How referral marketing can boost your business

Estimated reading time: 5 minutes

Would you go to a hairdresser without a recommendation from a friend? What about trusting someone to do your taxes? Whether you’re an accountant or teach pottery, referrals are key to generating both business and revenue. Referrals from people who know and love your work can be a powerful and inexpensive way to build trust and attract new customers. So, how can you harness the power of your customers to grow your business? Let’s look at the five cornerstones of referral marketing:

  1. Provide added value.
  2. Inspire people to spread the word.
  3. Ask for word-of-mouth referrals.
  4. Consider a referral incentive
  5. Celebrate referrals.

1. Start with a great product or service.

The best products and services benefit from the most organic word-of-mouth advertising. If you have something that people want or rave about, other people are going to want to check it out. Providing value to your customers is a must, but going above and beyond can really make the difference.

Some business owners make the mistake of being too transactional or narrow as they’re closing a sale, says Bill Cates, president of Referral Coach International, which works with organisations and small business owners to gain more referrals and personal introductions. Increase your referral chances by providing outstanding service to customers from the very start to completion of your services.

‘Ask good questions, share good information’, Cates says. ‘Do it in a way that makes the sale and makes you refer-able at the same time.’ For instance, instead of just tidying up a client’s garden, ask how they’d ideally like their garden to look and what they want to use the space for. If you’re in the insurance business, explain why you’re recommending certain products and how it will protect your client. This approach allows you to connect with customers on a more personal level and provide greater value, which in turn makes you more refer-able.

Joanna Alberti, founder of speciality gift and illustration shop philoSophie’s and named as one of Businessweek’s ‘Top Five Under 25’, says personal recommendations go much further than any advertisement. ‘My illustrations are so personalised to my clients that they create an emotional connection, and in turn, my clients have a natural tendency to recommend me to friends.’

2. Inspire people to spread the word.

Customers who’ve experienced your work are excellent referral sources because they can speak from first-hand experience…but these aren’t the only people who can refer you. Even if a neighbour or friend of a friend hasn’t tried your personal training or ordered one of your gift baskets, they can still provide a referral. Cates calls these strategic allies, but he also explains a challenge that comes with them. ‘They probably like you and trust you, but they may not be very clear on your value.’

So, it’s your job to make sure these people understand the benefits of your business and your audience, so they can refer you to the right people, in the right way. Explain the types of clients you work with and why. What common goals or pain points do your clients have and how do you solve those pain points for them?

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Make it easy for your friends and family to spread the word about your small business. Keep them well-stocked with business cards or postcards, and be sure to thank them if they end up referring a new client to you.

3. Ask for referrals.

Some business owners rarely get recommended because they’re too timid to ask, or they ask in a way that’s too vague. Questions like, ‘Who do you know that we could help?’ or ‘Who else should know about us?’ don’t usually get results, according to Cates. ‘The bullseye in asking for referrals is to suggest an introduction to someone else you know’, he says. For instance, if you’re connected with someone on LinkedIn, you can see what connections might interest you and ask for an email or in-person introduction. People are more likely to act on a specific request than a vague one because it takes away the guesswork for them.

Your relationship with your customers should be mutually beneficial…that’s why the best time to ask for a referral is after you’ve exceeded their expectations. Perhaps you’ve just catered a corporate party and your customer is thrilled with the response, or you’ve recently hosted a ceramics workshop and the group is loving their handmade products. While you’re fresh in their minds, thank them for using your services and ask for them to promote your business. Specific ways to do this include:

  • Leave a stack of business or referral cards with your client to hand out to friends who rave about the event.
  • Ask your client to post a picture of your event on social media and tag your business.
  • Ask your client to write a review online.
  • Inquire about friends or neighbours who might be interested in your product or service.

‘It’s difficult to openly ask customers for referrals especially when you’re a small business, because it may feel like you’re tooting your own horn’, Alberti says. ‘If customers really love your product or service, they shouldn’t mind at all, so don’t pass up this valuable opportunity.’

4. Consider a referral incentive.

Depending on the nature of your business, you might decide to offer a referral incentive. Cates says this works best when both the new customer and the person referring you get the incentive. For instance, gyms often give current members a free month or some other incentive for bringing in new members, while the new member might get their first month free or a discounted joining fee. Referral incentives you might consider are:

  • A percent-off discount on their next purchase.
  • A free gift or service to customers that bring in multiple referrals (like a free sample or complimentary service upgrade).
  • A special ‘insider’ perk, like free shipping or delivery, an exclusive invitation to an event or a first look at a new product or service.

Of course, even with a juicy reward, you still have to provide value and make sure you’re perceived as refer-able. Otherwise, no incentive will be enticing enough for someone to recommend you, because a bad referral could reflect poorly on them. In order for customers to recommend you, they need to genuinely believe in the great value and service you offer, or the referral will likely fall flat.

5. Celebrate referrals.

Even if you don’t provide a referral incentive, be sure to thank people who recommend you and make it known. Cates suggests including this message on your voicemail: ‘Please leave a message at the tone, and if you’ve been referred to us, please let us know whom to thank.’ This may be the first interaction a new prospect has with your business, and it sends the message from the very beginning that you welcome and appreciate referrals. Some business owners also include the words ‘We welcome referrals’ at the bottom of their email signature.

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Say ‘thank you’ to customers who send you referrals with a personalised email or handwritten thank-you card. It’s a small gesture, but it can make a big impact on your clients.

By creating a culture of providing value and celebrating recommendations, you position your business as worthy of repeat customers and a steady stream of referrals that can help sustain you over the long term.

Meet the author

Susan Johnston Taylor writes about business and personal finance for The Atlantic, The Boston Globe, Learnvest, Entrepreneur and Fast Company. You can find her on Twitter @UrbanMuseWriter.