If word of mouth drives your business, you’ve probably said, “Most of my business comes from referrals,” and feel really good about it. You should because it is a compliment about the work you do.
What I also know is that when you rely primarily on referrals, some months you have new clients show up. The money’s good and you don’t have to really do anything different in order to make things happen. Other months you’re doing the same amount of work but your phone’s silent. Nobody new shows up.
What this is really saying is that your best source of new clients is one that you have no control over and that’s the real problem with referral marketing. It’s not really marketing at all. It’s about waiting.
I Asked, People Nodded, and Nothing Happened
I really understand the resistance to asking because 20 years ago, I didn’t want to ask either. Back then, I was a life coach, and connection was my strength. Clients told me they felt seen, heard, and understood, but I didn’t want to be seen as a salesperson.
Anything that felt like selling, including even asking for referrals, I tended to avoid. On the very few occasions when I did ask, people nodded and said something kind. Very, very rarely did anything actually happen as far as referrals went.
Doesn’t Great Work Generate Referrals on Its Own?
No, unfortunately not. Great work generates a willingness to refer. Actually making a referral is something entirely different.
The nods I received indicated willingness.
Chances are this is exactly what you’re experiencing now too. Your happiest clients would absolutely recommend you. “I would be happy to refer you” is miles away from “I just referred so and so to you.”
Every referral you’ve ever received came from someone who made the leap from being willing to actually doing all on their own.
Now think for a moment about all the others who said they’d be happy to refer people to you, but didn’t.
Referral Marketing Is the One Lead Source Nobody Manages
Chances are that for every other marketing effort, you know how effective it is or isn’t. You may even know your ROI or close rate or even what a lead costs you.
But for referrals, most business owners have no plan or process or even tracking. And these are the leads that arrive already trusting you.
Nielsen’s global research found that 88% of people trust recommendations from someone they know more than any other marketing channel. There’s absolutely no ad you’ll ever buy that starts a buyer’s journey that far ahead.
So why is it that no one really has a plan, process, or tracking system for referrals? Because referrals show up free. And anything that shows up without effort feels like it can’t be engineered, so nobody tries.
Yes, your best-performing lead source is likely the one you pay the least attention to.
But the truth is that referral marketing will perform even better with a strategy just like every other part of your business. (A strategy is a series of steps repeated in the same order to get a predictable result.)
But Won’t Asking Make Me Look Desperate?
If you know when and what to ask, absolutely not.
Let’s tackle when to ask first. The best time to ask is when your client or customer is happiest, which is usually right after a purchase or a win you delivered.
There’s a great story about a car dealership. When this car dealership delivered a car, and the new owner was standing next to their new car at their happiest, the salesperson handed them half of a $50 bill. They would get the other half when they sent the salesperson a referral.
Sales went up, and the referred buyers were more profitable than the cold ones who walked in.
Sure, a torn $50 bill sounds like a gimmick until you see what it can do.
And this holds for more than just car dealers. Researchers from Wharton and Goethe University tracked nearly 10,000 bank customers for almost three years. They found that referred customers were worth at least 16% more than comparable customers acquired any other way. They stayed longer too.
Think of it this way. People love recommending things that make them look smart for finding them. When you ask, “Who else do you know that would benefit from …?” right after a win, you’re asking at the exact moment they want to celebrate and tell others about their win.
However, if you ask at the wrong time, or apologetically, the best you’ll do is get a nod. At least that’s what I used to get. So, this is why you can’t leave asking for referrals until you happen to build up the courage to ask. The moment you ask matters much more than the words you use.
The Cost of Leaving Referrals to Chance
Obviously, the highest cost is unpredictable revenue, but there are others.
When you can’t predict your pipeline, you can’t hire ahead of growth. You can’t invest in your business with a calm confidence. You tend to price defensively. If you’re a service-based business, you say “yes” to clients you’d be better off saying “no” to, and you even check your phone on vacation to make sure you don’t miss an opportunity.
Regardless, when your business runs by referrals without a strategy, you’re stressed out and so are the people who rely on you.
So, Why Don’t You Ask?
Even those who know why and how to ask for referrals often won’t do it because it feels uncomfortable.
When you see your client or customer at their happiest, it can feel like you’re taking something away from them to ask for a referral. So, you skip it. You tell yourself, “I’ll ask next time.” But you don’t. It happens time after time. So, your referral marketing plan dies.
And even if you push through and ask without a strategy underpinning it, you’ll get what I did. Polite yeses and no new clients. I didn’t have a designed process for my referral marketing. I didn’t plan when. I didn’t have a reason for someone to make a referral. And I didn’t have a follow-up plan. Of course it didn’t work!
At a high level, designing a successful referral campaign requires three things:
- Finding the exact moments of peak satisfaction in your sales process.
- Choosing an incentive strong enough to motivate action without eating into your margin or attracting the wrong leads.
- Building a tracking system that tells you how successful it is.
Each of these depends on the specifics of your business. And if you get them wrong, your system won’t work.
Luckily, this is one of the least expensive growth problems you’ll ever fix. Referrals cost little to nothing to generate, close better than any lead you’ll ever pay for, and compound as your client base grows.
If you want more of the low-cost and no-cost strategies that grow businesses, start with my book.
About the Author
Karen Finn, PhD is an author and business growth strategist. Download a copy of her book, The Business Growth Plan, to get insight into the low-cost and no-cost strategies she uses with her clients to 2x-3x their revenues.
