Pan for referral gold: everything you need to know about the basics of acquiring more customers through a customer referral and word-of-mouth program: including how to build a referral culture, how to instill a referral mindset, how to proactively seek referrals, and how to enhance four bank's capacity for being referable.

• Author: Gates, Bill
• Position: Column

THERE IS A WAY FOR YOUR BANK TO ACQUIRE MORE, HIGH-LEVEL CUSTOMERS at virtually no cost to the bank. That's right. You can reduce your new customer acquisition costs to just about "zero," if you and your associates know how to tap into a gold mine of referrals from your existing customers.

I know that everyone in your bank works very hard to create a high level of customer satisfaction. I bet your customer satisfaction scores reflect that hard work and dedication to a quality customer experience. So now what? Customer loyalty is very important. But that's not the pinnacle. The next level is for you to leverage that customer satisfaction into new customers--through referrals and word of mouth.

If you have not made customer referrals and word of mouth a significant part of your new business acquisition activities, then you are, indeed, sitting on an untapped gold mine. .

I'm not saying that other marketing strategies don't work. Of course they do. But what does it cost to acquire a new customer through advertising, direct mail campaigns, and special promotions? On the other hand, what does it cost to acquire a new customer through referrals and word of mouth? Well ... virtually nothing.

So ... if you have not made customer referrals and word of mouth a significant part of your new customer acquisition program, then you are missing an opportunity to acquire new and better customers at virtually no cost to the bank--or at least quite a bit less than traditional marketing methods.

Chevy Chase Bank (just before being acquired by Capital One) ran two customer-referral programs. The first program yielded approximately 2,500 new customers through referral from their existing customers. It was a simple program. Essentially the existing customer was rewarded with a $25 gift card when they referred a new customer. After a presentation to their branch managers and a bit of consulting, the bank added additional strategies such as value discussions, promoting referrals, and asking for introductions.

The bank's second campaign yielded over 5,300 new custom ers over 100 percent increase in results. You see, a little can go a long way when it comes to stimulating customer referrals.

Starting with an effective referral program, a bank can create a "culture of referrals" that can be sustained over a long period of time. The net result is more new business to the bank. deposits, loans, and all the other products and services offered.

Below, I will outline what...