If you don't have a systematic referral program you
are missing out on one of the simplest, lowest cost,
ways to generate your highest quality customers.
you haven't yet institutionalized a referral program,
you're making a huge mistake.
Why are Referrals so Powerful?
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.
because you know that a friend has no ulterior motivations
but to do what's in your best interest.
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?
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
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
Customer Service Doesn't Always Equate to Lots of Referrals
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.
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.
Word of Mouth Advertising and a Referrals are Not the Same
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 methodical 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.
Making it Rain Referrals Starts with Your Attitude!
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.'
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.
People Want to Give Your Referrals
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.
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.
How to Ask for a Referral
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?'
This is how 90% of all referral questions are asked and
unfortunately, you might as well not ask the question.
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?' 'Yes, most
of the time.'
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.
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.
Two Types of Referral Programs
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.'
Customer Referral Program
Receiving referrals from customers starts with giving
great customer service. Without going into much
detail about the ins and outs of customer service I'd
like to share with you eight 'Moments of Truth'
that provide opportunities for you create a loyal
customer for life.
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.
- Moment of Truth # 1: The moment your customer
- Moment of Truth # 2: The moment one of your new
customers comes back to place a second order.
- Moment of Truth # 3: The moment a customer has
- Moment of Truth # 4: The moment one of your
customers has been through a hard time because
of a foul up on your (or their) part.
- Moment of Truth # 5: The moment a customer needs
a favor from you.
- Moment of Truth # 6: The moment you see your
customer in public.
- Moment of Truth # 7: The moment your customer
brings in a referral.
Perhaps the simplest way to harvest referrals from
your customers is to write a simple letter asking
them for their help.
Centers of Influence and the 80/20 Rule
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
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.
Tier 1 and Tier 2 Centers of Influence
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
What is Your Goal with Tier 1 Referral Givers?
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:
1. Be their number one referrer: Make sure that you
also have a referral mindset. Before you get you must
give, which means that in order to get lots of referrals
from these people you must be giving them referrals.
2. Sponsor networking events or social gatherings
for them. Make sure you try not to invite competitors.
Have a good cross section. You might hold several
of these parties throughout the year so that you can
invite several different potential referrers from the same
3. Put each one of them on your newsletter list.
Give them helpful information that they can use to
make their sales go up. Give them marketing advice
and information on new developments in your industry
in which they should be aware.
4. Invite them to an all-expense paid marketing
association luncheon that has a great speaker.
Rent a limo to pick them up, serve them wine or
fine drinks, and treat them like stars. (I know a
mortgage broker that does this with real estate
agents and makes a fortune in referrals)
5. Purchase an information product about marketing
in their business and give it to them as a free gift.
They will thank you for your interest in wanting to
help them grow their business.
6. If it's a big potential referrer, send them a Harry
and David (www.harryanddavid.com) year round
gift that they will receive every month. This will keep
you in their minds all year long. Not long ago
someone did this for me and my wife and I glow
when we receive our fruit basket each month.
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.
Educate Your Tier 1 Centers of Influence with Special Reports
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
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.
Tier 2 Centers of Influence
Tier 2 Centers of Influence are people whom you come
in contact with on a regular basis in your personal life
but aren't connected to your industry. These are people
who come in contact with a large number of other people.
They too can multiply your marketing efforts.
Your Tier two Centers of Influence include but are not
limited to the following:
4. Small business owners
5. Corporate business executives
7. Financial planners
9. Pest control people
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.
The Power of Cross-Promotions
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
buy __________?' Or 'Do you a good ____________
that I can go to see about getting _____________ done?"
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.
The are some examples of complimentary products or
services businesses that can take advantage of this
- 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.
Ten Questions to Help You Become a Networking Pro
In my earlier years when I was naive I thought that
my success would increase in proportion to the
number of business cards I handed out. I handed
them out in droves.
the numbers that count, but the quality of relationships
that I nurtured.
To be a great networker you must become 'you' centered
rather than 'me' centered. Recognize that people
want to talk about themselves more than anything.
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
1. How did you get your start in the widget business?
People like to be the movie of the week in someone
else's mind. Let them share their story with your
while you actively listen.
2. What do you enjoy most about your profession?
This question elicits a positive response and good
3. What separates you and your company from the
This question gives them permission to brag about
4. What advice would you give someone just starting
in the widget business?
This question makes them feel superior and allows
them to do some mentoring.
5. What one thing would you do with your business if you
knew you could not fail?
This question allows your friend to fantasize and
they will be thankful that you cared enough to ask.
6. What significant changes have you seen take place
in your profession through the years?
Asking people who are a little bit more mature in
years can be perfect because it allows them to reminiscing
about the good ole days.
7. What do you see as the coming trends in the widget
This is a speculation question and positions them as an
expert in their industry which make them feel important.
8. What was the strangest or funniest incident you've
experienced in your business?
People love to share war stories but usually get a chance
to tell anyone about their experiences.
9. What ways have you found to be the most effective for
promoting your business?
This question, again, elicits a positive reaction and
also gives you an opportunity to see how they think.
10. What one sentence would you like people to use in
describing the way you do business?
You are allowing them to give themselves a compliment.
Who doesn't like compliments?
You'll notice something in common with each of these
questions. They all center around the person you are
talking to and allows them an opportunity to talk about
each of these questions, but do have a few ready when
you talk to others.
Start (or join) a Referral Group
Choose ten people that you think would be good
members of your referral group. They may or may not
be your Centers of Influence. Let them know that you
are establishing a referral group and that they were one
of the first people to enter them mind because of their
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
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:
1. Appoint yourself as the host of this network In other words,
be their leader. (No need to tell them, however.)
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?'
3. The answer? Training in how to build their businesses via
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
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
A Caution About Giving Referral Fees
Use a referral fee as your last ditch strategy. Money has
never bred loyalty. Friendship, trust, and a positive relationship
are what drive loyalty to you and your business. If you give
referral fees you will undoubtedly run into a situation in which
the referrer claims he gave you a referral and you disagree.
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
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
Establishing a referral program with your customers and
other influential people is absolutely critical. Many small
business people make the mistake of not institutionalizing
a systematic program for referrals. They confuse word of
mouth advertising with a referral system and, hence, overlook
the single most effective advertising for a small business.
Don't make the same mistake. Develop your networking
skills and referral programs today and start receiving an
endless stream of new customers.
David Frey PS: Join DAVID FREY live when he gives an A-Z demo of his favorite referral