Merchant Capital

The Value of Referrals For Your Small Business

Here’s a question: Which sales or marketing tactic is giving your business the highest return on investment right now? Is it your email marketing, PPC campaigns or inbound marketing strategy? Actually its none of the above. The tactic that is most powerful for your business growth, is referrals. Why? Because referrals require almost no financial investment but have the power to deliver warm, valuable leads. Unfortunately, many people don’t know how to get good referrals for their business. The good news is that if you can improve the way you think about referrals and ask for them, you can grow your business in a really cost effective way.

Networking as a referral generator

The problem with formal networking organisations is that the referrals are not based on actual experience which has a habit of backfiring and trust being diminished. The key to any good referral is trust. If you have served a customer well and have left your them satisfied, asking for a referral to friends, family or other businesses should be relatively simple. This is crucial because if the customer cannot genuinely say that they have used your service or product and truly vouch for your integrity, passing on your details will feel luke warm and won’t gather momentum.

Social media as a referral generator

Savvy business owners already understand the power of social media to generate referrals through rewards programs that encourage existing (happy customers) to spread the word. Customers really like feeling appreciated and so offering them a thank you and something valuable in exchange for a referral is a worthwhile move. It doesn’t have to be big or expensive and sometimes just a thank you card or credit towards a free coffee at their next visit, will suffice. Of course it depends on the value of the lead as well. For example if you are a coach, and your happy client has referred you to a friend, and this referral subsequently translated into a deal worth thousands of Rands, then a thoughtful bottle of wine to the original referring customer makes good sense. This will go a long way as the customer will feel validated and will likely do it again.

Where businesses often go wrong

The trouble comes in actually asking for the referral in the first place. Either they ask, but way too late. Because now the customer is no longer excited about the experience and has lost the desire to assist. The trick is striking while the experience feels new and exciting for the customer. This will also translate in the way they pass on your details. The second place people go wrong is that they take “no” for an answer. The trick here is 4 fold:

  1. Ask for the referral straight away – like at the exact time of the sale. While this feels incredibly direct and uncomfortable, your customer is (at that moment) absolutely convinced of your credibility and are elated about your product. So this is the time to ask and expect results.
  2. Include a referral template on email - This makes the process as easy as possible for both of you. As this type of transaction is favour-based, you want to make it simple and quick for the customer to complete. Some may use the template, others may use their own. The most important thing though is that they give you the details of a warm lead.
  3. Now thank them – As explained above, making sure their effort is valued is important and will encourage that customer to refer you again.
  4. Make this standard practice – It is important that each and every sales person understands this methodology and implements it with every sale.

The bottom line

According to  Social Media Today, 54% of marketers say that referral programs cost less than on any other channels and rate referrals as the second highest growth source when it comes to quality leads. In fact farming for referrals is much cheaper than advertising. Meaning that once you make getting referrals a priority and teach your sales team how to make this happen, the results will speak for themselves. This is one strong habit you can build right now to revolutionize your business in no time at all.

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