Business

Not Having a Systematic Referral Generating Program

If you don't have a systematic referral program you are missing out on one of the simplest, lowest cost, ways to generate your highest quality customers. Referrals are the lifeblood of small business and if you haven't yet institutionalized a referral program, you're making a huge mistake.

Why are Referrals so Powerful?
The reason referrals are so powerful is because they come from a credible third-party that has experienced first hand the benefits of doing business with you.
They are even more powerful when they come from a friend because you know that a friend has no ulterior motivations but to do what’s in your best interest. You can believe what you friend is saying versus hearing a commercial from a salesperson whose sole purpose is to make money from you.

Referrals are also valuable because most of the time they are completely free. How would you like to receive the benefits of the most compelling sales advertisement on earth for absolutely nothing? You can through referrals.

Research shows the importance of referrals. According to Paul and Sarah Edwards (authors of Getting Business to Come to You), up to 45% of most service businesses are chosen by customers based on the recommendations of others.

A recent Dun and Bradstreet survey found referrals to be one of the two most popular small-business marketing methods (the other one is advertising). Lastly, and I think this is the most powerful reason of all, customers that give referrals become more loyal to you and your business. Once someone stands up and makes a public statement about you, psychologically they will become more loyal to you and your business.

Customer Service Doesn’t Always Equate to Lots of Referrals

Customer service is critical to the success of your referral program. It is the foundation of the referral process. But just because you give good customer service, it doesn’t mean that you will get a lot of referrals.

Receiving referrals on an ongoing basis is as much a function of deliberate planning as it is great customer service. Many small business owners assume that referrals will happen by themselves if you give good customer service. This isn’t true. If you are not deliberate and proactive in creating referrals, the chances of you receiving as many referrals as you want are slim. And your best customers are ready and willing to give you referrals as was shown in the statistics above, you just need to show them how.

Word of Mouth Advertising and Referrals are Not the Same

Word of Mouth advertising happens when one of your customers or friends mentions your small business in a casual conversation. It’s not intentional or planned. It’s just something that came out of their mouth.

A referral system is a methodically process that you have put in place to capture qualified prospects through your association with other people. A "system" by its definition is a "process that products predictable results. "A system can be turned on and off like a light switch at will. Your business needs word of mouth advertising but don't mistake that with developing a methodical system for referral prospecting.

Making it Rain Referrals Starts with Your Attitude!

Time and again the same question keeps coming to me, "How do I get more referrals?" My answer is always the same, "You must ask for them." In reality, most small business owners know that they have to ask for referrals to get more referrals but it’s the fear of asking that impedes them from moving forward.

This fear of asking is rooted in your attitude. If your attitude is one that believes that you are asking that person to go out on a limb for you by asking them to give you referrals then you will always be battling with fear.

People Want to Give Your Referrals

If you truly believe that it will be helping them if you ask them to give you referrals your fear would fade quickly. Your customers want to give you referrals. It makes them feel good that they found a great small business that they had a good experience with and they want to share their "little secret" (you) with their friends. They will be seen as a hero, or someone "in the know." And when their friend receives great service from you as well, your referring customer will feel as though he was able to do their friends a great favor. When you ask for a referral, and you have treated that person right, you are actually doing them a special favor.

How to Ask for a Referral

Has someone ever asked you for a referral? Did it go something like this:
"Hey John, by chance would you know someone who could benefit from my services?" John starts to ponder and think about it and eventually says, "Well, not off the top of my head, but I'll keep thinking about it." This is how 90% of all referral questions are asked and unfortunately, you might as well not ask the question. Rarely, if every, will you get a positive response. Why? Because you didn't ask the question right. "know anyone who..." questions are too broad for people to think about.

People need a frame of reference to help them narrow down the playing field of potential referral candidates. For instance, imagine that you are talking to one of your good clients who is pleased with your services. You ask her, "Mary, you're a member of the Women's Financial Planning Association here in Chicago right?" Mary responds, "Yes, I am." You ask, "Do you go to their meetings on a regular basis?" "Yes, most of the time." Mary says. "Is there anyone in your association that you believe could benefit from my services? Maybe one or two people you've known in the group for awhile or sit next to regularly?"

