Connecting with like-minded professionals who serve a customer base similar to yours for the purpose of mutual referrals can be very beneficial to the growth of your business.
When a prospect comes to you via a referral, that person is immediately more qualified than someone who comes to you through any other form of advertising.
A typical relationship with a new customer progresses through the sales funnel, like this:
A referral lead is ideal because the referred prospect has already moved through the KNOW-LIKE-TRUST phase because they KNOW-LIKE-TRUST the person who referred them to you:
In addition, a lead from a referral comes to you
- Pre-qualified by someone who knows you and what you do;
- Pre-disposed to trust you because they trust someone who trusts you; and
- Prepared to hire you because they’ve got a problem they need you to solve
Ideal Referral Partner
When you start thinking about who to approach to become your Referral Partner, ask yourself:
- What kinds of customers does this potential Referral Partner serve?
- How many of these customers match my ideal customer profile?
- What kind of business is likely to be able to send referrals to me?
- What kind of business am I likely to be able to send referrals to?
For example, you’re an insurance agent, making a call on someone whose home has been damaged. Can you refer a roofer to these homeowners? A plumber? An attorney? You can if you’ve cultivated some ideal Referral Partners.
Another example, you’re a kitchen designer. Can you recommend a banker to a homeowner looking to remodel their kitchen? An architect? An interior designer? Appliance store? Tile studio? Lighting gallery? Flooring store? Contractor? Think of the many parts that go into creating a new kitchen.
Wouldn’t you rather work with suppliers you know and trust, rather than waiting for your new client to go out and find them for herself?
How Many Referral Partners Do You Need?
Truly, there’s no limit, but it’s probably smart to have more than one in each business category you’ll be sending referrals to.
Getting Started: Keep It Simple
Because you and your Referral Partner must provide services to the same customer base, you’ll need to develop a profile of your ideal customer.
Here’s a check list of characteristics to help you identify your ideal customer:
- Demographics: Age, income, number of children, etc.
- Location: The areas / neighborhoods you target
- Cost: How much your services cost and what level of income your ideal customers need to pay for your services
After identifying your ideal customer, answer these questions:
- What’s in it for everyone involved in the Referral Plan?
- Why would people refer you?
- What makes your services worthy of referral?
- Who do you want referred to you?
Know Each Other's Businesses
We’ve said it before -- you and your Referral Partner should have similar types of customers in common. You should also know how your Referral Partners conduct business, and they should know the same about you.
- Sales Cycle. How long does it typically take for a prospect to move through the sales funnel and reach a buying decision?
- Deliverables. Discuss what your customers get when they hire you.
- New Client Intake Process. Do you make initial contact by phone? Do you prefer to have your Referral Partner set up the introduction?
- Marketing Activities. How will you promote your Referral Partner? Think of places where you can give credit to your Referral Partner. Make sure it’s reciprocal.
- Contingencies and Problems. Plan in advance how you will deal with a difficult referral customer you might want to cut ties with or any other problems that will inevitably arise.
- Fine Print. Agree from the onset of your relationship the terms and conditions connected to referral fees.
If your Referral Partner doesn’t know you very well, building trust can be a challenge. Help him or her come to know, like and trust you by
- Sharing “Before and After” Case Studies, testimonials and online reviews
- Tell them about other referral relationships you have.
- Discover if you have any customers in common from before you started the referral relationship. Happy customers are the most powerful proof of your business expertise you can offer.
The more your Referral Partners feel they can trust you, the more business they will send your way.
Working The Program
Referral programs are considered successful when referrals flow both ways. Give first, and you’re more likely to get. The best way to start getting referrals is to start sending some.
After you share the profile of your ideal customer with your new Referral Partner, get to know your Referral Partner’s ideal customer, too. You expect him to know yours – turnabout is fair play.
If the situation occurs where you’re doing all the referring and/or not getting referral fees, you’re not benefitting from the relationship. Time to make some changes. Don’t invest any more time, effort and energy. Find someone new who is tuned into the program.
