Customer referrals are one of the most cost-effective and powerful ways to gain revenue and profits for your service business. Now, when it comes to referrals, you need to ask yourself several important questions:
Like it or not, these are the questions that you always need to keep in mind before you have a referral marketing plan.
Successful fitness clubs and gyms are prime examples of efficient referral marketing. They’re always having promotions for referring new members with things such as membership discounts, free training or boot camps, or downright free stuff such as a one-day access to the gym.
Whenever you walk past the gym door or even online, it’s not uncommon to see offers that encourage referrals with free classes, discounts, and other goodies that we’ve mentioned above.
Referrals are almost mystical in the business world as they offer instant credibility and trust in your business. Think about it, are you going to trust an online ad more or a raving recommendation from your best buddy?
However, the burning question is:
Why are small business owners still not utilising referrals effectively?
The first thing that you have to consider is that not all referrals are equal. If someone just gives you a random name and number (or e-mail), that’s considered a low-level referral because you don’t know if they are qualified or not.
However, if you have someone who regularly talks about your services as well as actually settings up meetings for prospects to contact you instead of just a number, that’s a high-level (and very likely profitable) referral.
It’s important to understand that referrals are one of the easiest ways to grow your business and it is one of the best client acquisition strategies that you should implement right now (which is what we will help you with today).
Businesses are literally leaving money on the table by not asking for referrals correctly. This is understandable, however; business owners are worried about rejection and they worried about the actual process of gathering referrals.
If you feel that way, no worries – we’ll help you overcome it.
The first thing to understand is the importance and benefits of referrals to your business. Until you truly understand the benefits of referrals to your business, you will always live in fear of rejection and asking for referrals.
What can referrals do for your business that it’s worth the risk of rejection?
One of the biggest challenges of being a business owner especially if you are just starting out is gaining enough trust and credibility for people to spend money on you.
Logically, if someone has not heard of you, they’d be skeptical about spending their hard-earned money on your business. They want to see an effective ROI and knowing nothing about you is going to adversely affect their decision making.
Sure, advertising is an avenue that is available to you but it’s really only useful if you know what you’re doing and if your business offer is great (we have a great blog post on how to craft online offers by the way). Referrals, on the other hand, are free and builds trust in your business almost instantly.
There have been numerous studies where people were found to be two to three times more likely to be convinced by a referral from someone they trust rather than traditional advertising.
Typically, with a referred prospect, it’s much easier to close a deal. Of course, you have to show that you are valuable during the initial consultations, but you start off with more leverage on your side compared to a cold client.
Referrals from clients will help you make more money than your normal clients.
With referrals, the initial doubts and risks are significantly lowered, although they are not gone completely. This means that referrals are more likely to invest more in your business when they trust you more.
For instance, with your usual clients, the first project would probably net you $1,000-$2,000. With referrals, you can get double thateasily with half the usual efforts in convincing and selling your services.
Since someone they already trust has recommended you, they feel comfortable dealing with you which leads to bigger checks and faster scaling of your business.
Always remember, when a client says that your services are too expensive, they say it because they don’t see enough value in your offer. The problem here is that the perceived value of your service is not equal to the price that you’re charging.
Thankfully, money is usually not as big of an issue with referred clients. Now, it’s not that money issues suddenly become non-existent with referrals, it’s just that you can now sell based on value instead of price as there is already trust in your business.
The more referrals that you get, the more that you are motivated to do your best because you don’t want to let your referrals down. You want to meet their expectations and you want to prove to them that working with you is the right choice.
This can also lead to a domino effect where your referrals are so impressed by your work that they refer other prospects to your business. If you continue to deliver, you’ll eventually need to delegate or turn down work because there’s too much demand!
Referred prospects are also very likely to refer other prospects to you. Here’s why that happens; referred prospects already have the mindset that referrals are the backbone of your business. After all, that’s how they met you!
So, providing other referrals to you is a natural thing essentially. That’s simply how you run your business. In other words, your clients will feel that referrals are a natural part of the process of working with you.