Did you see the difference? You gave Mary a narrow frame of reference from which to think about. It allowed her to "see" the potential referrals in her mind. This may be limiting the number of potential people that your associates might know, but it is far more effective than opening up the ocean of people that Mary may know, but can't remember.

Your request will also stay in Mary's mind long after you've asked it because she visualized your services with much greater intensity.

Two Types of Referral Programs

Basically, there are two sources for referrals, your current customers (people who have done business with you) and other influential people. You should have an active referral system for both types of people. Your customers are perhaps your most enthusiastic referrers because they have experienced your product. But, you may in fact, get more referrals from other influential people who have never tried your product. Develop a system for obtaining referrals first from your customers and
second from other influential people or "Centers of Influence."

Customer Referral Program

Receiving referrals from customers starts with giving great customer service. Without going into much detail about the ins and outs of customer service I'd like to share with you eight "Moments of Truth" that provide opportunities for you create a loyal customer for life.

Pay close attention to watch out for these seven moments of truth and if you go the extra mile at the right time, bang, you have a lifetime customer.
Moment of Truth # 1: The moment your customer complains.
Moment of Truth # 2: The moment one of your new customers comes back to place a second order.
Moment of Truth # 3: The moment a customer has thanked you.
Moment of Truth # 4: The moment one of your customers has been
through a hard time because of a foul up on your (or their) part.
Moment of Truth # 5: The moment a customer needs a favor from you.
Moment of Truth # 6: The moment you see your customer in public.
Moment of Truth # 7: The moment your customer brings in a referral.

Perhaps the simplest way to harvest referrals from your customers is to write a simple letter asking them for their help. Centers of Influence and the 80/20 Rule
Your best referrers are your customers. The people who have experience with you and can vouch first hand for your product and service. However, there are many other people and organizations that you must include in your referral prospecting system.
These individuals are people who know and mingle with many other influential people. These people are often known as, "Centers of Influence." Centers of Influence can multiply your marketing efforts ten-fold.

They turn your marketing efforts from one-to-one to one-to-many. They are the heavy hitters that can have a profound multiplying effect on your business.

A smart small business owner will spend the majority of his referral.
prospecting time with the 20% of their Centers of Influence that will produce 80% of the results.

Tier 1 and Tier 2 Centers of Influence

Your Tier 1 Centers of Influence are people that are directly related in some way to your industry or profession. Tier 1 Centers of influence have a connection to your industry because they provide complimentary products and services. Referrals coming from your Tier 1 Centers of Influence can be very powerful.

For example, suppose you are a chiropractor. Tier 1 Centers of Influence for you would be orthopedic doctors, massage therapists, physical therapists, family physicians, local gym owners and managers, outpatient placement coordinators etc. All these occupations deal with people who may be in need of chiropractics.

What is Your Goal with Tier 1 Referral Givers?

Your goal with Tier 1 referral givers is to be the first person on their minds when someone asks them about purchasing a spa or pool. With this in mind, you should sit down with your staff and come up with ideas about how to be the first person standing in line in the minds of your Tier 1 referrers.

Here are a few ideas to start you off:
1. Be their number one referrer: Make sure that you also have a referral mindset. Before you get you must give, which means that in order to get lots of referrals from these people you must be giving them referrals.
2. Sponsor networking events or social gatherings for them. Make sure you try not to invite competitors. Have a good cross section. You might hold several of these parties throughout the year so that you can invite several different potential referrers from the same industry.
3. Put each one of them on your newsletter list. Give them helpful information that they can use to make their sales go up. Give them marketing advice and information on new developments in your industry in which they should be aware.
4. Invite them to an all-expense paid marketing association luncheon that has a great speaker. Rent a limo to pick them up, serve them wine or fine drinks, and treat them like stars. (I know a mortgage broker that does this with real estate agents and makes a fortune in referrals)
5. Purchase an information product about marketing in their business and give it to them as a free gift. They will thank you for your interest in wanting to help them grow their business.
6. If it’s a big potential referrer, send them a Harry and David www.harryanddavid.com) year round gift that they will receive every month. This will keep you in their minds all year long. Not long ago someone did this for me and my wife and I glow when we receive our fruit basket each month.

