This is a touchy subject for many business owners. The strategy of quite a few entrepreneurs is to focus on delivering excellent service or a unique product in the hope that it will result in a word-of-mouth referral and an influx of customers.
But let’s be honest, we don’t actually want to ask our customers to refer us. We think that by requesting a referral we look weak and needy and that it might cause doubt in the minds of our customers as to the viability of our business. I mean, if we’re asking for referrals then it must be desperate times, right? No. This couldn’t be further from the truth.
There really isn’t any other higher form of praise than a word-of-mouth referral, but I believe in taking the bull by the horns and leading him to water. Sitting quietly in your office sending out positive thoughts into the universe to drive customers your way is only going to end in disappointment.
Referrals don’t have to be slow and unreliable. You can make it an active part of your marketing strategy, and in fact, you should. I’m going to show you just how to do that.
The psychology behind a referral
Before we get into actively orchestrating referrals, I thought we should cover why people would refer a business.
Humour me for a moment and put yourself in the shoes of a customer. You had a problem that needed solving, for example, your flatscreen went on the blink, and now you need a new one. The salesperson assisting you has gone above and beyond. Not only has he helped you to find the perfect television, but he’s also given you a great discount and has organised to have it delivered, installed and tuned to your favourite channels that day. You were a little worried about doing the installation yourself because you’re not really very handy, but now it’s all been taken care of and at no added cost.
Pretty phenomenal service wouldn’t you say. You’re probably going to refer your mate who is in a similar situation, because hey, you want to help him out. But let’s be clear, you’re not doing it as a favour to the business you’re referring. You want the best for your mate, and he’ll thank you in the end. You look good, he’s happy, and the business doing the installation has probably acquired two new customers for life.
So now we’re going to tackle how to actively orchestrate customer referrals, without looking like you’re begging.
How to ask customers to refer your business
The key to getting referrals is to ask, but how you ask is going to determine whether your customer takes action or not.
Have you ever heard about the bystander effect? It’s a phenomenon that occurs when a large crowd gathers around an ongoing emergency or crime and essentially treats it as a spectator sport. You might be wondering how this relates to business. I can’t tell you how many networking events I’ve been too where someone stands up and says ‘if you know of anyone looking for service X, please refer them to me’. Everyone nods their heads, but who is anybody?
This is the perfect ingredient for the bystander effect. Everyone assumes somebody else will assist with the referral request. The result is no referrals.
To avoid this, you need to be giving specific instructions. You want to make it known in the customer onboarding stage or shortly after you’ve completed a job that referrals are part of doing business with you.
It could be a leave-behind note, a thank you email to the customer, or it could be included on your quote.
Requesting referrals prior to doing business
Let’s take the customer onboarding stage. Your leave-behind note could look like this.
‘Mr/Mrs X, I’m going to do a fantastic job for you, but I do need your help. Much of our new business comes from customers who refer us. This means that we don’t need to pay for expensive advertising, and can, as a result, keep our service costs down. Typically, we get about three referrals from new customers. When we complete the job, and you’re 100% satisfied with the work we’ve done, I’d really appreciate it if you could keep in mind three or more other people who we could also help.’
See what’s going on here?
- Upfront you’re letting them know that you’re going to do a great job and deliver excellent results.
- You’re showing them a direct benefit that they derive by referring your business.
- You are creating an expectation of the number of referrals you’d like without being pushing. This gives them time to think of who might be a good fit for your services or product.
- And you’re also giving them the power. You do this by informing the customer that the referral is subject to your company doing a great job for them.
But what about requesting referrals once you’ve completed a job?
It follows a similar pattern to the onboarding referral request.
‘Mr/Mrs X, it’s been an absolute pleasure assisting you. If you know of anyone who is in a similar situation to yourself, we’d love you to give them the enclosed gift card which entitles them to $100 off any of our services. One of the reasons we’re able to keep the cost of our service down is because we get a lot of our business through referrals from people like you.’
Again, let’s take a look at what is going on here.
- Your thank you note acknowledges and appeals to their ego.
- You’re not asking for a favour, but instead offering something of value like a discount voucher, this is always a nice little incentive for people.
- And lastly, you’re giving them a reason to refer your business.
But this isn’t the only way to get referrals. Have you thought about setting up a joint venture?
Why setting up a joint venture is a great way to grow your business
A joint venture is a great way to connect with prospective customers who might never have come across your business, and it’s a relatively inexpensive way of attracting these individuals.
The best way to go about this is to think about where your prospective customers are. Who already has them, and how can you get them to do business with you? You’ll want to start by looking at complementary companies who are not in direct competition with you.
You could approach them by offering a finder’s fee for incoming leads or sales generated as a result of the arrangement. Admittedly not everyone is comfortable with this solution, so the alternative is to create a gift card or voucher for your services or product which can be placed in their store and given to their customers.
The purpose of this tactic is to drive more business your way. Vice-versa you can also recommend their services to your clients ultimately sending potential business their way. I’m partial to this solution because it focuses on goodwill and it removes any form of sales pressure.
It really is a win-win for everyone.
So remember, you will never scale your business with passive word-of-mouth marketing. You need to be active. Don’t be embarrassed or afraid to put systems in place that will help you generate referrals because this will massively increase the reliability of your word-of-mouth marketing. While not everyone will refer you, enough will to keep you busy and your business steadily growing. And that’s all that matters in the end.