Getting Referral Business from Clients

create a referral based businessPretty much everyone claims his or her business comes primarily from referrals. It’s true that clients who come to you at the recommendation of someone else are the best kind. After all, they’re proactively contacting you because they need what you offer and they’re biased because their friend or colleague already likes and trusts you.

If you want your business to continue growing, it only makes sense then to have a program in place to encourage and collect referrals. Don’t have a referral program already? Here’s what you need to do. Shortly after delivering your product or service, ask for a testimonial along with three referrals. The testimonial can be written or it can be an audio or video recording. Now is presumably the time when your client is most happy with you and therefore most willing to recommend you to others.

Put these testimonials on your website and share them on social media. They provide social proof for your services and they give your clients nice exposure as well.

Reach out to existing clients by sending a special letter asking for that testimonial if you don’t already have one, as well as the referrals. It’s a good idea to include an actual script that your clients can share with someone they think could benefit from your services. Make it super easy, take away the need for your clients to put a lot of effort into giving referrals, and it’s far more likely they will deliver.

Once those referrals start coming in, you absolutely must acknowledge them, whether you think it will be a “good” referral or not. It’s common courtesy to let the person referring know you’ve connected with their acquaintance. Then keep him posted on the outcome.

Sharing the outcome is important for two reasons. First, it’s good manners of course. Second, regardless of whether or not the referral works out, your feedback allows the referral source to get better at sending you future connections. For example, “Thanks so much for the referral of Sally Smith. We had a great conversation. Unfortunately we weren’t able to work together because she’s in the xyz industry and my services are better suited for the abc industry.” Now your referrer can be on the lookout for contacts in the abc industry.

When the referral does turn into a client, it makes good sense to not just let the referrer know, but to share your appreciation with a thank you note or gift. (See why cash isn’t as good a gift in this free special report.) Rewarding people for their kindness encourages them to continue that kind of behavior. Make this reward part of your appreciation program system and you’ll never have to stop and spend time figuring out what to do or give. You’ve already decided when you created the program and now it’s really easy.

You want a referral-based business? Set up the proper systems to support you.

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Good Idea to Pay for a Good Deed?

The concept first showed up to me in Dan Ariely’s book “Predictably Irrational.” I just finished “Drive” by Dan Pink and he talks about it too. So it’s high time I mention it here.

Paying people for doing nice things for you is not only ineffective, it’s insulting. Think about how you might feel if you did a favor for someone and he turned around and said, “hey buddy, thanks a lot. Here’s 25 bucks.” Or a friend shows up to your dinner party and instead of presenting you with a nice bottle of wine or a yummy dessert, she hands you some cash. You’d think, wow, that’s kind of weird.

There are two sets of norms in our society – social norms and market norms. Social norms are the domain of friendly requests, good deeds and warm and fuzzy. Market norms are about monetary exchanges in transactions such as wages, prices, rents, etc. Life is good when you understand the difference and keep them separate.

Things get a little hairy though when you start mixing the two. And that’s what happens in business when you pay people for giving you referrals. Essentially, when you pay a commission to someone who is not an employee for giving you a referral, you’re making a financial transaction.

Many times people make referrals because they want to be helpful. They’re not necessarily looking for anything in return. It’s a social exchange. And in social exchanges, gifts are the most acceptable type of “reward.”

Not only are small gifts more the accepted norm, giving them instead of money actually increases the likelihood that they will continue to share information with you. Studies have shown people will work more for a cause (or something they believe is worthy) than for cash. Both Ariely’s and Pink’s books address the reasoning behind this in more depth and I recommend reading them. But suffice it to know that if you want more referral business, saying thank you with a small gift or gesture is more effective than offering legal tender. Yes, even in “this economy.”