Customer Referrals

What Is A Customer Referral

A customer referral is when a customer recommends your business to another business or consumer who is a potential customer.

Nothing complicated about this concept… or at least not on the surface.

Here’s an example.

“If you want a good accountant, then I recommend you speak to John Cooper of XYZ Accountants. He’s saved me about £8,000 in tax in the last two years and he can probably do the same for you.”

It’s a clear recommendation and it gives you a reason to act if you’re looking for an accountant or if you feel you current accountant doesn’t do enough to save you tax.

So why don’t you get more referrals and what can you do about it?

To find the answers to why you don’t get more referrals, we need go through the referral process to give you a deeper understanding of what’s going on underneath the surface.

Why Customer Referrals Are Important

There is tremendous impact on all three parties that comes from making a credible referral like the example of the accountants above.

The Benefits Of Referrals For The Person Receiving The Referral

For the person who receives the referral, the benefit is simple – a trusted recommendation for a solution to a problem.

He or she wants to hear about a credible offer, made with integrity which can save or make them money (or enhance their lives in some other way).

The huge advantage customer referrals have over network referrals is that the person who is making the referral has put his or her money, time and experience behind the recommendation.

Network referrals have a credibility problem.

Here’s an example.

“Try Fiona the website designer in my network group. She’s really nice and I’ve heard some great things about her. I suggest you give her a call on xxxxxx.”

It sounds OK on the surface but underneath it’s wishy-washy.

There’s the hidden subtext…

“I use a web designer called George myself but he’s not much good – or I’d be recommending him – but I can’t see enough advantages in working with Fiona to be bothered to switch.”

If someone really believes in the referral recommendation they’d either be a customer or a past customer (who has outgrown or no longer needed the services provided) or be very closely connected to a customer.

Here’s an example of a referral from a past customer.

“Because you’re a start-up business I recommend you talk to David. He was my accountant for five years before my business outgrew his practice and needed specialist international tax advice. He really helped me to achieve my success with his down-to-earth and practical approach to finance and tax. If I had my time again,I’d certainly go back to David”

No credibility problem there. The reason why he’s no longer a client is explained.

Why are recommendations so useful and valuable?

Because the person receiving a customer referral is benefiting from the experience of the customer and their assessment that they’ve received good value for money and customer service.

Referrals take some of the risk out of buying and can be a huge time saver. It makes the buying decision easier.

To stay with the accountants example:

  • Can you tell a good accountant from a bad one at the first free meeting?
  • Do you know the questions you should be asking?
  • Do you even want to “interview” five or ten different accountancy firms and keep answering the same questions time after time?

I didn’t think so.

It’s much better to get a referral from someone you trust who has already experienced the service before and do what they recommend.

What matters when receiving a referral is:

  • The credibility of the person giving the referral;
  • Their credibility in this situation. Getting technology advice from your technically challenged best friend won’t carry the same weight as a recommendation from their “techie nerd” 19 year old son; and
  • The strength of the recommendation.

The Benefits of Referrals To The Business Being Referred

The benefits to the business getting a referral are obvious.

A new prospective customer who is referred is much more likely to buy than a normal cold lead and little marketing effort has been needed to get the referral.

What’s not to love about getting referrals to new customers from existing customers?

More revenue, little cost – hello big profits!

Since referrals are so good, you need to be doing what you can to make sure you get at least your fair share and hopefully many more.

The Benefits To The Person Giving The Referral

The person giving the referral is the one stuck in the middle – the vital cog who makes it all happen.

It’s a giving role and comes with a feel-good reward.

He or she helps the person receiving the referral and also helps the business being referred.

A good referral strengthens the relationship with both parties and it can lead to reciprocation of favours.

No written contracts or obligations of course.

But if you receive referrals from another business, wouldn’t you start referring them if you have confidence in what they do?

And if you received some great recommendations from someone more experienced than you, wouldn’t you want to give something back?

You may also receive a more tangible reward for making the recommendation.

Affiliate commissions are the normal way of business in Internet marketing and some kind of commission/fee share is common in the professions.

There is often the opportunity of a “You help me and I’ll share my profit with you” type of deal if the potential recommendation volumes are high.

If Referrals Are So Good Why Don’t More Happen?

This is the cycle you must break if you are going to get more referrals.

First, people don’t see how everybody wants and gains from a good customer referral.

It’s silly but people can be worried that making a recommendation may be seen as a bit cheeky or an unwanted intrusion or interference.

It goes back to the fear of sales and marketing and being seen as pushy. If you’re reluctant to put yourself forward – knowing you’ll make every effort to do a good job – you may be reluctant suggesting anyone else.

It can also be traced back to being sensitive to another person’s problems.

Imagine you meet a woman you worked with three years ago.  She’s got a pushchair with two children… and at your best guess, she’s put on about 40 pounds since you last saw her.

You wouldn’t rush in with “I know a great gym and slimming club which can help you shed those unwanted after-pregnancy pounds” would you?

And if she’s sensitive about her weight, and especially because you haven’t seen each other for so long, so she probably won’t make any comment about her own weight and ask for help.

But she may say something about how great you look and that could be your chance. Especially if you’ve used the service to shed weight after having a baby so you were in the same position.

“Thanks. I’m now the same dress size I was before I was pregnant and I feel great. I found this super gym and slimming club called Giorgio’s with a special program for Mums who want to get back in shape.”

