If you’re getting few customer referrals but are confident that your products and services are as good as or better than those of your competition, you should seriously examine the steps you’re taking to turn your customers into your most effective salespeople. Then, you should write a plan detailing how you will increase your customer referrals.

 Rule One: Ask your customers for referrals.

Oftentimes, the simplest techniques work the best. Back in my furniture days, when I had a good customer on the phone I would simply ask whether they knew a colleague who might be able to use our products. In one case, I got a referral that resulted in a $25,000 sale that would never have happened otherwise. First, without the referral, I never would have known that the person needed my product. Second, even if I knew about the person’s needs, I wouldn’t have closed the sale because I lacked the introduction from somebody my new customer knew and trusted.

Rule Two: Written follow-up communication also works well in stimulating referrals.

For some business people, it’s challenging to ask directly for referrals. The fear of asking for a referral should be quickly overcome since you’re really not selling but offering your customer the opportunity to refer you, a qualified vendor who has proven ability, to solve the problem of a friend. Who wouldn’t want to help a friend solve a problem?

Fortunately, written communication can also be a very effective tool for generating referrals. A custom cabinet manufacturer I knew left a detailed survey with a self-addressed stamped envelope asking for detailed feedback on the just completed job and included a section where the customer could refer friends resulting in some excellent introductions that led to large sales.

Rule Three: Cultivate your key influencers.

Every business has a core group of customers who generate the largest number of referrals. Yet, how many businesses have active programs to reward these key influencers? What are you doing to reward your key influencers?

Various studies have shown that discounts or rebates to folks who send business your way oftentimes fail to provide motivation unless they offer truly significant rewards. Unfortunately, it’s impossible to justify major referral awards for low dollar value or low margin products.

Happily, I found that the simplest and most cost-effective techniques worked best to motivate my key influencers. I developed a plan to stay in contact with my key influencers and kept them in the loop with thank you notes, calls, and updates on the satisfaction of the referrals they sent my way. My customers were genuinely pleased to know that I was helping their friends.
Since few people really engage their past customers in a dialogue, you’ll stand out from your competitors much more than you imagine. The time and money you invest in a good contact management system to manage your key influencers effectively will pay for itself very quickly.

There really is no magic to generating customer referrals; however, those companies that succeed in this area all seem to have a plan for doing it and they stick to it.