How To Gain Referrals
Friday, February 15, 2013 at 10:26AM
Matthew Bywater in Referrals

Building a business should never stop no matter how large the business grows. There are a host of tools which can be utilized for the purpose of “growing a business,” but probably the most important one and also the one with the best return on investment is developing referrals.

A referral is a potential customer who arrives at your business because you have been recommended to them in some way by others. These referrals can result from the simple act of reading testimonials on your website to long conversations with their next door neighbor who raves about your artisan bread. They are not restricted by time, place, or relationships, but are “out there” for you to convert to devoted followers of your business, and can increase the revenues of your business up to 75%. That’s a pretty nice return for a little bit of effort.

Before beginning the search for referrals, look hard at what you are doing right now. Make sure that your current customers are absolutely pleased with you, your product, your service, or whatever you offer, and if they are not, fix the problem immediately. It stands to reason that if your current customers are not pleased, they are not going to be willing to refer anyone else to you. In fact, if you don’t correct problems, expect negative publicity in some form and that will begin to kill your business—the exact opposite of what you are trying to achieve. So, clean up any business issues that you might have before you begin to look for new business.

There are two types of referrals which are available to you: relationship referrals and transactional referrals. These types do not work well in all situations, so you must use what is appropriate for the circumstances. In both types of referrals, trust is the basis. If your customers do not trust you, they will not respond.

A transactional referral is one where your customer receives something from you because they refer someone to you. For example, you could give your customer a discount coupon for one of your products, or even better, give them a coupon for themselves and one for a friend. There is a very subtle psychological push here: most people will feel guilty for withholding a gift from their friend, especially since they have been “paid” to do so; this produces additional motivation in them to get their friend to come to you. This type of referral is especially popular right now with TV cable companies: refer a friend who starts our service and receive a $50 discount on your service. There is a fine line here between successful referral and failure, for if you pay money to a customer for a referral, you have asked them to put their credibility on the line so that you can benefit. There are many people who won’t do this.

A relationship referral is when a customer refers a friend or family member to you just because they really like the service or product you provide. You often see this type of referral for physicians. Most people will ask their neighbors which physician their neighbor prefers, for people are more willing to trust their neighbor’s experience than other referral sources. If the neighbor has had a good experience, they will tell their friend, and that friend will probably use their referral. People prefer to do business with those they know something about.

The question then arises: how do you find or create these referrals? The transactional referral is a little easier to execute, but has to be part of an overall marketing scheme. There are several ways to create the transactional referral. One method would be to plan your referral campaign, then contact your current customers with a special offer that if they refer someone to you, then they will receive something in return. You can even advertise this offer to the public in general. Another type of transactional referral is to “ask” for the referral at the time you do business with the customer:
the plumber comes to your home to repair a faucet and upon leaving, gives you a flyer with a special offer for anyone you refer plus something in return for you. The plumber, very subtly, has asked for a referral from you. That flyer sits on your counter and is a constant reminder of his service and special offer. Not everyone will act upon this, but a good percentage of customers will, remembering the good service he gave them.

In the biblical terms, the phrase “ask and you shall receive” is the key to relationship referrals. The trick here is to ask your current customer to refer, but you have to ask in such a way as to have them want to send people to you. Probably one of the hardest things you will do during your business day is to ask for a referral; everyone hates to do it, and because of that, we all tend to avoid it. Through trial and error, experts have discovered these are the best ways to gain referrals:

1. Start looking hard at all the relationships in your life. All of your customers, business contacts, family, and friends represent multiple other contacts, creating layer after layer of relationships all around you. Thanks to face-to-face contacts as well as social media, you can develop these connections into possible referral sources. As part of this relationship-building, don’t be afraid to bring different associates together if you think they can benefit from your referral. They both will appreciate your gesture and remember you.

In reality, most of the time referring to you has not even crossed the minds of your customers and business associates. That is when you need to directly ask these people for their referral. Timing can be critical when asking for a referral, so don’t ask in any old way. If your customer is very impressed with your customer service and tells you, then say something like “I am so pleased that you liked our service. Thank you. If you happen to know of anyone else who would appreciate our customer service, please send them to us. We would be honored by your referral.” You’ve asked, but you are not in their face. You have told them that it would be a privilege to receive their referral (gentle flattery) as well as recognizing the complement to your business (thanked them). All-in-all, this was a non-confrontational conversation that will very possibly gain you a referral.

When asking someone directly for a referral, think about your words before you ask. Don’t ever ask a question where your customer can say no: “Don’t you want to refer to us?” “NO.” You have put them on the spot, and quite possibly, they don’t want to refer to you, but don’t want to tell you directly. Even if they would want to refer, this type of question has understated negative/confrontational vibes and will cause people to step back. Keep every request positive and upbeat.

2. Once you receive a referral, the first thing you should do is to thank the source. That simple act can actually encourage more referrals, for they will know that you value their referrals.

Then, immediately follow up on the referral in a professional manner. Don’t ever take a referral for granted — this is new business for you.

3. Refer others freely. Did you find a good restaurant lately? Did you tell anyone about it? Tweet? Not only are you telling family, friends, and the world that Joe’s Hamburgers is a great place to eat, you have also put your name and opinion out into the public. “Trust me; I know what I am talking about.” Thus, you have become a good source of info about the community; there is that trust factor again.

4. Reward good behaviour (from a purely biased point of a view). As mentioned  incentives to gain transactional referrals work, with relationship referrals make sure you reward the referrer. I find this is best done without much fanfare and should be done commensurate with the value of the order you gained. Send the referrer a gift with a handwritten thank you card, make it personal and heartfelt.

There are some habits that you might wish to adopt personally to increase the number of referrals you receive. One young man, in his first sales job, frequently looked at his watch. His wise old boss taught him that each time the young man looked at his watch, he should ask someone for a referral. As time went on, this young man became very adept at asking for referrals frequently during the day and increased his sales numbers dramatically. Drawing from this experience, you might want to set a daily or weekly goal for yourself in asking for referrals: “Today, I am going to ask three people for referrals.” As time goes on, this goal will become easier for you if you work at it.

Another man, when closing a deal with a pleased customer, would hand them his business card and say, “I have really enjoyed working with you on this project. If you know of someone else who needs help in this area, I would be happy to work with them.” Over time, these simple sentences built a real estate empire for him. A business woman, in emulating this situation, actually gives out two to three business cards, telling the customer “One for you and the rest for your referrals.” She claims this is more successful than giving out just one card.

Gaining referrals is a proactive undertaking. You can be the greatest shoemaker, but you will have to act in order to make sure that your delighted customers tell other customers. You “need to stir the pot,” or in other words, do something to get more business into your shop. Asking your customers to recommend you should be your very first step, but after that, get involved with the people and businesses of your community, making those special connections, referring others, and because of that, getting yourself noticed and referred.

Article originally appeared on Matthew Bywater | Marketing Strategist & Media Commentator (http://matthewbywater.com/).
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