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Frame of Reference

Referral-based business is good business, so why not put it front and center?
February 1, 2008
URL: http://www.entrepreneur.com/article/188918

Referrals are great. Everybody knows that. You do some nice work for a customer, they tell a few people, and next thing you know, you've got another customer--and it didn't take any extra marketing or sales work on your part. Aren't you brilliant?

What's more, that customer is probably already sold on the value of your product or service, isn't looking for a deal and won't jump ship the next time they can save a buck elsewhere. That's the powerful nature of referrals. But far too many companies sit and wait for these referrals to happen on their own.

If referrals make for such great business, why not build your business around a strategy aimed at generating referrals from 100 percent of your customers and strategic partners? Here's how to go about creating a referral-based business:

1. Deserve referrals. One of the great things about adopting a 100 percent referral-based mind-set is that you're forced to examine every interaction you have with customers to ensure that they're delighted at every turn. They won't refer unless they feel good about your products and services and like doing business with your company. Map out each way your business comes into contact with prospects or serves customers. Where are the gaps? What are you lacking in service? What could you add to create over-the-top happy customers?

2. Expect referrals. Now that you know you deserve referrals, make them part of the deal. Introduce your 100 percent referral-based mind-set during the sales process. This can be as simple as saying, "Our customers are often so delighted with our service that they're willing to introduce us to at least three more people who need this kind of result." As simple as it might sound, injecting a phrase like this early on in the conversation helps you set the expectation that they'll be happy and that you want them to refer business in return. Some entrepreneurs marvel at how easy and effective this step--when done correctly--can be.

3. Create the moment-of-truth moment. Once you've set the referral expectation, you still have to deliver the goods, delight the customer and collect those red-hot referral leads. Make sure you build and document your process for actually collecting these leads.

It can also be helpful to build some referral education into this process. For example, let your customers know exactly what your marketing action steps will be if they refer a lead to you: Tell them what you plan to send the lead, how you plan to nurture the lead and that you plan to extend the lead your best services. In some cases, your lead sources will be motivated by rewards, but mostly they want to know you appreciate their efforts and will therefore take good care of their lead.

4. Follow up. Make sure you incorporate lots of follow-up into your routine. Follow up often with the referred leads. In many cases, they may not be ready to do business with you just yet, but they need to know you're still around.

Lastly, keep in contact with your referral sources, and let them know what has become of their efforts. Many of your customers take great satisfaction in knowing they've played an essential role in your success.

John Jantsch is a veteran marketing coach, award- winning blogger and author of Duct Tape Marketing: The World's Most Practical Small Business Marketing Guide. Find out more at ducttapemarketing.com.