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How to gain referral business print Print

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Getting referral business from your existing customers is a cost-effective and efficient way of increasing business. This guide explores the key drivers that lead to referral business and offers some tips on exploiting the potential of referrals to the full.

Reducing your costs

Getting referral business from your existing customers is a smart way of doing business. It's smart because gaining more business from existing customers costs you far less than finding new customers. It also allows you to take advantage of a key marketing principle: maximise the full the potential of what you already own (a valuable customer base) before you spend money on looking for more customers or clients. Finding new customers is expensive. In addition, as the rest of this guide emphasises, getting referral customers is a natural by-product of doing business well.

Better conversion rate

Another advantage of referrals is that the sales conversion rate is much higher. In Sales Prospecting for Dummies, author Tom Hopkins claims that the average sales closing ratio for non-qualified leads is only 10% compared to a 60% close ratio for referred leads. It's not difficult to understand this better conversion rate. A referral has built-in credibility that reduces the risk new customers might feel in doing business with you. The customer is half-sold on doing business with you even before contacting your business.

Utilise the 20/80 rule

Which customers should you concentrate on to get referrals? All of them, but particularly the 20% of customers that (in most businesses) provide 80% of your business. These customers are likely to be the most enthusiastic advocates of your business.


Referrals: the key drivers

If they're not happy, it won't happen

The first and most important key to getting referrals is to make sure that your customers are more than happy. Customers who are less than satisfied are very unlikely to refer others to you. People like to talk about excellent, unusual or outstanding businesses they have encountered. But they also spread the news of unhappy experiences even more widely. The golden rule is to go out of your way to make sure your existing customers are very happy.

Good systems are essential

It's important that you have effective feedback systems in place to monitor customer satisfaction. If there are any problems with products or service levels, you need to be able to pick these up quickly before they damage your business.

See complaints as a turnaround challenge

Complaints and poor service offer you an opportunity to turn the situation around. This applies even more to that 20% group of customers. With some smart thinking, you can convert a disgruntled customer into an advocate for your business. These advocates can turn out to be the most ardent champions of your products and services because they have been so unexpectedly and pleasantly surprised by how you've rectified a wrong or a mistake: The secret is to identify unhappiness early and correct it. Don't let the problem fester.

 

Case study: A business breakfast

A group of business people have all gathered for breakfast by 7:20am on the pavement outside a coffee bar. The bar opens at 7:30am, but it's bitterly cold and they notice a staff member inside. They knock on the door.

Can we come in?
Sorry, we only open at 7.30.
But can't we just come in and wait?
We only open at 7.30.

The business has just lost not only this group of freezing customers, but also potential referrals. This customer service disaster could easily have been averted through training focused on the customer's needs rather than inflexible rules.

Good staff training

You can only rectify problems if your staff report the problem to you in the first place instead of hoping the problem will disappear. Staff should be encouraged to see that customers are more than just customers. They represent unseen customers (future business) as well. Try to create a business culture where staff are praised, not punished, for alerting you to such problems, Giving staff some authority and flexibility to rectify problems on the spot is also important.


Great follow-up pays dividends

Always follow up sales

Try to follow up all sales through a thank-you card, a telephone call or other form of contact. How soon you follow up depends on the nature of your business. Sometimes following up too quickly with a telephone call can seem a bit too aggressive and self-serving and therefore counterproductive. It may be better to wait a while.

Selfless service

Too many businesses forget about the customer after they've been paid. If this sounds familiar you've likely experienced this yourself. The attitude of: 'Now I've got your money I've lost interest in you' comes across all too clearly in many commercial transactions. This makes it comparatively easy to differentiate yourself from the rest. Simply visit or contact the customer when no money motive is involved.


Delight and surprise them

To gain referral business make sure you exceed the expectations of your customers or clients. Here are some suggestions:

  • Under-promise and over-deliver.
  • Send unexpected gifts.
  • Send useful information.
  • Be seen as an authority and a resource.
  • Keep in contact at least every 90 days.
  • Be different: do something better than the competition.
  • Make your customers feel special or privileged.
  • Community involvement also helps because people like businesses that put something back.

Anything that builds goodwill is a good way of encouraging referral business.

 

Work to a plan

Referral business works best when you work to a plan.

Set specific targets

'Let's aim for a 20% increase in referral business in the next 90 days' is far better than 'Let's try and get more referral business this year.' The reason for this is simple. If the target is not specific, then you can't measure progress towards the target.

Be consistent

Treating everyone consistently and setting high service standards are the keys to achieving the targets you set. Train your staff so that everyone is aware of the targets and how important referral business is to the success of the business.

Monitor progress

Have systems in place that allow you to measure how much extra referral business you're getting. Without such systems you have no way of knowing whether you're likely to achieve your targets. More important, without monitoring, you have no way of knowing if your customer satisfaction levels are increasing or decreasing.


More tips on how to get referrals

Asking for referrals

  • Be careful about how direct you are about asking for referrals. People don't like to feel used. Asking is easier if you've built a close relationship with a customer or client. One business person simply says: 'You know, I really enjoy doing business with you. I wish we had more customers like you. Do you have any friends who'd like to do business with us?'
  • If you're asking for referrals, it helps to be specific about your target market 'We're looking for people/businesses that….'
  • Hand out business cards. An effective tactic is to write the customer's name on the back of the card, so that if it comes back to you, you know whom to thank.
  • Try this tactic: 'If one of your friends comes in with this card, I'll personally make sure they get the best service and a great deal.' In this case make sure you train your staff to identify these referrals and notify you so you can keep your promise.
  • Always thank people for a referral. Never take referrals for granted. Give them a quick phone call, a card, small gift or whatever seems appropriate.
  • A newsletter (conventional or email) offers an excellent opportunity for you to provide useful information and ask your current customers to pass it on.
  • Make it as easy as possible for customers to pass on information.

 

Conclusion

Referral business offers you a cost-effective way of building your revenues. Success depends upon delivering excellent service, so you need systems in place to monitor and maintain high service and quality levels. You also need the full co-operation of your staff and this means explaining to them the importance of keeping customers very happy. In achieving these goals, you're also building an expanding circle of excellence. Satisfied customers bring in more customers who in turn refer your business to others.


Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit anz.co.nz/business
Visit your nearest ANZ branch

      

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