If she’s interested she might ask for more details or make a mental note to check it out when she feels ready.

Second, people don’t think of making referrals in many situations unless prompted.

Imagine a business meeting at 4:30 which goes on until 7:00 pm. You apologise for keeping the sales person so long and wish them a safe journey home. They say they’re stopping at a hotel a couple of miles away because they are in the region for the next couple of days as well.

Do you start recommending your favourite local restaurants to this stranger in town?

Some people do… many don’t recognise the problem they can solve unless asked a direct question…

“Can you recommend a good restaurant nearby?”

Third, making a recommendation is putting your reputation on the line. You are taking a risk and you may have a few concerns about how the person will be treated.

We all like to feel we are special and that may mean we think we get special treatment which others don’t get.

Whether a business has this problem  partly depends on what you see the business doing for others and if you perceive much of a difference with what you get. Yes, there is an irony here. The more special you make one customer feel, the more difficult they may find it to refer you to others – the bar has to be consistently high.

Fourth, you don’t know what to say. It’s tough enough marketing your own business without trying to find the right words to say to promote another business.

Fifth, you may not appreciate what a great job some of your suppliers do for you. The IT guy who stayed up all night fixing your PC when it was infected with a nasty virus didn’t tell you about his efforts and you assumed – because he’s an expert – it took about 30 minutes to fix.

Sixth, you may feel unsure about what kind of customers are ideal fits for your supplier. You won’t send your aunt with a few thousand in savings to invest to speak with your local financial planner who brags about the million dollar deals he’s involved in.

Three Types of Referrals

I think in terms of three types of referrals:

  1. The “when asked” referral
  2. The “great offer” referral
  3. The habitual referral

1 – The “when asked” referral.

Someone you know asks you a question looking for a particular solution.

“I’m starting a new business. Do you know a good accountant and lawyer in the area?”

Very easy to answer if you have a lawyer and accountant and you’re happy with the service and value you receive.

Or you may hear a less direct question.

“My business isn’t doing as well as I want and I need to find ways to get more profit. Any ideas?”

This time you’ve got some more thinking to do.

What’s appropriate?

Do you start giving advice… “If you need more profit then you need to cut costs while trying to sell more. I can tell you what we do if you want?”

It’s a helpful answer but not a recommendation.

Or do you say “I recommend you become a member of www.YourProfitClub.co.uk. It’s a membership website packed with tips to help you to double your profit in 12 months.”

That’s a recommendation but it’s going to cost some money to join.

Or do you do both – belt and braces?

Now think about your customers and how they might be asked for help on problems you can solve.

2 – The “great offer” referral.

A great offer referral involves being more proactive to help people based on a particular time limited or quantity limited offer.

Three examples.

Take the salesman staying at the local hotel. It’s Tuesday night and you say “If you’re looking for somewhere to eat tonight and like Cantonese food, I recommend Li Yi’s. They have an “everything you can eat for £10″ offer with a free drink. You have about 40 different dishes to choose from on a help-yourself-basis and the food is excellent. It’s only available from Monday to Wednesday each week.”

Or your accountant invites you to a tax planning seminar to focus on the new tax regulations which will hit small businesses hard unless they take action in the next 30 days. He offers you the opportunity to invite up to five friends, customers or suppliers who also need to hear what’s said. Their accountants may or may not be running similar events but if they don’t protect their businesses, they will lose out and you have the opportunity to help.

Or I announce that the fees for new members of Your Profit Club are going up by £10 a month on the 31st. You’re delighted with what you get and you’ve been meaning to recommend it to other small business owners you know.

The crux of all these is that you have a limited time to take action – and that urgency can cause you to do something to help those you care about.

3 – The habitual customer referral.

This is a recommendation that you always make.

If someone new moves in to a house near you, perhaps you are friendly, go around, introduce yourself and recommend your Doctor and Dentist.

You may be getting a great service and think really highly of them.

Some times this type of referral happens after a particularly bad experience with another local health practitioner. It’s a kind of positive and negative referral in one. “Go here but not there.”

Or if you’re an accountant meeting a new client who is starting a new business and you’re collecting background information, you may ask about their lawyer and financial adviser. If you find out they don’t have one or both, you make a recommendation to someone you trust because it makes your work easier as well as helping your new client.

If you are a website designer and you want your clients to have a successful website, you may have a habit of recommending a copywriter or website traffic expert (search engine optimisation and/or pay per click).

Or if you are an information marketer, you probably have referrals through affiliate links in your auto-responder series. Anyone who signs up to your email list will receive the recommendation.

In all these cases, the referral is habit or contained within your systems and processes.

Three Types Of People You Make Referrals To

Giving referrals feels good if you are confident about what the person will get but let’s be honest, there are some people you care more about than others.

There are three types of people you refer to:

  1. Your family and friends
  2. Those you have a self interest in helping
  3. Others – casual acquaintances

1 – Your Family & Friends -People You Genuinely Care About.

You want these people to do well and you don’t want them to make expensive mistakes.

You want to protect them.

Because it’s a small group of people, there may not be enough opportunities to say it is habitual but your referrals will be automatic.

You’ll be thinking about what they need and the better the service you receive from your relevant suppliers, the more names you’ll add to a recommendations list.

If a referral doesn’t work out, you may feel a little guilty but you know you acted with their best interests at heart.