Because of this, you’ll hardly ever receive the objection, “Well, I don’t really refer businesses to people I know.”
If you do get rejected, however, don’t feel bad. People are afraid of referring businesses to a friend as they don’t want to be made to look bad by an underperforming business.
The key here is to remember that when you get clients through word-of-mouth, always deliver value to your referrals; they will feel justified in their decision to work with you and referring you to other people is no longer a problem as they know you’ll make them look good.
With a healthy flow of referrals, your business becomes a lot easier, a lot more fun, and much more profitable, as you’ll constantly find yourself talking and communicating to warm prospects only.
Once you’ve generated a list of referrals, you only spend your time with prospects at the bottom of the funnel or prospects who are: in the final stages of the buying process, who needs a solution to their problems, and who has the resources to become a valuable client.
In other words, you’ve skipped the entire process of qualifying and prospecting leads which can take up a lot of time if you don’t have a good team working with you.
There are 2 main obstacles that are preventing you from getting referrals to your business.
It’s painfully obvious; the number one reason that businesses do not get referrals is that they do not ask for it!
When you don’t ask for referrals, your clients assume that you have a steady flow of leads from elsewhere which completely eliminates any chance of them referring prospects to you.
Once again, business owners are afraid of asking for referrals because:
Fear of rejection
You don’t have to worry about getting rejected!
Rejection is part of sales and overcoming that is going to help you a lot in growing your business. You also don’t have to worry about rejection for another significant reason:
What answer would you get if you ask a client for a referral? It’s either a yes or a no, right?
What happens when you don’t ask a client for a referral? Again, it’s either a yes or a no.
In the end, both processes have the same outcomes but asking for referrals speeds up the time for you to get an answer.
As a business owner, you don’t have time to wait for prospects to come to you; you don’t wait for business opportunities to come to you. You need to be active and be hungry for opportunities.
Fear or under-performing
Your performance is one of the more important factors in determining the success of your business as well as your referrals rate. Naturally, it is normal to be worried about not delivering enough value to your clients; who wants to disappoint a paying client, right?
The answer to this is very simple: be confident. If you don’t have the confidence to serve your clients, how are they going to be confident in spending money on your business? How are they going to trust you when you don’t even trust yourself?
Our advice would be to just do it; but, if you think that you need more time to improve your business, by all means, do so. Once you are ready to go, go into sales mode and chase those referrals down – show them that working with you is the perfect choice for their goals.
Here is a sample of a good referral request from a software business.
Not knowing how to ask for referrals
Asking for referrals can be a tricky decision. The two things that you’ll need to consider when asking for referrals are: a) the timing of your request and b) the results of your work.
The timing of your request
The timing of your referral requests is important. You don’t want to ask for referrals at a time when your client is not ready for it.
In other words, you don’t want to:
When you ask for a referral at the start of a working relationship, it’s too early because your clients have not seen any returns from their investment yet. Why should they refer you?
When you ask for a referral too late into the relationship, you might have missed out on some excellent referral opportunities beforehand.
Also, when you ask for a referral from a busy client, they don’t have the time to do so; they want to focus their efforts on their business, not yours.
So, when should you ask for a referral?
The best time to ask for a referral is usually after a good job is done. It’s that simple. Notice the word “good” there. You always want to ask for referrals when you deliver great value and your client is happy with your work.
If you still do not want to ask for referrals, do this instead – integrate referrals into your sales process from the very beginning. Remind them throughout the working relationship, and request for a referral politely after they’re fully satisfied with your work to refresh their memory.
The person who cares the most about growing your business is you. So why should customers care about growing your business?
Customers feel valued when you give them the best service ever. Underpromise and overdeliver.
So if you build a rock-solid foundation of efficiency, empathy and good service with your client, they’ll trust you and they’ll want to help you. The key here is to outdo the client’s expectation of you so that it makes them want to bring you to their network of peers as a solution.
