We live in an interconnected world. It’s easy to find information about a company, a product, service, or an individual. It’s easier to search the Internet than microfilm to find out what happened in old newspaper articles. But Google, Bing, Yahoo, or your other favorite search engine is no match for personal contact when it comes to getting business from someone else.
I’m talking about the referral.
Trusted referrals [are] the most trustworthy source of advertising.
A referral is when a colleague of yours tells a colleague of theirs to check you out or contact you in some way. It may be a formal referral with a reward structure or it may be an informal comment at the neighbor’s tailgate party. Either way, someone you have not met (the referred party) seeks you out because a mutual acquaintance said to do so (your colleague).
Referrals are greatly preferred to finding customers through old fashioned marketing because they have a dramatically lower cost of acquisition and a dramatically higher chance of conversion. This means it costs less to get the customer to sign up and it is more likely that they will. A 2013 survey from Neislen says that “84 percent of global respondents across 58 countries said [trusted referrals] were the most trustworthy” source of advertising. Especially if you sell a product or service that has a long sales cycle (consulting, durable goods, complex systems, etc.), anything that bypasses the early stages of qualification and discovery equates to faster sales and faster revenue.
So how do you get these referrals? The best way is to make sure that you are letting your existing customers know what you do and that you are always looking for more customers. Your current customers are the most likely to provide referrals. If you sell dog grooming services, and a favorite customer of yours tells their neighbor how great you are, you are likely to get a new customer from that referral.
Don’t overlook your employees, either. A formal rewards program for leads and/or converted referrals with cash, gift cards, discounts, free service, or other rewards goes a long way towards making every employee (or friend, family member, or customer) a part of your sales team. I distinguish leads from conversions because a lead is just an interested party, but a conversion is an actual customer. Reward either or both as you see fit to encourage the short-circuiting of the sales cycle.
You can also get referrals from your competitors – though there is a risk here. If your dog grooming business competes with another business in the area, but you can differentiate your services (say you specialize in family mutts and they specialize in show dogs) then you can refer business to the other place that you might otherwise not take in exchange for the business that they might not take.
In the end, a referral is more than a yellow copy of a three-part form you fill out at a networking meeting. A referral from a trusted friend is more powerful than a casual mention from a business colleague, but both can be to your advantage. Your goal should be to maximize the referrals you get from your customers, friends, family, associates, and even competitors, while minimizing the amount of time you spend chasing those referrals down. Get them, qualify them quickly, and either pursue them or drop them and move on. In the end, who you know may be worth more than what you know.