How Much is a Referral Worth?

When it comes to finding new customers there is one method that beats all of the others. Referrals. Let’s examine why.

Based on Trust

A referral occurs when one person, who you know, like and trust, suggests that you do business with someone else that they know, like and trust.  Sometimes it is called “Word of Mouth Marketing.” People buy from people.

Your customer has to buy you before they buy from you. There needs to be a level of trust, knowledge, and competence before they will make a purchase. Think of your own buying habits. When you are treated as a special customer, you are far more likely to purchase than not. If the salesperson is indifferent, you are more likely to go elsewhere or not buy at all.

Referrals = Speed Dating

I can look for a plumber online, searching through ads and reviews, checking out websites, and hope to find a good one.  Or I can ask friends and neighbors who they would recommend. It is faster and easier for me and carries less risk.

How does the plumber feel about it? They love it! Not only is the referral a compliment, it is an easy sale. For no cost, they have a new customer. The savvy business owner will ask, “How did you hear about us?” If it was from another customer, they will call or text a thank you for the referral.

How Do You Get Referrals?

The first and obvious step is to offer a great product or service. Please don’t expect a referral unless you have earned it. Which leads to the next step – you have to ask for referrals. Tell every customer that you are looking for more great customers, just like them, and you would appreciate any referrals.

There is another step, and this is the one most frequently overlooked. You need to teach people how to refer you. Give them the right words to use. Here’s an example for my services as a Business Coach:

“Dude, you’re struggling. You need a Business Coach” is not going to be well received by most people. Try this approach: “Wow, your business has really grown and you have a lot going on. Would you be interested in a free strategy session with a Business Coach? She can help you manage the growth.”  

I give my trusted referral partners a paragraph of what to say. I also give them key words to listen for that would indicate a potential client. My contact info on my phone has my logo in place of a picture. It makes it very easy for people to remember who I am.

A Referral is not a Sale

When you refer someone to me it is 100% on me to make the sale. Yes, your kind words will help. However, it is up to me to follow up with the prospect. Likewise, when you get a referral, it is up to you to contact that person, figure out their needs and close the deal. The referral is only an introduction. Always, always thank the person who gave you the referral and let them know the outcome, even if you did not get the business.

My Marketing Gets Enough Business

Getting referrals may sound like a lot of time and effort, and it is. You may be asking, doesn’t marketing achieve the same thing? Marketing is an investment in your business and effective marketing will buy you customers and pay for itself. True marketing takes a multi-pronged approach.

Quality referrals will also bring you customers, at little to zero cost. It also buys loyalty from the referral partner or customer who made the referral. The person making the referral has already identified that this is a potential client, often resulting in a much higher success rate than general marketing campaigns.

Referrals are a Two-Way Street

Yes, getting referrals is a great way to gain new customers. However, you will need to reciprocate. If you are relying on customers for referrals, find a way to thank them. If your referrals come from a trusted partner, take the time to learn how to refer business to them. Read Coach Mark’s blog to learn more about strategic referral partners.

For many businesses, referrals can be the source for 75% or more of their income. For one of my clients, it is the source of 100% of her new customers. She does no other marketing. Referrals can be a source of great customers with little investment on your part. It is worth the time to cultivate them.

Author: Sandy Merritt, Business Coach in Louisville, KY

How Much is a Referral Worth?