Innovation

Generate More Client Referrals

It's pure gold when a happy customer steers a prospect to you. Here's how the masters make this happen

Written by Michelle Warren

For Thomas and Sally Cook, the line between business and pleasure often blurs. During a weekend this winter at their cottage, for instance, the husband-and-wife real estate team hosted a bevy of guests who enjoyed skating and a home-cooked dinner. It sounds like the perfect getaway, but it’s all in a day’s work for the real estate power duo, who two years ago built a cottage with a self-contained guest suite to be used as a treat for valuable clients.

How valuable? When client referrals account for 75% of new business, relationships are paramount. The Cooks, who dub themselves “Your Real Estate Consultant & Advisor—For Life,” have mastered the art of generating referrals. They and their Toronto-based team at RE/MAX Hallmark Realty Ltd. stay on top of the discipline by taking online courses and attending workshops from By Referral Only, a San Diego-based referral-coaching firm. And Sally Cook spends up to two hours a day reaching out to clients. It’s not unusual to find her at her desk at midnight, finishing thank-you and birthday cards. “The secret to building a referral business is being in constant contact,” she says.

The payback from this level of commitment can be tremendous. Joanne Black, a Greenbrae, Calif.-based referral-selling specialist and author of No More Cold Calling, says a well-executed referral program shortens the sales process by at least 30% and converts at least 50%—and usually 70% to 90%—of prospects into clients: “You’re presold. There is no other sales and marketing strategy that even comes close to these results.”

Happy clients are a prerequisite for generating referrals. But relying on good service and word of mouth will get you nowhere fast. Those who build their business through referrals say you have to make them a core part of your sales and marketing. “People who are successful with the referral process are the ones who really do the work, set the metrics and practise,” says Black.

Stacey Cerniuk is one such person. When he launched Annex Consulting Group Inc. in 1998, his office was his kitchen table. Today, his Vancouver-based IT consultancy and staffing firm has sales of almost $12 million. Cerniuk credits its growth largely to a program in which Annex pays referral sources $2 per hour billed on every referred project.

In 2009, it paid an average of $5,000 per project—$105,000 in all. Annex’s No. 1 referrer has collected $115,000 over the years. Cerniuk says it’s worth every penny, because 95% of work stems from referrals, including repeat business: “It’s almost like having a virtual salesforce out there selling for us.”

Annex uses a customized database to track everything from first contact to hours spent on each project and to generate monthly reports sent with a cheque to referring clients. “I’m delighted to sign those referral cheques,” says Cerniuk. “It’s not a sunk cost, where you spend it and see what happens.”

Like Cerniuk, Cook starts the process of generating referrals from Day One. She mentions them during the initial consultation, telling prospects to expect premium service because “I spend time with my clients, so I rely on them to build my business.”

Cook mines her database (“my lifeline,” she calls it) every day for a to-do list. She e-mails neighbourhood-specific information she thinks might interest a given client and uses a quarterly newsletter to touch base with her entire contact list. “You have to have a reason to be in touch,” Cook says, drawing the line between adding value and being a pest. “It’s all about giving people something useful in their lives.”

Every point of contact mentions referrals, even Cook’s e-mail signature. When a client forwards a name, even if it doesn’t pan out, Cook sends a thank-you note and Starbucks gift card.

Daryl Logullo, author of Maximum Referrals and founder of Strategic Impact, a Vero Beach, Fla.-based client-development consultancy, says companies underinvest in client appreciation. He says you don’t have to spend much to make a strong impression, such as sending clients subscriptions to niche magazines. One no-cost idea: set up a Google alert on a client-friendly topic and forward interesting tidbits to show your interest in her or the health of her business.

All this sounds fairly straightforward. Why, then, do so few companies have a formal referral plan in place?

“The biggest reason is people are uncomfortable asking for them,” says Black. Instead, firms talk vaguely about growing through word of mouth.

“It’s almost arrogant to think, ‘I’ve done such a great job that my client will always remember and refer me,'” says Cook. “Life goes on, and you become a blur in the past.”

Logullo says it’s never too late to make referrals a priority. Start by writing tactics and goals into your sales and marketing plan. Ask: “How will I know this referral initiative will be successful?” From there, devise a weekly plan that includes a list of client contacts. Then set aside time to hit the phones.

“Start having genuine conversations with clients about how you want to grow your business,” says Logullo. Kick these off by asking how they rate your firm on a scale of one to 10. The idea is to remind your fans why they should refer you. And, to avoid false leads, provide examples of people and companies you want to be referred to.

“The key to referrals is to get an introduction,” says Black, who advises asking your client to make the initial call or facilitate a mutual e-mail introduction.

That said, you want to make it easy for clients to supply referrals. Be flexible, and if you sense someone is uncomfortable, back off. Cook says she asks clients how they wish to proceed, whether she should take the referred person’s name and number or instead await an introduction.

Reach out to a referral by phone. Chances are you’ll get voicemail, so devise a 30-second script mentioning the referring client and suggesting a time you’ll be available to take their call. If you don’t hear back right way, follow up by e-mail.

One area in which many businesses falter is keeping the referral source in the loop. It’s respectful to send updates—”I spoke to X and we’re meeting in two weeks”—and to do so throughout the sales cycle.

In the end, a sincere thank you is paramount. “Don’t underestimate the value of a handwritten note,” says Black, who believes the five simple words “How may I help you?” are a smart way to say thanks and pave the way for future discussion.

Cook is no fan of flashy gifts, preferring ongoing gestures such as party invitations and annual calendars. But clients who generate substantial business deserve something special. That’s where the lakefront guest suite comes in. So, whether it’s penning an anniversary card, sending a newsletter or even towing a waterskiing client around the lake, Cook knows that business and pleasure are an ideal mix for client referrals.

Originally appeared on PROFITguide.com