Nothing beats good word-of-mouth.

Whether you’re looking to find a good deal on a purchase, a nice meal out, a plumber you can trust, a new job, or to hire someone to build-up your online presence, when someone you know and trust refers you to a specific vendor or individual, his or her words carry a lot of weight for you and for the person/service being referred.

While marketing and brand recognition and online presence are critical, referrals (especially for small businesses) remain king. As the subject of a referral, the implication is that you/your business has passed a litmus test of sorts. You’ve made a customer happy, exceeded expectations, and delivered a quality product or service—so much so that someone is willing to recommend you to a colleague, friend, or family member.

That may not sound like much—you might even assume it happens all the time—but trust me, positive referrals are hugely important to the success of small businesses and entrepreneurs  . . . and it doesn’t happen all the time. There is often just as much BAD word-of-mouth out there as there is good, and you don’t need to be a rocket scientist to figure which kind of word-of-mouth you’re after. 

Without further ado, let’s take a look at previous blog of mine on the real value of referrals. It’s an oldie, but a goodie from nearly three years ago. Enjoy!

The Real VALUE of Referrals

(Originally posted on April 28, 2011)

Between you and me, referrals are the lifeblood of my business, the jungle juice. Without referrals, this King Monkey would seldom jump for joy. I suspect referrals are critical for your business too, especially if you work in the professional services space.

Now, I wouldn’t be a good marketing guy if I told you referrals were the only answer. They aren’t. There are zillions of other ways to reach your target audience, and each has its own time and place. But referrals are a vital part (if not the vital part) of any successful business generating and business sustaining strategy. That’s right—many times referrals are the key both to finding customers and keeping customers.

How do you go about generating referrals? The easiest, least costly way is simply to ask for them. Anyone can do it. In fact, you could start doing it right now. For example, “Would you refer a friend or colleague you think would benefit from my product or service?” (See—I just did it!)

Where do you start? You don’t have to look any further than your current customers. They already know you, they trust you, and chances are they know someone just like them who could use your help. Think also of the message this sends your customers: “I value you so much as a customer that I respect your opinion on who you think would make a good client.” Talk about a retention strategy. Most customers will be flattered you asked (as long as there’s no pressure or heavy-handed salesmanship, of course).

Now think about all of your close associates and those service providers with whom you already do business . . . your network. They, too, can be a great source of referrals. Like your current customers, they already know you and may have the inside track on prospects they think will be a good match for you. They, too, will be flattered you asked, further cementing your relationships.

So with one simple action—asking—you’ve:

  • Created a huge sales force of goodwill ambassadors that’s bigger than any sales team you might otherwise employ
  • Generated better leads of people more likely to want to do business with you
  • Strengthened relationships with current customers and your network

In my book, that all adds up to huge VALUE for everyone involved: you, your customers, your network, and your prospects.

TIP #1: You may be wondering, “Couldn’t I sweeten the pie by offering incentives (bananas anyone?) to my customers and my network to make referrals?” You could, but before you commit, consider how doing so might decrease the authenticity of and value of the leads you get.

TIP #2: I believe you get by giving. As you get referrals from your network, don’t forget to return the favor.

TIP#3: Check out these great reads for referral base marketing: The Go-Giver by Bob Burg and John David Mann and Referral of a Lifetime by Tim Templeton, Ken Blanchard, and Lynda Rutledge Stephenson.