2 – Those People You Have  A Self Interest In Helping.

Here you are helping others but also helping yourself.

If you have a business, then you have a self interest in helping your customers. As their business grows and prospers and you have a strong relationship, they will buy more. There is money to be made in helping your customers to succeed.

If you are an employee, then you have a self interest in helping your boss. The better your relationship, the more chance you have to get the pay rise, the promotion, the interesting work or a little flexibility around the rules when you need it.

It could be your in-laws. You may not like them personally but it makes things better for your husband or wife if they have an easier and better life.

With each of these examples there are brownie points to win from a good referral to a reliable person or business that fixes a problem.

But the risks also go up. If it doesn’t work, there may be consequences so you’ll probably play safe.

  • A strong referral for those you have real confidence in.
  • A qualified referral for those you think can probably help.
  • No referrals for anyone you have doubts about.

What do I mean by a qualified referral?

A weak recommendation like this one:

“My accountant seems to know what he’s talking about. I haven’t had any problems, his fees are reasonable and I haven’t heard anything bad from anyone else. Why don’t you check him out but I suggest you take a look at a couple of others as well.”

This weak referral is better than nothing but it leaves you everything to do in your lead conversion activities.

3 – The Others – Casual Acquaintances

These are people you come into contact with but you don’t have a strong interest in the relationship.

This means you don’t have a strong incentive to help but you will if you can and it’s easy.

If you’re asked for a recommendation, you’ll answer but you won’t make much effort to help these people (unless there is something in it for you from the person and business being referred).

3 Types Of Businesses You May Refer

There are three types of business you may refer:

  1. Businesses you care about.
  2. Businesses that reward you for referrals.
  3. Other businesses – the rest.

1 – Businesses You Care About

These may be businesses owned, managed or worked in by people you care about or it may be a business that does such an outstanding job, you are happy to go out of your way to help them.

Unless you have the personal connection, the key comes down to outstanding value for money, great customer service and an amazing experience.

These are the moments of magic covered in Pillar 6.

2 – Businesses That Reward You For Making Referrals

You can be rewarded for referrals in a number of different ways:

  • By cash – you receive a percentage of any sales or commissions (or you may get a discount on their fees you have to pay.)
  • By referrals – you give referrals to them and they give referrals to you.
  • By appreciation and gifts – you give a referral and you receive proper recognition and thanks from them including perhaps small occasional gifts. You don’t do it for the gifts but it makes you feel good that you are helping them.

3 – Other Businesses You May Refer – Everyone Else You Know Who Doesn’t Do A Bad Job

You’re not going to be in a hurry to refer other businesses unless you are asked a specific question.

You don’t have the personal connection, you’re not amazed and delighted with what they do and you don’t get any kind of reward for giving referrals.

Why should you give referrals unless it helps you with your relationship with the person you give the referral to?

Even then it’s likely to be a weak recommendation because you’re unsure about what’s on offer or the customer experience.

To Get More Referrals You Need To Give More Referrals And Ask For More Referrals

Referrals are a mindset issue.

You need the right mindset to ask for referrals from others and to give referrals to others.

You need to see the positive aspects of referrals and you need to be looking for referral opportunities. This is why breakfast networking can work if you find the right group.

The best way to develop the right referral mindset is to start trying to give more referrals and to ask for recommendations when you need help.

You are completely in control of this.

Someone needs to get the referral engine started.

A referral engine is a good way to think about it since referrals create more referrals.

If you are introduced to a supplier through a referral, and you’re happy then you’re more likely to refer the business to someone else.

If you ask someone for a referral, they are more likely to come back and ask for a referral from you.

If you refer a business (and they get to hear about it), they are more likely to want to get to know you better.

You will learn so much about getting more referrals by looking at how you can give referrals. You’ll see the dilemmas, doubts and problems that stop potential referral opportunities dead in their tracks.

Then you can make sure those issues are not stopping you from getting more referrals.

Go back through the different types of referrals – when asked, great offers and habitual referrals.

Think about the referrals you’ve given in the last six to twelve months. Who were the customers and suppliers and why did you make the referrals?

Do you normally volunteer referrals or do you need to be press-ganged?

Then think about the next six to twelve months.

Make a list of the people you’d like to help by making proactive referrals, split between your family and close friends (the people you care about) and the people who you have an interest in helping because it’s good for you.

Take each in turn and think about them. What help do they need? What would they appreciate? Is anything causing you to hold back from making recommendations?

Now think about the list of businesses you’d like to help by making proactive referrals. Again split your list between the businesses you care about (because you care for the owners or because they give a great customer experience) and the businesses who reward you in some way.

Take each in turn and think who you can refer them to or in what situations you can make a referral.

Again is anything causing you to hold back? Not sure what to say? Who they really want to serve?

The more you understand what bungs up the referral engine and stops it working, the more you can stop those things happening in your business.

Paddi Lund: The Referral Dentist

Probably the most famous referral story is that of Paddi Lund, a dentist from Brisbane, Australia.

Paddi Lund ran a traditional dental practice and hated his work.

He decided to make a change and he fired half his patients, worked half the time and doubled his profits by building a business based purely on referrals and based on a special customer experience.

He took his patient list and graded them A, B and C based on how much he liked treating them. The C patients turned up late, bitched about his fees and complained. So he fired them by writing a letter telling them to find another dentist.

