Chapter 8
It is often said that referral is the sincerest form of flattery. OK, I made that up! But for many of us, customer referrals are our main source of new leads.
In the Formula, these leads are measured separately to those generated from marketing activities (Key #1). There are two reasons for this: firstly, you employ different strategies to encourage referrals; and secondly, because you should achieve a higher conversion rate from referrals.
After all, people that are referred to you often come primed and ready to be converted! This is because your product or service was recommended by someone they know and trust.
If your existing customers are willing to put their reputation on the line by recommending you to their friends, this is a massive vote of confidence in your business.
And yet, many businesses don’t have a formal system for requesting referrals. Heck, most people I have spoken to don’t have an informal system…in other words, they don’t even ask!
So the first step to encouraging more referrals is to ask. Don’t worry if this makes you uncomfortable – you don’t necessarily need to do the asking in person.
I know at least two professional contacts who have a line in the footer of their emails that reads something like “we grow by referral – of you know anyone that would benefit from our services, please let us know”.
Then there is the difficult question of whether to incentivise your customers to give referrals. It works well in many industries, but many other people are hesitant (and you may well be prohibited from doing so in your profession). Don't forget that you don’t need to give cash as an incentive.
For example, DirecTV offers customers $100 in bill credits for every person they refer, and the new customer gets the same reward. They have effectively made their customers part of their sales force!