The One Marketing Tactic That Can Improve Your Cash Flow

If you're leaving referrals to chance, you're missing out on business. Follow these easy steps to make referrals part of your marketing strategy.
June 23, 2014

How did you find the last service provider you used? What about the last product you bought?

It’s likely you asked someone you know who they used or where they purchased a particular item. That’s pure human nature to ask the people we trust about the things that we want.

According to the 2013 Nielsen Global Survey of Trust In Advertising, “Recommendations from people I know” comes out right on top at 84 percent. Nothing else even comes close.

How do you tap into that? You could leave referrals to chance and hope that people will refer others to your business, but a better way is to actually make it part of your marketing strategy. It’s not hard to do, and the payback will be well worth it.

Before we get into what you need to do to create a structured referral marketing strategy, let’s clarify the distinction between a lead and a referral. They are two very different things. And referrals will yield a much better return on your investment.

A Lead Is Typically Cold or Lukewarm

Here’s an example of a lead: I got an email from a colleague that said she had heard about a man from a friend who probably needed some help moving his business along. Then she gave me his contact details.

Getting business from this person would be a real long shot—not much different from making a cold call. Here’s why: This person doesn’t know a thing about me, and the person who provided his contact information doesn't know him.

A Referral Is Warm to Hot

Here's an example of a referral: There was a woman I knew through an organization that I was very involved in. I knew of her and had spoken to her. She had never done any business with me but she did know of me. She called me one afternoon and she had someone in her office with her who ran a small business and was really struggling and wanted to talk to me about the potential of working together. When she called, she actually had her friend right there with her and was ready, willing and able to put that friend on the phone with me.

See the difference?

Referrals are a warm personal introduction. It could come from a common connection between you and someone else or directly from a prospect or one of your customers. And it’s a good way for you to increase sales in your business, too.

3 Steps to a Referral Marketing Strategy

Before you can start getting referrals, you’ll need to define a structure and method, which can be done in three easy steps.

Step 1: Identify potential referral partners. Start by taking an inventory of your contacts, including your customers. Your objective is to identify those people who have the potential to be most successful in referring business to you. Two of the best types of referral partners are your customers and joint ventures.

Finding customers who will be your referral partners should be your top priority because they’ve already done business with you. They’re the people who know, like and trust you, and know what kind of service you provide. They can provide you with the best referrals possible. Plus, if they are your ideal customer, they likely know more people like themselves and will refer more ideal customers to you.

Joint ventures are those people who have a similar customer base but don’t compete with you. For example, if you are a financial planner, your best joint venture partners might be a CPA firm or someone from a business consulting company.

Step 2: Prepare tools for referral partners. To ensure you receive the right type of referrals that will provide a good return, you’ll need to educate your referral partners so they can send you the type of referral you want.

You’ll need to prepare communications for partners—discussion scripts, outreach emails, process emails, thank you emails or letters—that they could send on your behalf. Then you’ll document the workflow of what steps will transpire during your referral process.

You’ll also need to make sure you have templates for discussions with your referral partners so you clearly communicate who you’re looking for and confirm what types of tools they might need to help you.

These tools take some time to develop initially, but will save you time and headaches in the long run, because you can use them over and over again.

Step 3: Put it into action. Once you have your partners, tools and methods defined, you need to make it happen. That will begin with outreach to those potential partners. Then schedule follow-ups to let them know how the referral process is going, whether you are getting the right type of referrals and to answer any specific questions or concerns they may have.

Referral marketing can pay off in a big way for your company. Take the time to set the foundation, then put your plan into action.

What about you? Are you using a referral marketing strategy in your business? Please share your tips in the comments below.

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