Referrals are an important part of every business. In fact, most small businesses are built on referrals alone. Referred prospects are much more likely to do business with you because you have been recommended, they have a much higher initial trust with you and they have seen that you can deliver what you promise.
Many business owners believe that the only way to get a referral is to WOW the customer with great service and they will tell their friends. While this gets you referrals, it is not the only way to get them. I’ve discovered three main types of referrals, there are a few others, but these are the main three ways that referrals occur.
- Customer Tells A Friend or Colleague – This type of referral usually happens because you WOW a customer and they are happy with your services. These referrals are the most genuine, there is often no reward and they are referring purely because they believe their friend or associate can benefit by contacting you. These people are MUCH more likely to convert into a paying customer than a cold prospect. The downside to these referrals is that you have no direct control over them, if someone tells a friend about you, you can’t follow up, you can’t market to them or build a relationship etc.
- Customer Tells You About A Prospect – This type of referral is often used by businesses who have a strong sales team. This method generally involves giving your clients an incentive to refer people to you. Usually you’d ask something like “If you know anyone who might be interested, give us their details and we’ll contact them on your behalf and if anyone goes ahead, you’ll be rewarded with x.” – These referred prospects are more likely to convert than cold prospecting because by mentioning their friend, you’re much more welcome when you make the first contact. It is a lot more work that the first contact method because YOU actually need to put in the hard work. The other benefit is that you have their details, you can follow up, market to them and you have control of the referral.
- Customer Tells a Friend AND Tells You – This is the ultimate referral. It combines the above two referral types. They tell their friend all about you and then tell you that they referred them and give you their details to follow up. I don’t know how many times I heard clients say “I referred a few people to you over the last few months, did any of them contact you?” in many instances the answer is ‘no’. If those customers told me immediately when they referred the person and gave me a phone number or email I can quickly flick an email or make a quick phone call to say “so and so mentioned you were looking for x, is there any advice or help I can give you?” – once again I’m in control of the situation and can follow up.
Referrals can be induced, it always pays to WOW your customers in every way you can, but if you want to put referrals on overdrive, build a relationship with them, train them to refer and implement a formalised referral incentive system where your customer AND the referral get rewarded.