Originally written by Matt Simmons on Small Business

For new and growing businesses with limited marketing budgets, a personal referral can be one of the best ways to pick up new business.

A referral is a business contact telling one of their own business contacts that they would recommend you, asking that person if they would be happy to hear from you directly, then passing their details to you if they say yes.

Just to be clear, a referral is not the same thing as a lead or even a recommendation.

Online enquiries can often be described as leads, but in truth a lead is any information which might help you towards a sale. Offline, that can be something as small as a tip-off about someone who might be interested in your product or service. A recommendation could be a good review online or a passing positive remark, which is great, but doesn’t actively bring a customer to your door.

A referral, however, is a warmed-up opportunity to do business – a personal introduction to someone who has expressed a specific interest in hearing from you and is awaiting your call. Effectively, it’s a lead and a recommendation combined.

The advantages of referrals over leads or passive recommendations cannot be overstated. With a referral, you come actively recommended and find yourself talking to someone who expressly wants to hear from you, meaning the chances of conversion skyrocket. Comparatively, leads offer you a mountain to climb of even getting to speak to the right person, persuading them to hear what you have to say and finally convincing them to buy.

With referrals you’re leveraging the persuasive science of authority, which professor Robert Cialdini PhD talks about in his book Influence: The Psychology of Persuasion. This instantly builds rapport and trust in you as you’ve been given the status of ‘expert’ simply by being referred into the prospect as someone who may be able to help them with their issue.

However, despite all the huge advantages warmed-up introductions offer, many make the mistake of putting all their efforts into leads, and taking a passive approach to referrals, simply crossing their fingers and hoping clients or associates will recommend them to their contacts.

Here are my top tips for taking a proactive approach and maximising your opportunities of building your business by referrals.

Incentivise referrals

Always look for some way to incentivise your contacts to pass you referrals. E-commerce uses incentives all the time. For instance, websites that offer a discount on your next purchase if you post a review are effectively offering a cash incentive for your recommendation. But how can we incentivise our existing customers without offering out cash, which can seem a bit ‘brown paper bag’?

A great way to offer an incentive to a current client while saving face, is to turn it round on them if they ask for a discount. Let’s face it, most B2B customers ask for some money off the quoted price almost as a standard measure.

Offering a discount in return for a referral is a great way of rolling with the request for a discount without devaluing your products or services. Instead of just being seen to drop your prices under pressure, you can offer a discount while maintaining a respectable level of value exchange by asking for a referral in return.

A similar approach can be applied to existing customers, whereby you can proactively offer a client a discount off their renewal fee or next purchase in return for a referral. If you can work this well, you can effectively combine a sales promotion strategy with your referral strategy. And if they are a client offering you repeat business, there’s a chance they could become your referral golden goose, especially if they are the kind of client that are well-networked with other potential customers.

Reduce the friction

Don’t make passing referrals any harder for your client or contacts than it needs to be. Make it easy. Time and time again I see salespeople asking clients for referrals but not providing them with clear instructions on how to do it – or even on exactly the kind of referrals they need. My biggest tip is to produce a templated email that your client can simply send directly on to their own potential referral contacts.

Keep it short and punchy, but also make sure you include information on why that person might want to hear from you. If you can add in specific details about the work you have done for the referrer, even better, as it makes it sound like more of a personal recommendation, not a general one.

Don’t be coy. Write what you feel your customer would say about you and they’ll usually be more than happy to pass it on and be glad you saved them the effort of writing it.

Then you can just pass that onto your client or contact and they can just send it on, without having to think too hard about how they are going to sell you. Or even worse sell you in the wrong way – so that you technically get your referral, but it turns out to be no good because your contact hasn’t explained properly what you offer.

The easier you can make it for your client or contact to refer you, the more successful your referral strategy will be.

Ask

Finally, the biggest tip for getting referrals is to ask for them. It’s an old adage: if you don’t ask you don’t get, so ask. I’ve had so many businesspeople and salespeople tell me that they ask for referrals regularly, but when you listen to them on the phone or in a pitch they just never do.

Research by the Dale Carnegie Institute found that 91 per cent of customers would happily give a referral if asked for it. But only 11 per cent of salespeople actually do ask for referrals. Similarly, only one in four sales people actually ask for the business. Ask, ask, ask – and ye shall receive.

Matt Simmons is senior sales training geek at Sales Geek.

Read more

How to maximise sales through the art of listening

How to encourage your business contacts to refer you to new clients

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