He then locked his front door and put up a sign.

If you’re a client ring the bell, if you’re not a client then there are other dentists in the area.

From then on,the only way to become a client was through a referral from another patient. He went one step further and made giving referrals a condition of being a client. Anyone who didn’t make referrals lost the opportunity to be a patient.

The logic is simple.

People tend to be like their friends.

Rich people know other rich people.

Nice people know other nice people.

Paddi Lund totally transformed the experience of going to the dentist.

Out went the receptionist’s desk and in came a Cappuccino machine, freshly baked dental buns for clients and more than 30 varieties of tea served in fine bone china.

It’s a remarkable story but it shows what can happen if you start thinking differently.

A Quick Recap On Referrals

Most things I’ve read about getting more referrals focus on the tactics to get more referrals without really trying to understand what the referrals are all about.

Referrals are good therefore get you should take action to get more.

But the tactics fail if you don’t understand the referral process and why people don’t make referrals.

The foundation of building a business on referrals is that they are good for everybody – a win-win-win if you like – based on delivering exactly what the marketing promises.

But accept that people are not equal.

You’ll be much more willing to helping some than others and so will your customers.

Show Me The Money

The extra profit from referrals comes from:

  1. The annual and lifetime value of an extra customer
  2. The difference in marketing costs between non-referred prospective new customers and referrals
  3. The increased conversion percentage of leads from referrals (who are pre-sold on you based on some one else’s recommendation) and the usual leads which keeps conversion costs down.
  4. The increased loyalty of the business giving a referral – it creates a type of lock-in or reconfirmation of the benefits of doing business with you.
  5. The referrals from the referrals.

This can get complicated so let’s just focus on the first – the extra customers and the stream of profits from those extra customers.

Hopefully you are tracking the number of referrals you get and the number you convert into customers.

Unless something indicates otherwise, assume that referred customers are average – they’ll buy an average amount from you at an average number of times per year.

You should know those numbers from Pillar 1 so you can calculate the extra contribution that comes from extra referral customers.

Play with the numbers so you can get a feel for the potential extra money – or hidden profit – you get when you receive more referrals.

Try it with speculative numbers – 10 more referrals, 25 referrals etc – but also look at it from your customer numbers.

If you have 300 customers and you only get 30 referrals a year, you’ve got a referral rate of 10% (30/300). If you looked in detail, you may find a few customers are responsible for many of thosee referrals.

What if you could increase your referral rate to 20% or 25%? What would that do to your profit?

Or what if you had a target to get every customer to give you at least one referral? You can make that happen if you follow Paddi Lund’s example and made giving you referrals a condition of being a customer?

I want you to get excited about the hidden profit opportunities from getting more referrals.

Set Your Goal

Decide what you want to aim for in terms of:

  • Number of referrals received
  • Number of customers who come from referrals
  • Number of customers who give referrals

Start measuring.

The more you can see and feel that this money is rightfully yours, the more you will take action.

What Is Working In Your Referral Systems

If you already get some referrals in your business, then something is working.

Identify what you do at the moment so you can start to prepare your Referrals Stop Start More Less Grid.

Look at who is giving you referrals and especially referrals that convert… and who isn’t referring but should be.

Thank the people who do, ask them how they spot the opportunities. Never be frightened to learn from someone else and especially if there’s money in it for you.

Talk to the people who you think should be giving you referrals.  Find out why they don’t refer but do it gently and softly.

Prepare the ground and say you’d much prefer to hear the truth, even if it’s not nice to hear because you have a chance to put it right.

here’s an example.

“Jenny, can I ask you a question please? We receive plenty of referrals from our happy customers. You’re one of our biggest and best customers and our new leads records suggest that no one has named you as their referral source. Is there a problem we need to fix?”

There may be a small little niggle of service that has created a doubt.

For example, your favourite restaurant may be great when the owner is there but is a shambles on his one night a week off.

Or perhaps the person thinks you’re good but expensive. Whilst she’s prepared to pay the extra, she doesn’t think her friends will be so keen.

Or perhaps they don’t know what to say because you don’t have an offer or they don’t understand it.

Or they hadn’t realised you’d like some referrals.

the sooner you find out why your best customers don’t give you referrals, the sooner you can fix whatever is holding them back.

How To Get More Customer Referrals

To get more referrals, you will need to build referral systems:

  1. Passive referrals – you encourage customers and clients to give you referrals if they are asked or when the opportunity arises
  2. Asking for referrals – you ask your customers and clients for people who need what you sell periodically.
  3. Active referral systems – you build asking for referrals into your systems and encourage clients to build referrals to you into their systems.
  4. Targeted referrals involves getting introductions to the people you want to meet.

You Earn Referrals From Top Notch Customer Treatment

Before going to your customers to ask for more referrals let’s make sure your own house is in order.

The opportunity for referrals comes from excellent value for money, customer service and experience of the outcomes from your product or service.

If many of your customers aren’t receiving this excellence, you won’t get many referrals. It’s too risky for them and it may even be too risky for you.

Remind yourself of the Ultimate Question

“How likely is it that you would recommend the company to a friend or colleague?”

Only scores of 9 and 10 are likely to be promoters of your business according to the creator.

If most customers are giving you top marks and the remainder are in the 6 to 8 range (with the odd dissenting voice – things do go wrong) then you can implement a referral program with confidence.

