Why are referrals such a great business generation tool?

Consider these reasons to develop your own referrals systems, contacts and results. Referrals offer the following:

• The most cost efficient and profitable source of business acquisition
• A far higher conversion ratio from prospect to client than any other source
• Less time is taken to access the prospect, advise on their options and write the new business
• Generally a higher rate of persistence and consistency of business written
• Give a greater capacity to develop “nests” of business
• Business is generally more discreet and confidential
• Generally a better class of client is attracted
• People referred are generally more responsive to other services you can offer
• Delivers a consistency and regularity of supply of new names
• The three products principle of client sustainability

It’s true. People would rather do business with people they know—or know of—than with strangers. Haven’t you experienced the same thing yourself? There is nothing more reassuring than a positive endorsement from someone you know and trust, is there?

When you’re introduced to a prospect through a personal recommendation, that prospect has a vastly higher comfort level than, say, a buyer you find from a list or a cold call.

So why is it that, while we all want to use referrals, we don’t pursue them as much as we should? Practical evidence would suggest that it’s largely a matter of developing the correct habits and being persistent.

Change your thinking

Imagine your business as an infinite web of relationships. Every one of your business contacts has the potential to connect you to dozens of other contacts.

The relationships are out there but they’ll likely remain out of reach unless you actively pursue them. It may never occur to your current contacts to broker an introduction. It’s up to you to put the idea into their heads and help them positively refer to you.

Don’t feel sheepish about asking for referrals. There’s nothing pushy about it. People won’t give you referrals unless you deserve them. In fact, getting a referral is one of the highest compliments you can receive in business.

Let your customers know that you value and prize referrals, which you’ll earn by providing excellent quality products and services. Simply educate them to say this is the way I do business

Make asking for referrals a HABIT

Have you heard about advisers who built their business almost solely on referrals? How did they get so good at it?

A classic story from the USA goes like this. When a now successful adviser was an eager young trainee, his manager trained him to ask for referrals by conditioning.

Every time he glanced at his watch, which he did often in his zeal to stay on schedule, it meant it was time to ask for a referral. Eventually, it became second nature. Why, because he conditioned himself to ask everyone as part of his presentation.

Here are some easy ways to start developing good referral-building habits through conditioning and good work habits.

• When you begin working with a new customer, make referrals part of your initial agreement. “If I do a great job for you; and I will; do you agree to give me X number of referrals”? Chances are your customer will be impressed by your honesty, dedication and drive.
• Whenever a customer compliments you, respond with a thank you, quickly followed by a referral request. For example, “I’m so pleased you’re happy with my work. Do you know two or three other people who can benefit from my services”?
• Use every client meeting as an opportunity to collect referrals. To keep yourself on track, jot a reminder down in your meeting preparation notes. Make it one of your standard talking points. It simply becomes part of your sales process.
• Set a weekly goal for yourself. Keep track of the number of times you ask for referrals each day. You don’t need to limit your requests to clients; you can also ask business associates, family, neighbors, business neighbors, particularly people you spend money with, acquaintances and prospects.
• Make the most of every networking opportunity. Step out of your comfort zone at networking events and set a goal to talk to at least three new people. Plan in advance what you might say. Everyone is drawn to interesting, enthusiastic people.
• Always be specific when asking for a referral. Looking for high net worth individuals? Say so. Interested in midsize companies? Want to meet a certain type of person? Define them. Let people know what you are looking for. If you don’t tell your contacts who your target customer is, you may waste time pursuing leads you can’t use.

Give and you shall receive

One of the most powerful ways to elicit referrals is to give them generously yourself. Whenever you have the opportunity to refer an associate or bring two contacts together, do so.

When you’re attending any networking event, make a point of introducing people to one another. Most people will appreciate the referral, and it may inspire them to respond in kind.

Always thank someone who has given you a referral. Send them a note or a reward, keep them informed of your progress and maybe even treat them to lunch.

What’s the closing ratio on referral business, compared to other prospecting methods?

Whatever that number is for you, you can bet it’s a whole lot higher than cold calling, advertising, web marketing or virtually any other sales technique you might employ to gather prospects.

The referral is the number one tool in your kitbag. Get in the habit of reaching for it often.

Thoughts on referrals

During a recent session on building a referrals based business at a practice I was asked how do you explain to clients why you need referrals.

To develop this idea of a referrals based business you have to explain two things to people who are potential referrers.

1. This is what we do
2. This is why we do it

It stands to reason that if you can articulate and illustrate what you do people will understand your approach to this from a business perspective.

You can mount a very compelling case for asking for referrals as part of your business model. You can explain that you do not leave the new business generation part of your business just to chance.

By having a manageable and measurable system in place you can show this to be beneficial to potential referrers.

An explanation of what you do from a business perspective is important for clients to understand. This idea of business continuity through a referrals system for new business acquisition is critical in explaining that you are here for the long term.

When clients understand this is just not short-term transactional business but a business based on a long-term relationship they will actually be more positive in their delivery of referrals.

So developing a sound, business based reasoning about what you do is critical to the success of gathering referrals. Reinforcing why you are doing it comes across not only as good practice, but accentuates the need for a strong referrals flow that is regular and reliable from your existing clients.

Consider how you would explain in simple business terms why you need referrals to clients. Build a strong verbal justification for referrals, not a defense about what you do and why you do it.

Activity: In the next 5 interviews you have with clients ask them this simple question: Who do you know that would benefit or really get value from having a chat about (insert your specialty).

This might be concepts like Transition to retirement. Consolidating super. Getting your nomination of beneficiary correct. Investing in property through their self managed super fund (insert your own specialty)". Remember you are not selling product. The only outcome you require is to acquire some more people to talk about how you can help them.

This article is reprinted with permission from Jim Prigg CEO and founder of Knowledgemaster International (KMI) Pty Ltd. KMI is an online resources company that delivers practical communications, interaction, sales and soft skills tips, tactics, techniques THAT WORK.

Learn more about winning business programs by calling Jim at mobile 0408 520 453 or jim@knowledgemaster.com.au.

Which areas of your business could you use more practical knowledge to boost your productivity and profitability? Email jim@knowledgemaster.com.au.