We’ve covered this earlier so we’ll keep this short. Make sure that you over-deliver on what was promised in the contract. If you can’t deliver, read some books and learn something new every single day until you become a better business owner and sales person.
There are four different types of referrals that you might get in your business. While it’s not essential to know all of them, it’s a good idea to understand the different types of referrals to tweak your sales approach.
Value-based direct referrals
A value-based direct referral program is a referral program where you offer your existing clients something valuable for each referral that turns into a client.
For instance, if you are running a home renovating business, your existing clients may refer a prospect to your remodeling service and you’ll give them a free house inspection for a day if the referral becomes a client.
This is an approach that can highly motivate your clients to refer your services. However, be very careful with this approach. If you are not careful enough, you risk turning your referrals into a messy flow of prospects who are not in your target audience which wastes a lot of your resources.
This is one of the more underutilised referrals by small businesses. In an implied referral program, you want to do things that make it obvious that you want to do work for someone without directly asking for referrals.
It sounds complicated; so, here’s an example. You can post photos of your work on social media or someone influential could tag you on Instagram which can bring a lot of exposure to your business.
Implied here means that you are getting business without explicitly asking for business.
Testimonials are also a form of implied referrals; you don’t necessarily ask for business with testimonials, but when people read good things about you, they will want to work with you.
Think of tangible referrals as providing value to your prospects instead of your existing clients. Here’s a very common example, every year (or half a year) you may send gifts to your existing clients as a token of appreciation.
The key, however, is to tell your clients to share that gift with a friend or colleague as a token of appreciation. So, you could send a box of chocolates to your existing clients and ask them to share it with their friends.
It sounds ridiculous but it is a great way to generate referrals for your business. Even if you don’t get any extra referrals, just knowing the fact that a stranger (you) is kind enough to share gifts with someone they don’t know is enough to build trust and authority in your business.
Here’s the most important part of this post. We will cover the strategies and techniques that you need to master to get referrals flowing into your business.
You don’t have to be shy about asking for referrals; there’s nothing pushy or desperate about it unless you act desperate. Remember, the only thing that you should focus on is your performance as well as the timing of your request.
The answer to getting consistent referrals?
Make it a habit.
Some successful businesses are built almost solely on referrals. These happen not because of passive referrals, it’s because the owners go out of their way and actively pursue referrals in the early stages of the business.
Here are some easy ways to develop a habit for referrals:
If you don’t tell your contacts who your target customer is, you’re going to get referrals who are not within your target audience which is a total waste of your resources.
When asking for referrals don’t limit yourself by asking close-ended questions such as, “Do you know anyone else who might want my services?” Instead, detail your approach and give a more specific example which fits your target audience.
For instance, a mention like “Do you know of anyone like you who has similar issues in the (your niche) industry, which I can help with?”is much better than a general question – don’t be afraid of looking desperate.
At the end of the day, asking for word of mouth referrals is a lot less expensive than traditional ad campaigns, because at least you know the people who you are targeting are actually aware of your business.
When you ask for a referral, make sure that is very easy for your clients AND prospects to get in touch with you. Don’t ask for referrals and make it very hard to find you – it’s annoying.
Here are some things that you can do to make life for your referrals easier:
We cover the 80/20 principle a lot in our blog as it applies to almost everything in a business. In this case, you should understand that it’s very likely that not all of your clients are going to provide new referrals to you; that’s just how it is.
The famous philosopher, Pareto, said that 80% of your results are going to come from 20% of your efforts.
This same concept can be applied to your clients as well as your referrals. 80% of your best referrals are going to come from 20% of your existing clients. More often than not, this 20% of clients are the people who are extremely loyal and happy about your work.
So, if you want to maximise the returns of your referral program, you’re going to need to identify that 20% of clients and figure out ways to get referrals from them while giving them a lot of value in the meantime.
One of the best ways to get existing customers to start talking about you to people around them is to make sure that you’re giving them the experiences and service.