If only a few customers are delighted and the majority are OK, promoting customer referrals can be dangerous.

One person may recommend you to three others and if all three come back with stories of disappointment, you may lose your client who is forced to re-examine what he or she is getting compared to the  expectations of others.

Fix your customer service problems first.

Maximising Referrals Conversion

How easy do you make it to refer your business and how do you treat the person referred and the person giving the referral?

The “great time limited offer” referral is easy to give and it’s easy to explain why you’re making the recommendation now.

In my examples above these were:

  • the Chinese restaurant eat as much as you want on a Tuesday for £10 with a free drink,
  • the saving tax seminar needing urgent action before you become victim to new tax rules aimed at small businesses,
  • joining www.yourprofitclub.co.uk before the price increase.

There’s a little story to tell and a deadline.

Other ideas to make giving referrals easy include:

  • Discount coupons (Save 20% if you buy this month) and
  • New customer competitions. (My accountant is offering a luxury weekend in Paris for two for one lucky client who joins this quarter, it could be you).

Second, how do you treat referred prospective customers?

Do you do everything you can to make sure that you deliver on the promises made by the referrer?

Do you have a new customer system so the person feels they are having special treatment and in particular being listened to and understood before you sell your solutions?

I use the Business Assessment for my personal coaching and offer a free 30 minute consultation which involves about an hour of personal preparation. Where a recommendation has come from someone else, I put even more time into the preparation and the call.

Why? Because I owe it to both the potential client and the person who has been kind enough to give me the referral. Disappointing one person is unfortunate, letting down two people needs to be avoided if at all possible.

Third, how do you deal with the person who gives you the referral?

You should contact them to say “Thank You”. You might even find out some useful information which will help you to make the sale.

You should also keep the referrer informed about how things are going because you never know when their help could tip the balance and win you the business.

Don’t break confidences but if you’ve spoken to a referral on the telephone and agreed to meet up next week, tell your referrer. It may lead to more favourable communications about you, before or after the meeting.

Even if your prospective customer has some doubts, your referrer may be able to squash them much more convincingly than you.

Sometimes the referral doesn’t fit with what you want and you don’t want to pursue it.

You still owe the person making the referral thanks. Take the opportunity to explain how much you appreciate them thinking about you but explain why it wasn’t right and what you are looking for.

Dan Kennedy, the direct marketing expert tells a story of referring business worth hundred of thousands of dollars to a lawyer until one day he woke up to the fact that he’d never received anything back. No reciprocal referrals, no gifts or special treats and not even a thank you.

He stopped referring and the lawyer never did mention it.

Perhaps he wasn’t keeping statistics on the source of his leads. It was an expensive mistake.

Your Passive Referral System

This is where you encourage people to give you referrals when the opportunity arises because they are delighted with your service.

It starts with an education process.

Make sure every customer who could be a referral source (i.e. every customer) knows that you love to get referrals and in fact it is your preferred way to grow your business.

Explain how it is in the interests of the person receiving the referral. Most business sectors have their rogues and charlatans. People who charge high prices for indifferent or even bad service and treatment. A referral to you – a business they know and trust –  protects their family and friends.

Explain how it is in your customer’s interest. Every business needs to spend time looking after its current customers, developing new products and services and marketing to new customers.

The first two are of direct benefit to your customers, the third a necessary activity which draws time, energy and money away from serving them.

Have your offer clearly defined to turn a vague service into a specific, tangible offer.

Going back to the accountants example . (I use accountants a lot in my examples because it’s one you can understand as a likely buyer.)

Instead of looking for general recommendations like “my accountant Graham is great” why not have the offer of the “New Business Accounts Start-Up Service” ?

The New Business Accounts Start-Up Service looks after everything needed to get your business registered with the tax and legal authorities and your bookkeeping and payroll systems installed and customised on your PC. It also gives you a three hour training induction on how to use your software and a helpline for the next twelve months.

It’s targeted to the needs of a new business looking for an accountant who is much more interested in getting out and meeting customers than trying to figure out debits and credits.

You may even want to give your customers brochures to give to potential customers. I’m not a huge fan of brochures and especially since the Internet but it may be applicable in your business.

You should have a special one page guide on how to make referrals to your business – what I call an Easy Referral Sheet.

The idea is to make your business as easy to refer to others as possible.

Your Easy Referral Sheet will include:

  • The type of prospect you best suit (and maybe even who wouldn’t be right for you),
  • The common problems you fix and possible symptoms to look out for.
  • What to say about your business and any offer
  • What referrals should do – visit a web-page, send an email, telephone, visit?
  • How prospective customers will be treated including anything special you do for referrals.
  • How you will treat your referrer – although it’s nice to leave something to come as a nice surprise.

When you get passive referrals, make sure you go back and thank the person.

Recognition and sincere thanks can be enough. We all repeat behaviour that’s rewarded.

This is another reason why you should ask how a prospective customer found out about your business so recognise you can referral effort when it happens.

Asking For Referrals

Most businesses don’t get referrals because they don’t ask for them.

Why don’t they ask for referrals?

