How to build your business with referrals

Consider putting one of the most persuasive forms of marketing to work for your business.

Referrals are highly regarded by customers when they’re making purchase decisions. A recent Nielsen Harris Poll shows that 82% of respondents seek referrals from family and friends. Small businesses really depend on referrals, because of their persuasiveness and the low cost of generating them compared to other forms of marketing.

Your best customers may recommend your services on their own. But you don’t have to leave it to chance. There is a lot you can do to generate referrals. Consider this step-by-step process:

Overcome Procrastination and Shyness
Have you ever heard the phrase “The cobbler’s children have no shoes?” Many small business owners are working so hard to serve their customers that they don’t have the time to focus on their own goals. But generating referrals doesn’t have to take a lot of time. It can be incorporated right into the relationship you have with your best customers.

Some small business owners feel shy about asking for referrals. A better perspective is to view referral generating as a mutually beneficial situation. When your customers recommend your services to their network, and you provide good service, this boosts the referrer’s reputation, too. 

Choose the Right Time and Right Customers
Some small business owners try to prompt referrals the first time they have a business transaction with a customer. It’s better to let your customers experience the benefits of your products and services first. You could also choose a time to ask when your relationship with your customer has reached a high point. This may be after a long project or large business transaction that got great results. 

What’s more, you may only want to ask a limited number of customers for referrals. You can use formal surveys or informal methods to identify the right customers. A popular survey method that may be of use is called the Net Promoter Score (NPS). Based on a 1-10 scale, the NPS is a one-question survey asking “How likely is it that you would recommend our company/product/service to a friend or colleague?” Referral prospects would then be chosen from the higher scores. Informally, you can select the top 10% - 20% of your customers to ask for a referral. 

In either case, you should vet your customers’ networks as much as possible. Connecting with your customers on LinkedIn and viewing their professional networks can be one way to do this. A recommendation will be more valuable to everyone involved if it is shared with genuine prospects. 

Know What to Ask For
There are many ways your customers can offer referrals. The best ways may be determined by the business you are in and the comfort level of your customer. In a professional services business where relationships require a high degree of trust, a referral by phone or face-to-face may be best. 

You could also ask your customer if they’d be willing to do a video testimonial or a written testimonial to place on your website. For retail businesses and restaurants, complimentary online reviews on websites like Yelp or Facebook may be sufficient to gain customers. 

Sweeten the Deal
As noted before, it’s good to ask customers for referrals at a peak point in your business relationship. You could also show your customers extra attention before you ask. Many small businesses offer a rewards program for referrals. This can be as simple as an offer of free products, cash, or discounts for the referrer if the new customer does business with you.

Show Gratitude
Remember to say “thank you” for referrals. You should also focus on maintaining the good relationship. A customer willing to refer you is likely to continue to do business with you long into the future. With practice and improvement, your referral-generating process will become a valuable tool for growing your business.