If you don’t have the time or inclination to develop a relationship with your Tier 1 Centers of Influence then don’t even try. If you're a chiropractor, it's better to choose only one local family physician and become close friends with him then trying to be friends with 10 physicians haphazardly.

Educate Your Tier 1 Centers of Influence with Special Reports

Arm your Tier 1 Centers of Influence with tools to help them to help their customers (and your prospects). You may consider giving your Tier 1 Center of Influence a supply of special reports that you have developed. Again, if you're a chiropractor and someone inquires about chiropractics to your Center of Influence they can give them a special report that will answer some of their questions. This will make your Center of Influence look good and it will also be an effective method of referring you.

Another idea is to purchase a best selling book-on-tape that you think they might be interested in and give it to them as a gift to let them know you were thinking about them. Information products about that teach your Center of Influence how to grow their business are always welcome and will let them know that you are interested in growing your business. Tier 2 Centers of Influence Tier 2 Centers of Influence are people whom you come in contact with on a regular basis in your personal life but aren't connected to your industry.

These are people who come in contact with a large number of other people. They too can multiply your marketing efforts. Your Tier two Centers of Influence include but are not limited to the following:
1. Neighbors
2. Friends
3. Clergy
4. Small business owners
5. Corporate business executives
6. Accountants
7. Financial planners
8. Lawyers
9. Pest control people
10. Etc.

Your Tier 2 Centers of Influence are people that may have no idea what it is that you do. Take the time to clearly explain to them not only what it is you do but the importance of referrals for your business. Go one step farther by inviting them to after-hours socials. Tell them stories about some results that your customer’s have experienced as a result of your product or service. Get them excited about what you do. Get to know what they do by asking them questions. Now each of you can get excited when you give valuable referrals, which in turn will be transferred to the new prospect.

The Power of Cross-Promotions

Perhaps the single most powerful referral program is a cross-promotion using endorsements from other well-respected people. It's a simple idea, an associate sends an endorsement letter about you and your product or service to their customer list and you, in turn, do the same to your customer list. It's a win-win.

The reason endorsement letters are so powerful is because people will buy from people they know and respect. How many times have you asked a personal friend, "Do you know a good place to buy __________?" Or "Do you a good ____________ that I can go to see about getting _____________ done?" You trust their opinion so you feel comfortable buying from them.

You can make it a one-way cross-promotion in which you have someone send out a letter to their customer list and you give them a referral fee for those people who buy your service. Or you can make it a two-way crosspromotion in which both of your send letters to your customers about each other's products and services.
The are some examples of complimentary products or services businesses
that can take advantage of this powerful strategy:

• Pizza place and video rental store
• Accountant and financial planner
• Toy store and fast food restaurant
• Dry cleaner and clothing store
• Paint store and tile business
• Jewelry store and wedding supply

The possibilities are endless. Brainstorm with people in your network to come up with potential promotions that you can do together. The payoff can be tremendous.
Ten Questions to Help You Become a Networking Pro In my earlier years when I was naive I thought that my success would increase in proportion to the number of business cards I handed out. I handed them out in droves. But I couldn't figure out why I wasn't getting any business. After a few years of experience under my belt I realized that it wasn't the numbers that count, but the quality of relationships that I nurtured.

To be a great networker you must become "you" centered rather than "me" centered. Recognize that people want to talk about themselves more than anything. They are their own favorite subjects. Take advantage of that and learn these 10 questions that will make people feel warm, appreciated, and important.

Zig Ziglar, the famous sales trainer once said, "You can get everything in life you want if you just help enough other people get what they want." This is so true. Thanks Mr. Ziglar. The following are ten questions that Bob Burg, author of the book, "Endless Referrals" gives to help you get to know potential referrers and leave a lasting positive impression.

