Referrals and Service Recovery

At Next Generation Marketing, we recently presented a great deal of information about referrals. I wanted to share some additional information and resources about this important topic. It's worth a deeper look.

We all know that people live, socialize and communicate within networks ... and today across social networks such as blogs, forums, e-mail, Twitter, Facebook, etc. People talk about their kids, hobbies, their vacation destinations and their favorite sports teams; naturally people also share their experiences as consumers.

Studies prove this. The Coca-Cola Company conducted a study in the late 1960's and found that a highly satisfied customer is likely to tell four to five people, on average, about a positive experience. On the other hand, a bad experience will also be communicated—to an even greater extent. Coke learned that a dissatisfied customer is likely to spread the bad news to nine or 10 people.

Such information provides substantial motivation to the business owner to seek out and repair customer complaints. In fact, such situations create an opportunity for a company to inspire a loyal, engaged customer. (Remember, you cannot convert a customer to a loyal advocate. You have to inspire them to become advocates.)

When a company successfully recovers from a service snafu (i.e., makes it right for the customer and successfully addresses the situation), it can be a very powerful experience. The Coca-Cola study found that in service recovery situations the consumer is likely to share the news of the resolved problem with nine to 15 people. Today with the prevalence of social networking tools the numbers are likely multiplied. Still, the ratios are likely to remain intact.

As Justin Seibert explained: "You only have two opportunities to make a good first impression. One occurs upon initial contact; the other occurs after you've screwed up (and fixed things)."