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Why You Need A Rigorous System To Get More Referrals

Dec 26, 2009 Sales

It’s no surprise to anyone that referrals can be the most profitable and effective source of new clients for professional service firms. Yet in truth, few of us generate enough high quality referrals to reach our business growth objectives.

So do referrals really work? Are we mistaken in thinking they’re the best business development approach for professionals? Or perhaps the concept is right, but it’s our execution letting us down?

For most professionals it’s a bit of both. While all the evidence highlights that our clients rely on referrals as their most trusted source of information on new suppliers; we must remember that not all referrals are created equal. Unfortunately, some referrals can be little better than random cold calls – a name and number we’re given of someone who may or may not need our services, may or may not be able to afford them, and may or may not see the referrer as a credible and trusted source. It’s our ability as professionals to work with our clients and partners to deliver the quality – not just the quantity – of referrals that will make all the difference to our success.

Do Referrals Work?

When Raintoday magazine surveyed over 200 buyers of professional services they identified “Referrals from Colleagues” as the #1 method they preferred to use to learn more about new service providers. Close behind in #2 position was “Referrals from Other Service Providers”.

Buyers of professional services need to answer two key questions when hiring a new firm: “Can the provider do the job?” and “Can I work with them?”. How do they answer these questions? They either use their own personal experience with the firm – or they take the opinions and recommendations of people they know and trust: their colleagues and other service providers they’ve worked closely with.

For infrequent or “distress” purchases (for example, many legal and consulting services) – services bought because of an immediate or unexpected need; the reliance on trusted third parties increases. Buyers won’t invest in building a relationship up front with a provider of services they don’t know they’ll ever need – so instead, they rely heavily on the opinions of those they trust with experience themselves.

So do referrals work? The answer is a resounding “Yes” – if done correctly.

You’ve Got to Have a System

In his brilliant book “Creating Rainmakers”, Ford Harding looked at some of the commonalities and differences between highly effective and less effective business developers. His results were somewhat surprising. In reality, despite our stereotype of Rainmakers as extroverted smooth talkers, Harding found very little in common in terms of background, personality, style and approach. However, successful business developers did share one common factor: they all had developed a systematic and effective method which they coudl “switch on” when needed to generate new business. That system was often very different between Rainmakers (one, for example relying on cold calling, another on networking, another on an extensive contact network from previous client engagements, another on writing and publishing articles). But all had a system which worked well for them and which they could deploy consistently without having to think from scratch of what to do. When needed, they were able to “switch on” their system and carry out the steps which would bring them more business. less effective business developers, in contrast, either tried to “wing it”, or had to spend so much time thinking through and starting from scratch – gathering contact details, developing a script, identifying networking meetings, writing an article, etc. – that the opportunity was lost before they were ready.

It’s the same with referrals. Although we all know how powerful referrals can be, how many of us take a systematic approach to generating them?

Law firms, consultants and accountant wouldn’t dream of pumping time and money into a new advertising campaign or website without a thorough analysis and business plan for that investment.

But when it comes to referrals – which most firms say are potentially their best sources of new business – most simply leave it to chance.

At best, they remind senior staff to ask for referrals when they can. But they don’t put thought into how to ask, who to ask, what to say and how to attract referrals. At worst, they don’t discuss referrals at all.

Many firms believe that if they do great work, they’ll automatically get referrals. Sadly, research by TARP has shown this to be far from the case.

When it comes to dissatisfaction:

* An unhappy customer will share their bad experience with an average of 12 other people

* Each of those 12 people will then mention it to a further 6 people on average.

Unfortunately, satisfied customers aren’t so forthcoming with their opinions.

* A happy customer will only share their experience with a few close friends;

* Those friends will not remember much and will not share that information with anyone at all.

Essentially, without further pro-active work from the service provider, positive “word of mouth” ends with a few friends and colleagues of the satisfied customer.

So professional service firms who want to get more from referrals need to adopt a systematic approach to getting them. They need to plan and implement a programme utilising all the key factors which influence the quality and quantity of referrals they receive. Those factors will be explored in more detail in future articles.

To find out more about Marketing Professional Services, then visit Ian Brodie’s site including features on law firm marketing.

Tags: Advertising, Business, business development, entrepreneurship, marketing, networking, referrals, Sales, selling