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Referrals and Your Referral System

The job of your Referral System is to maximize the number of highly qualified new prospects entered into your sales system by your customers and other referral sources. Take the time to design and implement this system before you develop your next big advertising campaign. Your long-term results will be dramatically enhanced as a result. In fact, once they reach a certain point, many businesses are able to thrive on referral business alone.

As you know, unless your business is brand new, referrals are your best source of new customers. If you are not currently taking full advantage of this important method of attracting new customers, you are missing out on some of your most valuable leads.

Sources of Referrals

Your best source of new customers is your existing customers. Not only do they understand the value of your products and services better than anyone, they more than likely know others with similar needs as well.

Your customers are not your only referral sources however. There are referrals all around you if you take the time to look. Handled properly, these referral sources will provide you with a steady stream of high quality, pre-qualified leads, so treat them with the utmost care and respect. They are astoundingly valuable assets.

Following is a list of some of the best places to find referrals. The list is not exhaustive, but it should give you a good start.

  1. Customers — Of course your primary source of prospects will likely be your existing, happy customers. They already have an understanding and an appreciation of the value you offer, so they will usually be glad to refer your products or services to others they care about. If you’ve taken care of them well enough in the past, they will probably be pleased to help you out.

As a source, your customers will tend to offer the most qualified leads. Since “like attracts like,” they probably know others who have similar needs and resources. Not only could you pick up a new customer, you could acquire a new source of referrals as well.

Joe Girard, “The World’s Greatest Salesman,” according to the Guinness Book of World Records, gives each of his customers his card with the customer’s name written on the back. Anytime a new customer comes in with an old customer’s name on his card, the old customer gets $25 as a thank you. In one year, he mailed out $14,000 in cheques.

  1. Prospects — Not every prospect will become a customer, but if they fit within your Target Market, they may be another source of leads. If you don’t make a sale, but you strike up a good relationship, why not ask for a referral? It sure can’t hurt and you never know.

  2. Employees — An often-overlooked source of new business is your employees. Depending on your business, they may not be as rich a referral source as your customers, but they are highly motivated to help your company succeed. Someone in your company may personally know a valuable prospect, but since they are not in sales, has never brought them up. You may even offer some type of incentive to employees who bring in referrals who become customers.

  3. Friends and family — This is another often-overlooked source of new business. Ask around and make it known that you are always on the lookout for good referrals. You may not feel comfortable mixing work with pleasure, but the people who care about you will often be more willing to help than you might imagine.

  4. Others in your industry (referring horizontally) — If one of your competitors is unable to help a prospect, they may be willing to send them your way. Perhaps they do not sell the correct size or quantity, or perhaps they are too busy to service them right away. They may be willing to recommend your services to the prospect as an alternative.

Wedding photographers, for example, are often booked well in advance and must occasionally turn away high quality prospects do to scheduling conflicts. It is common for them to refer those prospects they are unable to help to other photographers of similar calibre.

As you may recall from “Marketing,” all of your competitors are not necessarily in the same industry as you. If you run a children’s gymnastics program, for example, you may compete indirectly with a neighbouring children’s dance program for the same Target Market. With the right approach, however, you may be able to get referrals from them as well. Perhaps you could run joint classes, or families from one program could receive a discount for the other program.

Don't forget to return the favour. Your peers will quickly tire of sending business your way if you never send any business their way.

  1. Others in complementary industries (referring vertically) — If your customers regularly make use of other businesses with products or services that complement yours, you may be able to set up a referral relationship with those businesses.

  2. Networking — Stay on the lookout for new sources of referrals. Business networking groups, social clubs, trade associations, and special events can all be great sources of referrals and new business. You don’t always need to be in “sales mode,” but if you are enthusiastic about what you do and if people know that you are always on the lookout for new business, the referrals will come.

I know of a lawyer and an accountant that have established a strong referral relationship. When the lawyer helps a new company to incorporate, he refers the client to the accountant to set up their books. When the accountant sets up the books for someone who is starting a new business, he refers the client to the lawyer to incorporate the company.

List the most effective sources of referral business from your past. Why do you think they were so effective?

List at least five new places you might find quality referrals for your business.

Your answers to the previous questions will form part of your Referral System.

As with every other aspect of your business, the only way to generate any consistency and predictability in your referrals as a source of new business is to systemize your approach.

Customer Referrals

When to Ask for Referrals From a Customer

Your first opportunity to ask for a referral from a customer is immediately following a sale. This is the point at which your customers’ excitement with owning your products or receiving your services is at its peak so they are more likely to be forthcoming. Even if you don’t make a sale you should still ask, however. If you have done your job correctly they will know that your offer is a good one, even if it doesn’t work for them.

Another good time to ask for a referral is in conjunction with your customer feedback system. When you make after-sales follow up calls to your customers to find out if they have any problems or questions, they are subtly reminded of the positive relationship they continue to enjoy with your company. If they are still happy with their purchase, then now might be a good time to ask them for a referral.

