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Do you use referrals to generate leads for your business? Done correctly, asking people to recommend your services to others can be one of the most effective methods of lead generation.

If you need financial advice, for example, are you more likely to pick someone off the internet, or an advisor who has been recommended to you by someone you trust?

Many of us may ask for referrals on an ad-hoc basis, but with a bit of structure and consistency, this can quickly snowball into a sure-fire method of achieving growth for your small business.

Why ask for referrals?

Word of mouth: There are many benefits to referrals. We are all much more likely to use the services of a company that has come highly recommended to us. In fact, especially when it’s a service in a competitive industry, it can be something of a relief to have a recommendation rather than having to spend hours researching companies online.

Low-cost marketing: It’s also an incredibly low-cost ‘marketing’ method. All you’re doing is asking, it costs nothing other than time.

Going in ‘warm’: Beginning the sales process with an introduction puts you in a position of trust straight away, so you’ll be much further along than leads generated ‘cold’. It also usually means you don’t have to quibble so much over price, as a potential customer is often willing to pay more for a business that has been recommended.

Higher conversion rate: Leads that have come through referral are usually much more likely to be converted into a sale, and often at a higher value.

The snowball effect: Referrals usually attract referrals. Gaining a client through referral usually sets a precedent for the relationship and starts a chain reaction. That client will likely give you referrals and so on.

How to gain valuable referrals

Referrals for lead generation only works if it’s done correctly. If you haven’t done it before, or you haven’t found it to be very lucrative, then perhaps it’s worth reviewing your strategy.

It also goes without saying that referrals will only work if your product and service is absolutely top notch. If it is, you’ll find that people will have no qualms at all about recommending you to others.

Here are some of our tips for a successful referral strategy.

Referrals, recommendations or introductions

Depending on the person you’re asking, you might want to phrase it differently. Asking for a ‘referral’ can feel like a big deal, whereas asking someone to help introduce you to anyone they know who might benefit from your services, is not so daunting.

Who to ask and how?

Think of everyone you know or do business with – they are all potential extensions of your sales team; all they need is a little prompting from you. Friends and family, past and future customers, business networking contacts, neighbouring businesses, former colleagues and industry connections all have potential.

As long as you do it in a non-obtrusive, friendly way, you’ll find that people will be only too happy to help.

For example, if you’re asking a previous customer, you might say ‘did you enjoy your rejuvenating facial? If so, why not recommend us to a friend who deserves a treat too? And to say thank you, we’ll give you both 10% off your next visit’.

To an industry connection: ‘As someone who is so well-connected in the industry, I could really use your help. Do you know anyone who it might be worth me having a coffee with? If so, I’d really appreciate an introduction.’

A great method with a business networking contact would be to find someone you know to refer them to first and with a bit of luck they’ll do the same for you. If they don’t, they’re unlikely to mind an email from you in the next few weeks asking if there’s anyone in their network who it might be worth you speaking to.

Don’t be afraid to be specific either. If you’re looking primarily for people in charge of purchasing for health and beauty companies, then it’s fine to say that’s the sort of referral you need. This will avoid wasted time all round.

The key is to just ask. The more you do it in your circles and beyond, the more of a culture it will become and soon everyone will be wanting a piece of the action.

The referrals process

Using referrals for lead generation generally works best when it’s consistent. Why not set yourself a target? It could just be to send out one request per day. Spending an hour a week to write a quick plan of who you are going to approach each day can help you stay on track.

If you use email marketing, you can set automatic emails to customers once they have used your services, offering ‘recommend us to a friend’ discounts.

Meeting regularly with other businesses is also a great way to build your referral network. If you’re stuck for networking opportunities, we host a number of business events where you’ll be able to meet like-minded people.

The golden rules of referrals

Make the call

If someone has gone to the trouble and risk of introducing you to someone they know, you must follow up on it. Even if you know it’s not going to lead anywhere in the immediate future, it’s crucial to make that contact with a ‘sorry we can’t help this time, but please keep us in mind for the other things in the future’. If you don’t follow up, the person doing the recommending is unlikely to do so again.

Do a good job

Obviously it’s important to provide a high level of service all the time, but if someone has put their trust in you by recommending you to one of their friends or customers, then you might want to put in that extra bit of effort. A job well done in this scenario reflects well on you, reflects well on the person who recommended you and is likely to result in more of the same in the future.

For more help on this, or any aspect of running your small business, contact Juliette Ryley, your local ActionCOACH today. And if you know any other businesses who are looking to grow this year, please pass on our details! 😉