Why Your Business Needs Referrals
Every Business Needs Referrals
In a world where many business owners turn to offline and online advertising to build their business, it is easy to forget the power of referrals.
While online adverts with the likes of Facebook and Google obviously work, the most cost effective way of reaching new potential customers is for an existing customer to refer your business to people then know.
If you don’t think referrals work then ask yourself this question. If you were buying a service or physical item would you be more likely to buy from someone who has been recommended by someone you know and trust, or would you buy from an advert you happen to see? Chances are you would check out both but most people would go with the recommended supplier.
Good referrals are like good reviews and every business needs good online reviews.
Good Referrals and Bad Referrals
Remember referrals work both ways. A good referral will almost certainly get you a sale. A bad referral will almost certainly lose you more than one sale.
Keep your existing customers happy and ask them for referrals. Don’t be pushy but you must also not be afraid to ask a satisfied customer to tell his or her friends about you.
So important are referrals that they have been called “forgotten gold.”
They are “forgotten” because many business forget to ask existing customers for them. And “Gold” because they are worth so much to any business. Most businesses are aware that they should be focusing more on getting referrals, but they don’t because they don’t have a referral system in place.
Setting up a referral system needn’t take up as much time or resources as you think. Here are a few reminders as to why setting up a referral system is a must for any business.
Little Or No Cost
If you look at what your marketing an advertising costs are and then work out how many people used your service or bought something from you because of that advert, you will be able to work out the cost per lead. This lead cost can be substantial. A well developed referral system will at best cost you zero and at worst will cost you a fraction of advertising and marketing.
More People Will Buy From You
There are three main ways people might reach you.
- Firstly there is the cold call. Typically this will lead to a sale only 1% of the time.
- Secondly you may find people come to you through advertising or some other form of marketing. These leads will typically buy from you between 15 and 30% of the time.
- Thirdly there are those who come to you because they have been recommended by someone they trust. You are now looking at over 70% of these people becoming your new customers.
Some business report that a sale made to a recommended customer is higher than those who have not been recommended. The reason for this has to do with trust. The fact that they have been recommended to come to you makes them trust you more and spend more in your business
Unpaid Sales Force
Making sure that those who have been referred to you get the best of service from you is vital. Why? Because by doing that you are turning the referrals into referrers. Yes that’s right they will go and refer their friends to you also. Basically what you are doing is building an ever increasing group of unpaid sales people.
Now what business doesn’t want that?
Your Referral System
Make sure that you are aware of the huge potential for growing your business because of referrals. Of course no one will refer you or your business if you do not provide a fantastic service. Work on making your business referable.
Don’t be shy in asking those existing customers that love what you do to refer you. Have a line already prepared so that you don’t even need to think about it. When someone tells you they have enjoyed buying from you say something like. “Thank you, please tell your friends all about us.”
Lastly, make sure you thank your referrers. This will encourage them to recommend even more people to you. So if a customer tells you that they were recommended by a friend, ask straight away if they could tell you who it was. Tell them that you would like to thank that person for referring them. Then make sure you follow through with a thank you note, a call or even a small gift to that person.