This means that you want to over-deliver for your clients, treat them well, and keep in touch with them constantly. Sounds familiar? Having a great relationship with your clients is exactly the same as making friends!
We are not talking nonsense either; here’s what Travis’ clients have to say about him about his work.
Do you see the effect of providing exceptional customer service to your clients?
Travis is not explicitly asking for new clients but his existing ones keep giving him referrals for no cost at all!
Yes, you still have to consider the business aspects of your relationship at the end of the day; however, it does not cost a cent to ask your client about his day or his family. We are all humans at the end of the day.
A good way to track and generate referrals is by using data and statistics to plan your referral program. For instance, you can have data from Google Analytics or something similar to track the top 20% of clients or channels that bring you the most referrals.
Using CRM tools like HubSpot and other SaaS apps also helps you to keep track of your referrals; it also helps you stay organised. When you can keep track of your referrals, you are able to find out the top 20% clients of your business easily.
Once again, excellent customer service is an excellent way to get people to talk about you. It doesn’t hurt to be extra friendly and courteous to your clients as a token of appreciation. Don’t mooch, though.
Better yet, if you can send gifts that your clients actually like instead of a random gift, you’re going to gain their trust and respect even further. The only way to do is that is by knowing your client on a personal level.
It doesn’t have to be a massive gift, just a thank you card or a box of chocolates will be fine. Even if you’re going down the luxury route, a bottle of champagne or cognac would suffice.
Remember, it’s the thought and honesty that counts – not the gift itself.
As soon as a client comes to you with a problem, get to it quickly. Acknowledge his or her problem and send regular notices regarding the progress of your work to keep your client in the loop.
On average, it takes about 12 positive experiences to make up for one negative experience. So, if you leave a problem unattended for too long, you’ll have to work extra hard to fix the relationship.
Resolve the issue promptly, and clients will be more than happy to tell their friends and colleagues about their positive experience. If you have too much work on your hand, however, consider hiring freelancers or employees to help you with your workload.
If you want word of mouth to spread about your business, make every experience a positive one. Counter your client’s disappointment with amazing customer service and you’ll be the talk of the town in no time.
With social media being an integral part of our lives today, you cannot deny that it is incredibly powerful in influencing the decisions of people around you.
The truth is, people trust friends and family more than any other information source; they also pay a lot more attention to recommendations that come from friends than other sources
This is why social media platforms like Facebook, Twitter and LinkedIn are multi-billion dollar assets. They are very, very important to businesses for social proof which is why you need to have an excellent social media strategy.
Another rarely mentioned fact about social media is the presence of reviews or ratings on channels such as Facebook. You can set up Facebook pages to represent your business.
You know what happens when you do a good job?
They will leave an awesome 5-star rating on your page, as well as sharing your business to their friends as Facebook allows them to do that super easily with just a click of a button.
The social proof that comes along with Facebook reviews are among the best that you can get in terms of testimonials. The golden rule: treat your clients well and they’ll treat you even better.
Always express your gratitude when a client brings another prospect to the door. Yes, clients do not expect a trophy or monetary reward for a referral, yet, everyone wants to feel appreciated for their efforts.
You can get creative here; instead of sending thank you e-mails or texts, give them something special – like a free visit to the spa. In most cases, verbal thank you’s are more effective than written ones, so keep that in mind.
It is also important to stay in touch with your past clients even if they are no longer working with you because you never know when they’ll need additional services.
It’s basic business protocols; follow through with every client and referral, and keep in touch with your past clients to keep up with their current status.
A ridiculous but totally accurate analogy of referrals is like going to a steakhouse. If the steakhouse serves the best damn ribeye that you’ve had in your life, surely you would talk about it to your friends, right?
That’s exactly how referrals work.
Deliver exceptional service to your clients and it is a guarantee that you’ll be seeing your client’s friends soon.
As always, you can contact us if you need help with your business. You can also head over to our blog to read up on more articles like this.