This episode of the Cultivating Business Growth Podcast is about referrals, and how they are one of the most economical ways to grow your business. How do you get referrals that will grow revenue? Why are they so effective in growing your business, and what do you need to do in your business to get the best results with referrals? The co-hosts for our discussion today are Megan Spicer, Marketing and Business Development Manager, and Katina Peters, Partner, at PJS & Co. CPAs.
What we cover in this episode:
- 01:17 – Why are referrals so effective?
- 07:35 – What do you do for referrals to work?
- 14:38 – Make it easy for people to refer your company
- 17:17 – Act on feedback from customers
- 19:26 – Create opportunities for customers to advocate for you
- 21:30 – Reciprocate prudently
- 25:33 – Reward your referrers
Why are referrals so effective?
A business referral is when someone in your network recommends your business to a potential new customer. One of the most important reasons that you should be trying to get referrals is that those prospects are coming to you with more trust than any other lead source. Charlie Cook, a marketing expert, estimates in a 2018 Forbes article that cold calling is successful 2 percent of the time; qualified leads convert 20 percent of the time, he says, while referrals convert 50% of the time. Why are those stats so impactful? The answer is in how much effort and time it takes to convert your leads into paying customers.
You may be curious about what the difference is in a “cold” vs. a “qualified” lead. In the sales process, a “cold” lead is someone who hasn’t heard of your company or services, but you may be reaching out to initiate a conversation. This could be through a phone call, email, regular mail, etc. You then have “warm” or “qualified” leads who have come to you and you have done the work to discuss services, began building a relationship, and have gotten them ready to buy. A well-run and established business will also qualify that person or company to be sure they are the right fit for the services offered. Are they the right customer for you? Are they the type of customer you can work with? That qualified lead does take time and effort to convert, and they are more ready to buy at a 20 percent conversion rate than a cold call prospect at just 2 percent. The difference between a qualified lead prospect at 20 percent, vs. a referral prospect at 50 percent conversion rate can be a game-changer for a business.
When you are thinking about finding a reliable service or product, you may start with Google or Yelp and read reviews and testimonials. We spoke about the importance of reviews and testimonials in our recent podcast, Episode #76: Tapping into Testimonials. What those reviews and testimonials cannot provide for a prospect is the personal experience that a trusted colleague can provide via a referral. A referral from a source that has worked with you, a trusted past – or present – customer, means they’ve had a relationship with you and have the ability to judge your company in the same capacity that they are looking for as a prospect for your business.
Another reason why referrals are so effective is that your circle grows exponentially every time you gain a new client. Referrals do not have to come from just your clients, they can come from anyone in your network. Perhaps an IT company you’ve worked with, or any provider that may service your industry. Your circle is not just your clients, it’s anyone that you’re working with providing related services. You are expanding your opportunities when you expand your circle, and that’s another reason that referrals are so important and can be crucial for the growth of your business.
What do you do for referrals to work?
In order for referrals to work for you, you really have to take a step back first and think about the experience that your clients or customers are having when they are working with you. You have to be delivering that high-level extraordinary service that’s worth talking about! You have to go above and beyond to make that experience worthwhile for them to go out on a limb and say “Hey, I have this really great company for you”, because they have to have trust in you that you’re going to take care of their friend or colleague or whomever they are recommending. There is another statistic we want to share with you from Statista.com that shows 61 percent of millennial consumers are willing to pay more for a guaranteed good experience. If you are really stepping up and putting everything you have into delivering that out of the ballpark experience for your clients, people are willing to pay extra to know that they’ll be taken care of and prioritize good service over pricing. That old adage applies where “you get what you pay for.”
You also have to invest in building relationships with your client in order for referrals to work for you. It all comes back to trust and building a rapport with your clients and with the partners in your industry who will be going out of their way to refer you. Even if you have a one-time service that you delivered to a client, you should engage with them on an ongoing basis and reach out to follow up and make sure their needs were met. Putting in that extra effort to let your clients know that you care about them goes a long way, like the personal touches of acknowledging big life events such as weddings, having a baby or birthdays, are truly appreciated. If you are hands-off, this process will be more difficult, and you will need to step up your game a bit in order to develop better relationships.
Make it easy for people to refer your company
Giving people the experience that’s worth sharing is how you make it easy for people to refer your company. I think we’ve all had experiences on both sides of the spectrum as far as a fantastic experience that we want to tell everybody about, and then a terrible experience that we want to tell everybody about, and we get passionate on both sides of those spectrums. You have to tap into that passion that you felt when you’ve received extraordinary services and deliver something that would make it worth talking about for your clients.