1. How did you get your start in the widget business?
People like to be the movie of the week in someone else's mind. Let them share their story with your while you actively listen.

2. What do you enjoy most about your profession?
This question elicits a positive response and good feelings.

3. What separates you and your company from the competition?
This question gives them permission to brag about their business.

4. What advice would you give someone just starting in the widget business?
This question makes them feel superior and allows them to do some mentoring.

5. What on thing would you do with your business if you knew you could not fail?
This question allows your friend to fantasize and they will be thankful that you cared enough to ask.

6. What significant changes have you seen take place in your profession through the years?
Asking people who are a little bit more mature in years can be perfect because it allows them to reminiscing about the good ole days.

7. What do you see as the coming trends in the widget business?
This is a speculation question and positions them as an expert in their industry which make them feel important.

8. What was the strangest or funniest incident you've experienced in your business?
People love to share war stories but usually get a chance to tell anyone about their experiences.

9. What ways have you found to be the most effective for promoting your business?
This question, again, elicits a positive reaction and also gives you an opportunity to see how they think.

10. What one sentence would you like people to use in describing the way you do business?
You are allowing them to give themselves a compliment. Who doesn't like compliments?

You'll notice something in common with each of these questions. They all center around the person you are talking to and allows them an opportunity to talk about themselves. Don't expect to ask your Center of Influence each of these questions, but do have a few ready when you talk to others.

Start (or join) a Referral Group

Choose ten people that you think would be good members of your referral group. They may or may not be your Centers of Influence. Let them know that you are establishing a referral group and that they were one of the first people to enter them mind because of their great reputation. Ask them to educate you on exactly what they do. Tit for tat. No favors, no begging, no debt, no smiley-facing. Just a clean, fair, intriguing and powerful approach.

Have monthly lunches when your group can get together and then perhaps visit one of the group member's businesses to allow them to explain what they do. Find ways to serve your group members and educated them on how to grow their own businesses.

You can begin to grow your network slowly and invite other people who you or other members would feel good about recommending. It's just a matter of expanding your network to tap into the network of other professionals. Simple, doable, easy. No selling required. Just honesty. Here are the steps to maximizing your referrals and revenue:

1. Appoint yourself as the host of this network In other words, be their leader. (No need to tell them, however.)
2. So, now that you are the leader, ask yourself, "What do my constituents need most that I can provide for them at a very small cost to myself?"
3. The answer? Training in how to build their businesses via referrals.
4. Send a monthly note and update your group about each others businesses. You need to be consistent with this mailing (or emailing) each month. In effect, the monthly list/email also works as an effective reminder that you are there!

I have a friend in the financial services industry who sponsors a monthly luncheon. Members pay a quarterly fee which covers the cost of the lunch. He gets 50 to a 100 people at his meetings and has literally stopped his advertising efforts all together.

A Caution About Giving Referral Fees

Use a referral fee as your last ditch strategy. Money has never bred loyalty. Friendship, trust, and a positive relationship are what drive loyalty to you and your business. If you give referral fees you will undoubtedly run into a situation in which the referrer claims he gave you a referral and you disagree.

Or one of your competitors starts giving referral fees and you feel the need to continually match them causing a referral fee war (I’ve seen it happen). Another embarrassing situation is when your customer finds out that a referral fee changed hands which breaks the trust and confidence the relationship.

It just seems that whenever money enters into the equation and there is no surefire way to track it, trouble is on its way. I’ve seen too many good relationships go sour because of a referral fee dispute. It breeds everything you don’t want in a trusting relationship.

Conclusion

Establishing a referral program with your customers and other influential people is absolutely critical. Many small business people make the mistake of not institutionalizing a systematic program for referrals. They confuse word of mouth advertising with a referral system and, hence, overlook the single most effective advertising for a small business.

Don't make the same mistake. Develop your networking skills and referral programs today and start receiving an endless stream of new customers.