Other opportunities will present themselves to you if you stay on the lookout for them. Essentially, anytime your customers are especially happy with your business is a good time. This could be when you drop by for a free service call, when you find a way to save them some money, or when you go beyond the call of duty to help them out.

The most important point here is, if you want more referrals you’ve got to ask for them. You can even offer a thank you gift to clients who are forthcoming with referrals that turn into sales.

One way of approaching this is to ask your customers if they would recommend your company to their friends. If they answer “yes,” you might say, “In that case, would you be so kind as to introduce me to some of them.”

Use your own words, you’ve got to feel comfortable saying them, but be sure they understand your sincerity. Once you are sure they are fully satisfied, and once they know how important it is to you that they are satisfied, you will be in a much stronger position to ask them for referrals.

Remember, sales are all about relationships. So a solid relationship with the right customer can easily produce a lifetime of regular, highly qualified leads.

How to Ask for Referrals

It’s important that you ask your customers for referrals, but do so with care. It is more important that you maintain the integrity of your existing customer relationships than it is to pick up a referral. Your best customers will become advocates of your business and will become a steady source of good referrals but some customers may take longer to get to this point than others.

The following points will help you design your Referral System. Not everything will apply to your business if referrals are an indirect part in your sales process. If you own a retail business that relies on walk-in traffic for the majority of your sales, for example, you may choose to approach them in a less direct manner. Do what makes sense for your business. Just be sure to do something.

  1. Collect the contact information on the referral plus any details that will make contacting the referral easier. If the referral is a business owner, for example, he may have a direct number that will bypass his secretary or gatekeeper.

  2. If possible, try to qualify your referral before pursuing them. It is likely that a referral from someone in your Target Market will be someone else from your Target Market, after all, like attracts like. But one or two quick questions can usually go a long way towards making sure. If you are a financial advisor, for example, it may be considered bad form to ask about a referral’s income or assets, but if you know their occupation and address, you might be able to make an educated guess.

  3. Try to learn something about the referral before contacting them. If your source can tell you something personal, you may be able to establish a relationship fairly quickly with your new prospect because you come across as part of a “safe” inner circle. Something as simple as knowing they have children who play soccer, for example, may give you a basis for conversation. Especially if you also have children involved in sports. For example, “Bob tells my you have a son who is quite a soccer player. You must be proud of him.” Remember, however, to keep the conversation focused on your prospect, not on you. Now is probably not the time to brag about the fact that your son is an all-star player and captain of his team. If this is not possible, something that emphasizes the personal relationship you have with your source may do the trick as well. For example, you might say, “Bob and I often golf together, do you ever get out with him for a game?”

  4. Whenever possible, have your source set the appointment for you, and if possible, make the introduction as well. With a little luck they may be willing to pick up the telephone and call the referral for you on the spot. At the very least, try to have them let the referral know that you will be contacting them. You’ll have a much better chance of getting through to them when you do. It’s ideal if they can accompany you on your first visit. Perhaps you can all get together for lunch.

  5. If your source is with you, do not be too aggressive on your first contact with a referral. Of course there are exceptions to the rule, but it is a good rule of thumb to get down to business at a later meeting when you are alone with your new prospect. The last thing you want to do is embarrass your source or make them feel uncomfortable in any way. In most cases, the purpose of the first meeting or contact should be to set up a business meeting at some future date. Certainly you are there to help the prospect. Your source knows this or they wouldn’t have set the meeting up in the first place. But a more subtle approach is often more appropriate.

  6. Treat your referral with care and respect. You were given the opportunity because someone believes in you and trusts you. Always remember that the trust of a customer is more important than a sale to a new prospect. If you handle the referral properly, there will be more where it came from. If you don’t, you could embarrass your source, cutting off the possibility for future referrals and jeopardizing your current relationship.

  7. Offer rewards to your customers. Referral incentive programs can be effective in some instances. I know of a real-estate investment company, for example, that offers their clients down-payment money in return for sending them successful referrals.

  8. I suppose this goes without saying, but be sure to thank your source for the referral. If possible, send a personal, hand written note of thanks. Depending on your situation, a small gift of thanks can be a nice touch as well.

Be cautious with this technique. You will have more success if referrals are sent your way because your customers believe in your company, than if you receive them because your customers are looking for a reward. A better option may be to offer a reward as a thank you for a referral, rather than as an incentive to send one. The quantity of referrals you receive is less important than the quality of those referrals, so if you do decide to set up a referral reward system, be sure to monitor your results and make adjustments as necessary.

Write a Referral System. It is likely that this system will link directly to your Sales System.

In this chapter you should have designed, shared, and made a plan to review your:

  • Sales Channels.
  • Sales Scripts.
  • Comprehensive Sales System.
  • Referral System.
  • Elevator Pitch.