  1. They think referrals should happen automatically – they can but they are not as frequent as we’d all like. I showed you in the introduction, many people don’t think of making referrals or asking for them.
  2. They don’t know how to ask
  3. They are embarrassed about asking or see it as an imposition on the customer relationship.
  4. They are afraid to ask, fearing that it will open up a can of worms for customer service problems. Sounds crazy and it is crazy. It’s much better to find out any customer problems while they are still a customer and you can correct it than afterwards, when they’ve found another supplier and lost trust in you.

When should you ask for referrals?

1 – When the customer is praising your product or service.

This can be so easy and natural.

2 – Periodically.

It depends on what you sell but it may be every three, six or twelve months depending on the buying cycle.

Remember the “life is a moving parade” idea about continuing to market because conditions change in people’s lives.

Everything may be fine but as soon as you have a problem – or think you might have a problem – you become a potential customer.

A chiropractor who saw a client for a check-up and general re-alignment every three months could ask each time “Do you know anyone else with a bad back or neck who could benefit from my help? We have an offer for a half price initial consultation at the moment.”

The friend with a bad back this month could be unconnected with the friend in trouble last time.

How should you ask for referrals?

If your customer is expressing gratitude for what you’ve done for them, you have an easy opening.

Ask “Do you know anybody else who would appreciate the same benefits? I love it when happy clients refer me to people they know.”

That’s a general question to make the point but it’s best to get specific.

A website designer could ask “Do you know anybody who’s unhappy with their current website and has been complaining about it. They may be interested in a new one?”

Because questions are automatically answered in the mind, the brain will scan for “who has been complaining about their website?”

It may or may not come up with a name or two.

A different question “Do you know any start-up businesses who may not have a website yet?” gets a very different search in the brain.

“John’s just started. I’m not sure if he’s got a website yet.”

It’s much more effective than the bland “Do you know anyone who wants a website?” [That would involve going to brain with the search “who wants a new website” and it would find no one.]

Or you can quickly tell a story about how you’ve helped someone solve a particular problem. Then ask if the person knows anyone who needs the same solution.

If you decide to ask for referrals periodically, I recommend making it the end of a short satisfaction survey.

Asking for referrals is  a logical follow up question to a favourable answer on the Ultimate Question.

Shine the light on whether your customers are getting the benefits and the service they expected. If they’re not, the sooner you know, the sooner the problem can be fixed.

If they are happy, then asking for a referral follows a similar pattern to the situation where you’re being praised.

It’s easy to get a few names and especially if you are specific on the type of people/business and the problem.

Sales professionals may be more determined to push for a longer list of referral names, partly because they are more prepared to warm up and court leads.

If you’ve established a good relationship, flatter the person, their knowledge and experience and ask for help. Ask if you could get five introductions to other people they know in the industry who may be interested in what you have.

“My name’s Paul from ABC Printers. One of our customers James Dixon suggested I give you a call based on how we’ve helped him reduce his printing costs by 22%.”

If you have staff – and especially sales and marketing staff – make sure they are involved in the referrals process. Give them training using this module as the basis.

Hold a little workshop and brainstorm ways to get more referrals.

Can The Referrer Help In The Conversion Process?

There are two flows for referrals

From Customer to an eager Potential Buyer to Supplier (where the customer may or may not tell the supplier about the referral).

From Customer to Supplier to Potential Buyer (who may or may not be interested).

In the second situation, the referral isn’t a red hot lead but is better than a cold lead picked from a telephone list.

The more you can get your buyer to do to help you the better.

A testimonial from them is great – instant credibility with a name your referral recognises.

A warm-up phone call is also very useful – this might be to find out if the buyer has the problem you can fix as a priority and to give an endorsement.

“I’ve given your name to Paul from ABC Printers. He’s saved us over £12,000 or about 20% on our printing and I thought you’d want some of that as well.”

The benefit and recommendation is much more believable coming from the customer than the salesperson and it makes the referral much easier to approach or more likely to come to you directly.

Active Referrals Systems

Let’s get active.

OK I know you were having to ask for referrals in the last section but there’s much more you can do to integrate getting referrals into other people’s business systems. [And getting referrals into your business systems.]

Reciprocal Referrals For New Customers & Clients

If your aim is to look after the broader well-being of your customers and extend it to periphery areas, then you can introduce a referral arrangement to your new customer procedure.

An accountant will want ask about other professional advisers –  the lawyer, financial adviser and banker – and can make recommendations if there’s a gap to fill or if the person has a relationship with someone not suitable.

This little network recommends the others when the opportunities arise and it’s all built into the new client system.

But it’s not just professional firms.

A real estate agent can recommend a removals firm, decorators and gardeners.

A local dog breeder can recommend particular dog food, a training school vet and boarding kennels.

The important thing is that there is reciprocation. Agree to recommend each other provided quality and service remains top notch.

Problem / Occasion Based Referrals

This is similar to the new customer/client process but is based around a specific incident in the customer’s life.

A lawyer may decide not to recommend a financial adviser to all new clients but at a will reading could seize the opportunity to pass over a recommendation to the beneficiaries.

A hotel venue talking to a prospective bride and her mother about a wedding reception may recommend a wedding planner.

A plumber repairing a serious water leak may recommend a builder and decorator.

It’s just a case of seeing the wider customer problems and the opportunities it can give you to help.

Again, if you have systemised your business, you can have questions built into your checklists and standard procedures.

The Voucher Referral With Purchase

Imagine you’re in the health and beauty business and own a hair saloon.

