BONUS EDITION: Return on Referral: 11 Keys to Referral Conversion

Have you or your company received referrals you do not even know about because these decision makers never took action to connect when referred? Have you received what felt like a hot lead or referral, only to see it go cold or silent for no explainable reason? Do you get frustrated by referrals that are not a good fit for your company, having to navigate how to refer them professionally and gracefully to someone else?

The two biggest problems we see with business development professionals and business owners in their business development efforts are in embracing the end goal of successfully converting a prospect into a paying customer. First the referral needs to be the right fit for your company, and your company needs to be the right fit for the prospect. Second, you need to realize that a strong referral generation program takes into consideration how the company operates, markets, and intends to grow. Your business needs to be a well-oiled machine that makes prospects excited to learn and know more.

#1: Return on Referral (ROR): Over 40 years of working with businesses, we have tracked success rates of different approaches to gaining new customers. Cold calling has proven to be the least effective means of generating new customers, with a 1% chance of securing a meeting or even a return phone call with a prospect. The most effective means is through being in the right place all the time. When someone seeking the services or products you offer is continuously being introduced to your business from a multitude of sources, this is how you increase your conversion rate and realize better return on referral (ROR).

#2: NOT Just a Marketing Initiative: Gaining referrals as a means of new business is often narrowly associated with marketing or sales efforts. While at a surface level, this makes sense, if you only associate it with marketing or sales, you may have a more difficult time converting the prospect into a long-term customer. Why? Because earning a customer’s trust goes beyond the slick marketing messaging you may be presenting to get them to buy for the first time. Everyone in the company, from operations to accounting, is and should be involved in customer experience.

#3: Attraction/Retention: Most business owners and salespeople do not understand the critical factors in attracting and retaining ideal customers. It begins with convenience and the perception that you are easy to do business with and then moves to two confidence-building phases. The first phase of effective confidence building will get the prospect to become a customer with an initial purchase. The second phase of confidence building will result in multiple purchases or an extended relationship. Customers begin to believe they are getting immense value for their time and money spent. The true pinnacle of success is when the customer believes they cannot find what you offer anywhere else. That can be a combination of a unique experience they enjoy with your company to a WOW factor that no one else provides.

#4: Wow = Customer Referrals: If you believe you need to create a referral incentive program to get more referrals from you customers, you have a problem you may not even be aware that exists. Your goal should be customer loyalty because you have delivered above and beyond time and time again. If you do an exceptional job in wowing a customer, they will happily refer others to your business. You should not need to encourage them or incentivize them. Another factor that can hurt customer referrals is not being kept in the loop with all that you offer. In interviewing thousands of customers of clients over a 30-year period, we learned that more than 50% of customers are aware of less than 50% of what a company offers. Read that again. No wonder referrals are not happening!

#5: Referrals = Beyond Customers: When a business first starts, how does it most effectively get customers? It doesn’t have customers yet so it cannot expect referrals to come from a customer base that doesn’t exist. This is the irony when businesses rely so heavily on customer referrals. They are shutting out circles and tools of influence that could exponentially increase referrals flowing in. An effective referral program should be started even before a business gets officially opened, building a network of highly influential connections that will refer customers into the business. These connections either serve the same type of customers you are targeting or are highly influential to these potential ideal customers.

#6: Internet = Credibility: What happens when you google your business name or google your name? What shows up in the feed either reinforces to a prospect that they should learn more about your business or move on to another option. In the same study that helped us define the key attraction and retention factors, we also learned that unless there is valuable content or an operational reason to access the company website, most customers had not visited the website since they were a prospect. However, it is the first place they will tell someone they refer to go to check the business out. Give your customers reasons to keep coming back to your website, as this will also remind them of all that you do. Make sure you have some credibility measures in place including testimonials, reviews, awards, case studies, or endorsements that reinforce why others have chosen your company over others.

#7: Get Involved Strategically: In a study where we compared high growth companies to negative or stagnant growth companies during the Great Recession, and amidst COVID, high growth companies were selectively involved in trade, civic, professional, or charitable organization with a clear strategy behind the involvement. Business owners that had stagnant or negative growth were over-involved. Why didn’t being involved in more organizations make a difference? Because there was no strategy connected to being a member, participating in an event or saying yes when asked to volunteer. These companies were desperately throwing spaghetti at the wall to see what might stick. The high growth companies were involved for one of three reasons. 1) Direct contact with ideal target segments, 2) Connections to a circle of influencers in their industry or marketplace, or 3) Providing resources or support to effectively operate and grow the business.

#8: How You Show Up: Your actions and how you conduct yourself when you think no one is paying attention is when you as a professional can really set yourself apart from competition. Do what you say you are going to do. Return the phone call. Respond to the email. Follow up as you said that you would. Help make a connection for the prospect even if it does not benefit you initially. This further enhances your strategic involvements when prospects see how you behave when you are not getting paid. Those who shine in volunteer roles get referrals for their business because people think, “Wow, if they are this way when they are just volunteering their time, they must be amazing when getting paid to do it!”

#9: Capacity to Deliver: The worse thing a business can do is ramp up marketing efforts when there could be capacity issues within the company that could impact delivery. Being referral-ready means you can effectively deliver to impress and win even more business. Referral generation should consider how you are going to deliver what you promise. If you have process issues, workforce issues, or supplier issues, you are inviting a prospect into a bad experience. Make sure your ducks are in a row operationally.

#10: Preference Building: In this age where any type of business can become commoditized, it is essential that your business is doing something that no one else is doing or can do as well. Even better is if what you offer cannot be provided by anyone else. Do you have proprietary products or offerings that are protected by trademarks, service marks, patents, or copyright? If you don’t, you need to stop looking like everyone else and figure out what you can offer unlike anyone else.  When you create something of preference, you gain customer preference.

#11: Strategy + Action: Generating quality referrals that easily convert to long-term customers is a strategic initiative that requires due diligence, focused thought, and momentum building decisions to be successful. The most critical component after these factors is consistent, unwavering action. We have been sending a weekly inspired action newsletter since 2008. Recently we had three prospects convert to customers because of this weekly email. Most interesting of all, is when we explored the open rates of all three of these new customers, not one of them had opened the weekly email for several months. The subject line caught their attention, because we always ask a question that gets to a pain point. They were inspired to action by simply seeing our name in front of them week after week, and then that singular question hit them in a way that inspired them to finally reach out to us.

In closing, a rule of thumb for return on referral is that you realize a 10x return on the investment of your time and dollars spent. Determine a realistic period of your recouping the investment of time and money and track your results against that investment. Referrals can be the lifeblood of your business when strategically motivated. A successful conversion is achieved when new customers have decided you are worth purchasing from repeatedly, and even more important, that your company is the best or only choice for what they are buying. When you realize that level of loyalty, your referral conversion will be far greater than the 10x return on investment.

Yours in economic vitality,

Sherré L. DeMao, CGS is author of Dream Wide Awake, 50 Secrets of Growth Companies in Down Economic Times, and Me, Myself & Inc. – a Synergized World, An Energized Business, Living Your Ultimate Life, and the CEO/founder of BizGrowth Inc. an award-winning next-level strategy, training, and intellectual property development firm based in Denver, NC, serving clients across the United States. As a Forbes Council expert and thought leader since 2022, her blog seeks to help entrepreneurs build businesses with economic value, worth and preference in their industries and marketplaces.