Your relationship with your Referral Partner is based on the fact that you have similar types of customers in common. In the getting-to-know-you stage, you should determine how your Referral Partner conducts business, and he should know the same about you.
This is where communication becomes key to the success of your Referral Program.
Communication snafus will de-rail your Referral Program faster than any other challenge. What you meant to say, what you actually said, what they thought you said, and what each of you remembered about the conversation – so much room for misunderstanding.
Best practices say you both should agree to touch base regularly; once a month is ideal. Every minute you spend talking with a Referral Partner will be beneficial. Whether face to face, on the phone, or via e-mail, you’re building trust.
Referral fees should be discussed at the beginning of the relationship with your Referral Partner. By having this conversation when you start exploring the possibility of forming an alliance, you help to avoid any unpleasantness down the road.
And what causes more unpleasantness than money?
Referral rewards should be generous enough to encourage referrals. The higher the price tag of a transaction, the bigger the reward should be.
Your reward program can be as simple as a certain dollar amount paid for a certain dollar amount sold.
Don’t be cheap! If you send a gift rather than cash, it should be appropriate for the cost of the closed sale. Think of something you would like to receive -- that’s what you should send.
There’s no better way to encourage your partners to send more referrals to you than to reward them for the ones they sent.
You and your Referral Partner are going after the same ideal clients, so join forces! Cooperative marketing activities will generate more business together than your separate individual efforts. Two heads are definitely better than one.
Some tactics that might work well: Host or sponsor live events in your town, like chili cook-offs or a 5K run, educational seminars, open houses at your business or at your Referral Partner’s (take turns), videos on your Facebook page or on your YouTube channel – you can think or more activities together.
Create a partner page on your website: Have your Referral Partners do the same with links back to your site.
Open House: You can be the host and introduce your clients to your Referral Partners as a trusted resource. And vice versa.
Press Releases: Announce that you’ve formed a working alliance with your Referral Partners. Focus on the benefit of the partnership to your customers.
Advertising: Share ad space and expenses. Together you can afford a much larger and more prominent ad than separately.
Direct Mail: Post card marketing works especially well for joint marketing. You get one side of the card, your Referral Partner gets the other.
Email Marketing: Send to your email list an offer of an exclusive deal on your Referral Partner’s products and services.
Trade Shows: Whether you share a booth or get booths close to each other, you can steer customers to each other. Go together on a great give-away, then share the leads you generate.
Conferences. You can make and receive introductions if you go with a Referral Partner. You can vouch for each other’s credibility.
Newsletters. Give your Referral Partner a column in your newsletter. Introduce him or her as a guest author.
Customer Events. Reward customers for their loyalty. Host Customer Appreciation events throughout the year that include your Referral Partners.
Prospect Events. Jointly host an event that benefits a local charity. You’ll get free local publicity to beef up your local SEO, you’ll get mentioned in promotions for the charity, etc.
Blogging. Guest blogging with your Referral Partners is a great way to expose your readers to the full range of products and services they can access because of their connection with you. Benefits are two-fold:
1. It adds valuable content to your website to pump up your SEO efforts, and
2. It strengthens your connection with your Referral Partners.
Social Media. Introduce your social media followers to your Referral Partners regularly. Cross share content with your Referral Partners - hash tags, likes, shares, reposts, etc. When you give a review or make a comment about another business’s products and services, it speaks well of them -- and about you.
Reputation Marketing. Create online reviews of your Referral Partners businesses. When customers tell you they had good results with one of your Referral Partners, coach them how to write a review.
Your Referral Program will thrive if you work it, and this means taking care of your Referral Partners: from nurturing them through the discovery and launch of the partnership on through reinforcing their confidence in you by taking excellent care of your new customers who are referred to you.
The successful Program will create a cycle that runs on trust: Your Referral Partners are happy because you did what you do, which in turn leads to more opportunities for you to do what you do that then makes them happy.