Getting Customer Referrals

Persuading your customers to refer you to their friends isn't as hard as you think.
Magazine Contributor
4 min read

This story appears in the February 2003 issue of Entrepreneur. Subscribe »

The most successful salespeople can trace their sales back in a direct line, one customer at a time. The first sale was made to John Doe, who then recommended the salesperson to Jane Smith, who then recommended him to Frank Jones and Sarah Collins and so on. Because your customers already know you and trust you, you're much more likely to get more business from them than to get business from somebody who's never bought anything from you before. It's also easier to get your customer--who already knows the kind of value you provide--to present you to a third party.

Although referrals are one of the most important selling tools you have for growing and expanding your business, they are almost always underused. Why are salespeople so reluctant to ask for referrals? There are several reasons:

* They think a referral should come automatically--they shouldn't have to ask for it. In an ideal world, things would work that way. In the real world, however, it may not occur to the customer until you ask.

* They are afraid to ask. What if the customer says no? If you have provided service and value, the answer will most often be "Of course, I'd be glad to." If you haven't earned the right to ask, your fears about getting a "no" may be realized.

* They don't know how to ask. You're not asking for anything you don't deserve. So the next time a customer tells you "We love your product" or "Thanks for your help in solving this problem," say "You're welcome. Is there anybody else you know who's having a similar problem I might be able to help?" or "Do you know any other vendors you might be able to recommend our services to?" I like to ask "If you were in my business today, what three people would you call upon that you have relationships with?" Find the way to ask your customers that you feel most comfortable with-and then go for it.

* They feel uncomfortable asking a customer for a favor. Think of it this way--you're bringing value to that customer, and you're simply asking if you can provide value for someone he or she knows who might also be in need. In that light, by referring colleagues to you, your customer will be doing them a favor.

You don't have the right to ask for a referral until and unless you have provided service and value to that customer. If you don't do that, it's like (as motivational guru Earl Nightingale used to say) "sitting in front of a fireplace saying 'Give me some heat and then I'll throw on some wood.'" Remember, you've got to give before you can receive.

While dabbling in real estate recently, I came upon The Fifth Edition of Real Estate Principles and Practices (South-Western Thomson Learning), a book that contained what I thought was a good definition of value: "the power of a good or thing (service) to command other goods or things in exchange." The value you give to your customers should command not only a monetary exchange, but also the desire to help you build and grow your own business just as you help them build theirs.

The second part of value, according to this book, is "the present worth of future rights to income." If you provide value beyond what your customers pay for, then that's worth "future rights of income," whether it's through new business with the same person or through the referrals that person gives you.

The type of value you're giving customers today determines how much referral business you will get in the future. It's investing now to pay off later. The greater that value is, the more you have future rights to income on your services.

So don't just sit in front of the fireplace and ask for the heat; throw in some wood and you'll get the fire your business needs.

Are you afraid no one will be interested in taking your customer survey? Get the feedback you need with the CriticalAlert! program from Qualistics-it allows you to encourage survey participation by offering your customers an incentive. For example, say you want to conduct an automated telephone survey to evaluate your business's efficiency, cleanliness and overall quality. With help from Critical Alert! you can set it up so that every 10th caller wins a prize-say, a free drink if you own a restaurant, or a free car wash if you run an auto detailing company. Data reports are generated automatically within 24 hours, and you can access them online. cost: $99 per month, plus a one-time $40 setup fee.

-Steve Cooper

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