Another thing that can make it easier and simpler for clients to refer you is to put together a template that busy clients can follow when speaking with potential prospects and referrals. All business owners are busy, and having something in hand that they can refer to can help them explain what your company does and remind them of the many things you may be able to do for a new client. They may be clients of one service you offer, but may not remember that you also have other service offerings that may be of interest to a prospective client. You can provide them with some of your marketing materials, or a brief paragraph that they can send out to colleagues they have in mind that could benefit from your services, and you can also share with them the types of clients that work best with your firm.
Act on feedback from customers
If you have no sense of how your clients feel about your services, and you haven’t asked them in any way, shape or form, it’s probably not a good point to start a conversation and ask for referrals. You want to take care of your clients, and proactively ask them how they’re feeling about your services before you begin the process of asking for referrals. While you may have a sense of their satisfaction levels, do you have an official process to ask? A survey process is a great way to keep tabs on client feedback and address any potential issues as they arise. It’s also a great way to know who is over the moon happy with your services, so you can potentially follow up. Once you have that positive feedback, then you can ask for those valuable referrals.
Create opportunities for people to advocate for you
As we spoke about in or previous podcast Episode #76 on Tapping into Testimonials, some business owners don’t get testimonials, or referrals in this case, because they simply do not ask. The request for a referral from a client does not have to be a long drawn out conversation that you might dread or have to work yourself up in order to do, but can be easy and simple if you create the opportunity and simply have a quick conversation.
Be careful to always be respectful of your clients if they prefer not to refer your services. You can’t take it personally, and perhaps they just don’t have the time. There are a million reasons that they could be saying, no, it’s not necessarily a reflection on the services that you’re providing. Always be gracious and give them space if you receive a “no” when asking.
Reciprocate prudently
When you are building your circle of influence, and building relationships with related businesses, be sure to look for a win-win situation when it comes to referrals. It’s important to come at this process from a place of service to your client because you don’t want to just build relationships with dollar signs in your eyes. You don’t want to have the mindset of “I’m going to get so many referrals because this person is so connected”, but you have to think, “are they delivering a great service that would benefit my clients too”, because part of building those business relationships for referrals is to reciprocate. It’s got to be a give and take relationship that you’re building with people, and at the heart of it is your client who is ideally helped further by this network of people that you’re bringing together.
Try to keep a balance between the number of referrals you receive, vs the number you give. Be careful here though! You have to do your homework and find referral partners that offer services at the same level that you provide so you don’t end up with clients who may be disappointed, or potentially blame you for bad service.
Reward your referrers
After you asked for a referral, and you’ve gone through this whole process of perhaps creating the template for them, and they’ve gone through all the work of reaching out to their network, and you finally get a referral from somebody, you don’t want to just ignore it. You want to reach out and thank them for their efforts on your behalf, and make them feel appreciated! The people who refer your business to others are the ones who have that trust with you, and you want to reward them. There are multiple ways to do that, and it should align with the type of business that you have and your shared values.
For example, you could send out a card, or a gift, and you could even do cash. Some people choose to institute an official customer referral program where the rewards are very clear. Everything’s detailed, everything’s outlined, but that obviously takes some work to put together. If you don’t want to go that route, you can kind of default back to a simpler incentive such as a gift card. Keep in mind the level of service that you’re offering when rewarding. If your service is a hundred dollars versus $10,000, that gift, and that thank you is going to change depending on that level of service. The main thing is to come from a place of gratitude, and thank them for referring your business.
Conclusion
When it comes to referrals and growing your business, it comes down to taking action and asking for trust to be placed in your business from clients with whom you’ve built a relationship. When the trust you’ve built with your clients is transferred to you via a referral, it’s critical that you use that trust placed in you wisely and do your best to deliver on your promises to the new client. There’s a great deal of relationship-building that has gone into getting you to that point. So don’t waste it. Use that trust wisely. Take action, keep doing the hard things that no one else is willing to do, because that’s going to take your business to the next level.
If you liked this topic and are interested in more ways you can grow your business, you can get our free webinar that walks you through the 4 Ways to Grow Your Business. We have included a worksheet with that as well so you can walk away with actionable ideas for your own business.
Links mentioned in this episode:
- Episode #76: Tapping into Testimonials
- Is Everything You were Taught About Cold Calling Wrong? How to Cold Call
- Share of Adults Willing to Pay More for Quality Customer Service in the United States in 2019, by generation
- 4 ways to grow your business