You could reach a reciprocal deal to exchange vouchers with similar businesses at the time of purchase.

  • Three weeks free at the slimming club starting next week.
  • A half price manicure for first time customers.
  • A free tanning session before 10:30 am on weekdays.

The idea is to encourage people to try a new service and if they like it, they may continue as regular paying customers.

The Referral Letter / Email Endorsement

Instead of asking your customers to refer you, why not ask if they can send a letter or email to their contacts.

This works best around a specific offer e,g. come to this seminar on tax saving tips for the small professional firm.

You do the work and especially write the letter or email.

Remember knowing what to say if often the biggest hurdle provided you meet their quality standards. So be easy to refer or endorse by writing your own letter or even outsourcing the task to a copywriter.

If there is no profit split, you need to cover the costs involved in mailing. It’s common sense but again, you want to knock down the barriers to getting the endorsement sent out.

Presentation Referrals

If you market through public speaking and presentations, ask for referrals on the assessment form.

Imagine you are an HR consultant with a talk on the new discrimination laws.

“Who do you know who can benefit from hearing this information and having the opportunity to ask questions and clarify how the new discrimination laws affect their personnel policies?

Then leave space for a few names, companies and other contact details. You probably won’t get all the details you want but you have enough to follow up later.

Refer A Friend Scripts

You will see “refer a friend” a lot on the Internet.

You sign up for something and the thank you page asks you to refer the offer to a few friends.

Many ignore it but if you give extra incentives for referring 3 or 5 names and you’ve given free quality information that’s been consumed immediately – a video is better than mp3 or report – it can work well.

Autoresponder Referrals

Referrals can also be built into a series of emails after you’ve asked people to opt-in for more information.

It’s important to stay relevant to the topic of interest and any geographic issues.

Anyone who joins my small business information email list may be anywhere in the world and doesn’t want to hear about my strong referral to my favourite safari camp in Botswana.

Just as you make recommendations this way, so you can be referred by others.

Fee Reduction Referral

I know a number of people who offer reduced fees or credits for successful referrals from customers.

An accountant may say to a start-up business who will be actively networking, “I will give you a £100 credit from your fee for every new client you introduce to me.”

It’s good for the accountant and good for the client.

The Money Back Referral

Sometimes there is no ongoing relationship between customer and business.

A roofing business I know gave its clients a book of 20 vouchers, each worth £50 to both the referrer and the potential customer. If it resulted in a sale, the new customer got £50 knocked off the price and the old customer had £50 cash back.

A student property landlord who faces the problem that his tenants move out each year, can offer a finders fee to a student who introduces the next year’s tenants.

The Condition of Service Referral

Remember Paddi Lund the dentist?

He made it a condition of service that a patient had to give three referrals of equal quality to themselves.

If they didn’t, they weren’t allowed to be a patient.

I make it clear in my coaching engagement letters that I expect to receive referrals. I don’t throw the clients out of the program but it’s down as one of the ways I expect to be rewarded.

Have  A Referrals Competition

If you want to attract a lot of new clients, run a competition based on generating referrals.

Make sure you have an effective way to track the referrers and award an attractive prize to the top referrer or have a sliding scale of prizes for the top 5.

If it’s pretty clear who’s likely to win, have a random prize draw where those outside the top 5 have a chance to win in proportion to the number of referrals they give.

If you watch the strange world of Internet marketing and the make money online gurus, then as well as having structured affiliate programs which create income, there are fancy prizes to encourage effort and repeat email blasts.

I used to think it was silly until I won my first prize.

Targeted Customer Referrals

In Pillar 4 on Generating Leads, I explained that it’s usually much more effective to have multiple contacts with a smaller target group of customers than to make one contact with many more.

If you’re going to go after a narrow list – what Chet Holmes called the Dream 100 – then referrals is another way to gain access to your chosen few.

First, it’s easier to give a referral for a specific request.

You can’t get better than “Can you introduce me to John Jameson, the CEO of Aardvark Industries? Or one of the other senior managers there?”

You either know or don’t.

You’ll either be willing to introduce or you won’t.

Next best specific question is “Can you introduce me to the CEO or Marketing VP of Aardvark Industries, Buffalo Holdings or Cheetah Inc?”

Then working down it would be “Can you introduce me to a partner in any of the big law firms in the city?” The suggestions you get back may or may not fit your definition of big but you’re still asking a targeted referral question.

It used to be hit and miss about trying to find connections to who you want to make contact with. Now thanks to the Internet and social media in particular, you can see who knows who.

You can get some information from Facebook friends and Twitter followers but the lists are often built up in a non-discriminate way. A better site to focus your attention on is LinkedIn.

This is a networking site which links people directly and through a series of connections.

It’s said that everyone in the world is connected to everybody else in six links and LinkedIn works on this idea.

A quick check showed I can get to Sir Richard Branson in five steps and Barack Obama in one and Bill Gates in five.

If I wanted to make contact with Barack Obama, LinkedIn tells me who the four people in my network who are directly connected to him. I can ask any to introduce me.

Contact could be made through LinkedIn but it’s better to make it more personal.

Give your contact a call. Networking is about building relationships and not adding more names to a list.

If you don’t really know your contact, get to know them. If it’s a relationship from your past, get up-to-date with the news.

What you want is for your contact to make the introduction, just like you might be introduced at a party.

