3 Things You’re Doing Wrong With Referrals

Referral networking—where people band together to help each other generate business through word-of-mouth and referrals—is all the rage. What’s not to love about other people keeping an eye out for opportunities to send you leads—for FREE?

It’s especially popular because your customers trust recommendations from people they know more than any other kind of marketing. Word of mouth is the top factor in 20 to 50 percent of all purchasing decisions and increases the effectiveness of your paid marketing by a whopping 54 percent.

While the rewards of a thriving referral network are lucrative, building and maintaining one requires real work. The task becomes more arduous with the following missteps.

1. You View Every Networking Contact as a Referral Source

In a perfect world, everyone sends leads to each other. In practice, attempting such an endeavor is a great way to burn out on the idea of ever sending a referral again.

Trying to keep everyone’s business top-of-mind is exhausting and overwhelming. And with referrals being a two-way street, if you can’t do it, your fellow networking companions likely can’t either.

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Find three or four people with whom you can create a referral partnership. They should operate businesses complimentary—but not
competitive—to yours. (Example: Foundation repair and mold remediation go hand-in-hand.)

Also look for people whose approach to business is similar to yours; your customers know you and will expect a comparable level of service from anyone you recommend (and you should, too).

Focusing your referral efforts in this manner can have a snowball effect: Frequent contact through frequent referrals leads to a greater level of trust in and knowledge of each other, enabling you to send—and receive—better referrals.

Keep in mind that greater familiarity can also lead you to the following referral-ruiner.

2. You View Your Referral Partners as Your Sales Team

You’ve identified your referral partners. You’ve learned a lot about each other’s business and have a solid relationship based on mutual care for your customers, and the referrals are flowing—in many ways, it feels like they’re an extension of your team.

Your partners are already in front of your potential customer talking about you—what if they knew to just mention this product? Or that price point? Then the eventual conversation would be so much easier!

Asking for or expecting this of your referral partner hurts you twice over. First, even if your referral partner is willing to talk up your product, they will never know your business as well as you do. Second, the sales team expectation can strain your partnership as you hit the inevitable missed opportunity, misstatement or accidental broken promise.

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Within your partnership, set clear expectations of where a referral starts and ends. The person referring should gauge the potential customer’s
interest or need, ask if they want to be referred and then provide contact information to both parties. The referrer should not make promises,
do any scheduling or provide more than a cursory overview of the referred company.

The customer is getting the benefit of a referral to a trusted company. The true benefit of a referral partnership is not that it sells products, but that it sells reputation.

But how do you know for sure that you aren’t sending your clients to someone who operates on an “all talk, no action” motto? If you wait until a very angry customer asks why you recommended the world’s worst whatever to them, see the next point.

3. You Don’t Follow Up on Your Referrals

In the example above, you’re lucky your customer tracked you down. Many will file the experience away, especially if it was just disappointing rather than disastrous. But now, they’ve mentally linked you with dissatisfaction—at best—and you don’t know to fix it.

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When you make a recommendation, let both parties know you’ll follow up. This creates an understanding that you care about its conclusion. Checking back with your customer then cements that conscientiousness, even if the referral ended poorly. They may also tell you something they haven’t told your referral partner—whether negative or positive—that you can then pass on to help them build a better business.

Even after you know without a doubt that your partner is referral-worthy, make it a practice to follow up on each referral. This furthers your relationship with both your customer and your partner while helping you gauge the overall success of the affiliation.

While a referral partnership rarely operates equally, you should have a sense of the value it adds to your business to know if it’s time well spent.