious about growing a company that can stand out in a sea of competitors, convert customers into evangelists, and attract the types of clients you want to work with, you'll align those goals with your day-to-day by treating client referrals as an important metric of organizational health.

Thanks to David Wagoner at Business 2 Community whose reporting provided the original basis for this story.