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Put the Power of Referrals to Work for Your Business

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Put the Power of Referrals to Work for Your Business

By Rieva Lesonsky, Guest Blogger
Published: June 22, 2010

One of the best ways to build your customer base is through referrals. In toda;s connected society, where people are eager to tell their friends and colleagues about worthwhile products or services, getting referrals from satisfied customers is a smart way to expand your marketing reach. How can you put the power of referrals to work for you?

First, understand there are different types of referrals with different values. Receiving someon-s name and e-mail or phone number from an existing customer is on the low end of the value scale. In fact, this type of referral can backfire on you if the person wh-s referred does't know the've been referred to you and is annoyed at getting what they perceive as spam or telemarketing call.

An existing customer who actually talks to the referral about your business is a bit higher on the value scale. The new prospect will at least know what i's about if you call, email or mail them information about your business.

At the high-value end of the referral scale is an existing customer who facilitates a sale. This customer sets up a phone call for you with a new referral, arranges a meeting between you and the referral, or actually brings the person in the door to your office, store or restaurant.

For all types of referrals, the key to success is to make the referral process systematic. If you only ask for referrals when you remember to, your referral process will be haphazard; yo'll feel embarrassed asking; and you wo't get many referrals; and you wo't benefit from those you do get. Here are some different ways to get referrals; adjust them to fit with your industry, product or service.

Make it clear that you expect referrals. If your business is one like consulting, IT services or financial advising where you enter into long-term projects for clients, bring up referrals in your initial meeting with the new client. As you lay out the details of what yo'll be doing for them, mention that part of your process is getting referrals from satisfied customers. Ask the person whether, if they are happy with the end result of your work, the'd be willing to provide you with three referrals. Most people, of course, will be more than willing to do so.

Incentivize referrals. Offer something of value in return for a referral. This could range from a $5 credit when a referral makes a purchase to a percentage discount on the person's next service or purchase to an actual cash payment when a referral becomes a customer. Make sure what you offer is commensurate with what you sell and what the customer does for you. If someone hands out your business card to a friend who comes in to eat at your restaurant, that's worth less than if someone sets up a meeting with a referral who buys $25,000 worth of consulting services.

Time it right. Ask for referrals at a time when the customer is in a mood to give them. If your company sells products online, for instance, you could include a referral form in each product shipment. The customer will be happy and excited to open their package, and in a receptive mood to refer friends to your business. Make it easy with a postage-paid postcard they can fill out and mail back. Similarly, retailers could include referral cards in the shopping bag; service businesses could include them with invoices so customers can mail them back with payment.

Make it easy for clients to refer you. People are busy, so don't make them do any extra work to refer people to you. Making it easy can mean developing an e-mail template they can fill out and forward to friends; handing out your business cards for them to give to colleagues; creating a referral postcard or mailer they can drop in the mail postage-paid; or putting a referral section on your website where clients can put in three friends' emails, click and be done with it.

None of these tactics will work for you, however, if you aren't worthy of referrals. That means giving great service. Customers are taking a risk when they make a referral; what if the person they refer uses your business and gets shabby or so-so service? This puts your customer's reputation at risk and will likely cause them to question their relationship with you.

Once you've got referrals, now what? The number one mistake most business owners make with referrals is thinking that they don't have to try as hard to make the sale. This is kind of like thinking that because a friend has set you up on a date with a girl, you can show up in sweatpants, take her to dinner at a hot-dog stand and belch throughout the meal. In fact, you need to try extra hard because your original client has put his or her reputation on the line by making the referral. Don't make your customer look bad, or you could lose not only the referral sale, but also the original customer!

Instead of assuming you've got an easy sale, educate the referral about what your business has to offer. Introduce yourself via a phone call, e-mail or letter, but make it a soft sell. A good way to start is by offering them some free information, such as a white paper or booklet you've written: Your colleague Steve said you might appreciate this booklet I've written on 10 ways to save on your taxes. You can also offer the referred customer something free, like a discount on their first service or a free appetizer at your restaurant.

None of the referral tactics above will work if your business doesn't earn referrals by providing good service. Be outstanding, and customers will be falling all over themselves to talk about you. I'll tell you a story: Ten years ago, one of my friends bought her first home and needed hardwood flooring installed. She found a flooring company (through a referral, of course) whose service and workmanship were incredible. It just so happened that dozens of her friends were also buying homes at the time. Whenever someone mentioned flooring, my friend was eager to share: Let me give you my guy's number.

Within a year, the flooring company had garnered at least 10 new customers thanks to referrals from my friend. And all those customers spread the word just as eagerly. What makes this story even more impressive? This company barely does any advertising. Sure, you can find them online if you look”but most people don't even bother to go online because they get the company's phone number from a friend.

John Jantsch, of Duct Tape Marketing fame, believes getting referrals comes down to what's become his mantra: Know, like, trust.Jantsch, the author of the new best-selling The Referral Engine says, Trust is the single most important reason a recommendation is made, and conversely, a lack of trust is the single greatest reason referrals don't happen.

Imagine getting all your business from referrals! That's what can happen if you live up to the trust your clients are putting in you when they make a referral.

Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva. Visit SmallBizDaily.com to read more of Rieva's insights.

About the Author:

Rieva Lesonsky

Guest Blogger

Rieva Lesonsky is CEO and President of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva and visit SmallBizDaily.com to sign up for her free TrendCast reports. She's been covering small business and entrepreneurial issues for more than 30 years, is the author of several books about entrepreneurship and was the editorial director of Entrepreneur magazine for over two decades

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