If you know more than one contact with your target, you might want to arrange multiple introductions. Remember the marketing idea that repeat messages are needed.

It’s the same thing here backed up with the fact that not everyone we know has equal influence. If a relative stranger recommends you, it may not mean much unless you have a hot button solution to a pressing need.

If one of their best friends recommends you and suggests you get to know each other for mutual gain, it creates more impact.

You can also use the social media sites for research into your key prospects. People used to be very secretive but you’ll be amazed at what people share about themselves on Facebook, LinkedIn, smaller sites like Ecademy and how they flag up what they are currently interested in on Twitter.

What If You Want Referrals From A Tight Market Niche?

Some markets are large and fragmented into small local areas.  Customers can give referrals to suppliers without damaging their competitive position.

It’s different in tightly focused niche markets where there are only a handful of competitors. The last thing you’d want to do is to tip off your competitors that a new process could make them much more profitable. You’d want to keep the advantage all to yourself.

This makes it difficult to get referrals – no matter how good a job you’ve done.

Thanks to some thinking around the subject by my mastermind partner and professional services marketing expert Ian Brodie, I’ve got some tips.

  1. Look for recommendations within the client. If you are working with a big company, you may be able to help different departments e.g. a company providing sales manager training to the Sales Director’s team may also be able to provide a first line supervisors course to the Operations department.
  2. Look for recommendations within the same group. Other subsidiaries are often in related fields and may have similar problems.
  3. Look for recommendations to customers and suppliers. Remember there is a often a vested interest in helping customers to grow and a supplier to reduce costs.
  4. Keep in contact with the key personnel and track their movements. Outside of the owner-managed businesses, turnover of senior managers can be high with people moving every three or four years.

What To Do To Get More Referrals

Let’s quickly recap on what you need to do:

  1. Make more referrals – the more you understand from giving referrals, the easier it will be to get referrals.
  2. Create your Easy Referrals Sheet and distribute it to the people you believe can refer you. Send a blank form and ask them to fill it in and return it so you have their details on file.
  3. Tighten up your customer service and the entire customer experience.
  4. Look for opportunities to ask for referrals – remember it’s at times of peak satisfaction – the customer is probably thanking you.
  5. Decide you are going to ask for referrals on a periodic basis. My advice is to just try it. Pick your ten best regular customers, check that they’re happy, ask the Ultimate Question and then ask about other people they know. Then follow through.
  6. Choose one active referral system and put it into action. Then pick another.
  7. If you are taking the Dream 100 route to your ideal customers, use LinkedIn and the other social media to get know your targets and to get introductions.
  8. Use your funnel vision. Any time you’re asked to give a referral or you see a recommendation from one business to another, make a note of it and look at how you can use it in your business.
  9. Keep tracking your referrals and conversion rates. Apply the logic of the Stop Start More Less process and do more of what works. Stop or change what isn’t working.

Extra Resources To Get More Referrals

Scott Hallman has given me permission to give you 16 Reasons Referral Systems fail as a bonus when you become a silver member of Your Profit Club. Scott charges $97 for this audio recording.

Ian Brodie, my friend, mastermind partner and a sales & marketing expert for professional service firms has his own referrals training – More Referrals More Business (affiliate link). Ian gives you a free referral training video to encourage you to buy his ebook and audio training – ideal if you are an accountant, lawyer, consultant or other professional service provider.

3 Responses to “Customer Referrals”

  1. I’ve been asked why I keep using accountants as an example and whether I really want to focus on marketing advice for accountants.

    First, I don’t always use accountants as an example although I realise I have in the referrals guide and the search engine optimisation guide.

    What I try to do is to give you the two sides of the marketing equation to give you greater insights.

    If you are a potential buyer or you do buy, then the contrast between the good and bad examples should be much clearer.

    Marketing needs to move from the “so what” to “I want that”.

    Because the vast majority of business owners hire an accountant, it makes a good example to work with. As you see more of the contents you’ll see plenty of other examples for businesses like restaurants, cars and airline travel as well as professional services.

    In places I even go into generic commodities like petrol and steel to emphasise a point.

    The Mastermind Forums at http://yourprofitclub.co.uk/forum/
    are the place where we can discuss applying general business improvement techniques to your particular market or to markets that share many of the same characteristics.

    I hope that makes sense.

    You haven’t wondered into an area intended for just accountants.

  2. One of my financial advisers, Hargreaves Lansdown sent me a referral letter

    Headline – Refer a friend to Vantage SIPP and get £25
    The more people you recommend the more cash we shall send you.

    Offer

    “For every person you recommend who starts a SIPP before 31st January 2011 we shall give you £25 as a token of our appreciation. The more friends you recommend the more cash you could receive.

    What’s more if at least three of the people you recommend start a SIPP you will receive a stylish CROSS pen set worth £125 as a bonus gift in addition to the cash.

    What’s in it for your friends? Not only will those you refer have the opportunity to benefit from a pension which gives them far greater control, choice, superior online access and value for money; when they transfer a pension of £10,000 or more they will also receive a CROSS pen set worth £125.”

    The letter also includes reassurance that friends will be under no obligation and if they don’t want to hear from Hargreaves Lansdown, they just need to let them know.

    At the bottom is a “£25 voucher” with space for six names and addresses which is to be returned by 30 July 2010.

  3. Thank you for the good information.

    Happy New Year !

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