CEO, Marketing Best Practices Inc.

• 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 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 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.
• Perhaps the simplest way to systematize your referral program is to write a simple letter to your customers asking them for their help. Click here for an example of a successful customer referral letter that I have used for a spa dealership in the past. 
• Another simple method of systematizing your referral process is to give referral cards to each of your customers. Click here for a simple example of a referral card and its the process used by a small animal hospital to obtain new customers.

• 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.
• 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.

• 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?"	Mary says, "Yes, most of the time."
  You pop the question, "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.

• 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."

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.

• Take these moments of truth seriously. Teach them in your customer service training. Put them on a wall for employees to review. Make a small card with the moments of truth on them. Plasticize the cards and distribute them to each employee. 
• Sponsor an employee competition for the "Best Moment of Truth" by having your employees record the moment of truth and what they did to capitalize on it. Think of creative ways to reward your employees for recognizing a moment of truth and taking advantage of it and it will revolutionize your small business. 

• 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.

• 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.

• 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:

• 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.

• 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.

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.

• 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 know 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 cross-promotion 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.

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.

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:

Step 1. Appoint yourself as the host of this network In other words, be their leader. (No need to tell them, however.)

Step 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?"

Step 3. The answer? Training in how to build their businesses via referrals,

Step 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.

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.

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

    To your referral success! - David

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David Frey is President of Marketing Best Practices Inc., a small business marketing consulting firm and the editor of the Marketing Best Practices Newsletter, the web's leading free small business marketing newsletter. Subscribe now at http://www.MarketingBestPractices.com.

© Copyright 2001 David Frey, Marketing Best Practices In