Busting the Myths About Customer Referrals

February 20, 2007

I'm currently working on a new book with two business associates, Mike Macedonio and Mike Garrison of the Referral Institute. In the process of working on our book, the thought came to us that many entrepreneurs have perceptions about referral marketing that aren't based on reality. In fact, they're delusions.

With that in mind, I'd like to share with you some of these referral "truth or delusions." See if you can tell the truth from the fiction.

Truth or Delusion? If you provide good customer service, people will refer business to you. This one's a delusion. Many, many entrepreneurs think that good customer service is the number-one way to cultivate word-of-mouth marketing and referrals. But it's not! It's a good policy and one that's vital to the health of your business, but it's not at the core of building a referral-based business.

People have come to expect good customer service. In fact, they demand it in today's marketplace. When considering customer service and its role in the referral process, it unfortunately works much more effectively in reverse: People are more likely to talk about your business when they're unhappy with you than when they're happy with your service.

So if you want to build your referrals, you must actively cultivate your referral sources and not rely on good customer service alone.

Truth or Delusion? For maximum referral impact, you should cultivate relationships primarily with the movers and shakers in your community. This one's also a delusion. The common perception is to look for influential individuals who will hopefully be able to provide large referrals for your business that will result in big sales.

I once heard a very interesting story that really brings this point home. A few years back, I was chatting with a local business owner I knew about the impact that all types of people can have on our referral business. The man owned a window covering business. During our conversation, he proceeded to tell me about a referral he got from a rather unassuming man he knew. It seems that this man's friend, an elderly woman living nearby, had one small window on a back door that needed a roll-up screen and he could find no other window covering business that would be interested in coming out to her house to measure and quote her on such a small job.

My acquaintance continued this story by recounting how he willingly agreed to take care of the job, much to the man's relief. About two weeks later, a large, black stretch limo pulled up in front of his store. A very well-dressed man in a custom-tailored suit and fine Italian leather dress shoes stepped out and came into his store. It was this little old lady's son! He had been very impressed with the work done at his mother's house and wanted to do business with my friend. He had just purchased a 6,000-square-foot house in Malibu and wanted my friend to handle all the window coverings on an unlimited budget (visualize with me all the windows in a really large house right on the ocean).

This is a great example of how a seemingly non-influential individual could provide you with a great contact. The point is to stop networking like a big-game hunter and approach networking more like farming. Cultivate all types of relationships with the clear understanding and knowledge that this is how networking works. You never know whom it is who knows just the right person to introduce to your business.

Focus on the quality of the relationships you develop and cultivate those relationships on all levels. The diversity of your contacts is much more important than looking for the "big guys." You'll be amazed how much better this approach works in the long run.

Truth or Delusion? People who like, care and respect you will refer business to you. You guessed it: This is absolutely a delusion! How often do you regularly get a referral from your mom? Yet you'd certainly be right to expect a referral relationship from those closest to you, such as friends, family members and other close associates.

The problem is, we don't remember that we need to train the people with whom we have the closest relationships on how to refer business to us. It's true! We need to educate them as well on how to listen for people who might need our products.

Teach those closest to you to listen for the "language of referrals." When people say words like "I want" "I need" "I can't" "I wish" or "I don't know who," whatever they say next could be a referral. When we teach our referral sources how to listen to the language of referrals, then we provide the tools for them to refer business to us.

Truth or Delusion? It's best to limit the number of networking groups you belong to. Truth! Networking is more about farming than it is about hunting. This means you need time to cultivate the contacts you make. In a recent survey of almost 1,800 businesspeople my company did, almost 32 percent of respondents attended eight or more networking events a month. One-third of that group attended between 12 and 20 networking events a month!

Building your business through word of mouth is not a contest to see who can attend the most meetings. It's about building the best relationships! Therefore, you must be selective about your efforts and focus not only on attending meetings but also on building bonds with the people you meet at those meetings. Unfortunately, it's all too common for businesspeople to focus on breadth--not depth--in their networking.

Truth or Delusion? The best way to ensure referral success is to follow the Golden Rule: Treat your referral sources the way you would want to be treated. Unfortunately, again, this is a delusion. While this may seem like a "trick question," it's not. All too often we deal with our referral sources the way we'd want to be treated. If we want to strike a chord with them, however, we need to keep in mind that it's important to remember what they want and need. The referral process is more emotional than it is factual. It's crucial that you find out what's important to the referral source in order to maintain and develop the relationship.

Truth or Delusion? Referral marketing is the safest form of advertising. This one's definitely a delusion! When you give a referral, you give a little of your reputation away. If the business you've referred someone to does a good job, it helps your reputation. But if they do a poor job, your reputation may be hurt.

The payoffs of referral marketing are immense--when done right! But it involves a really big risk: giving away a piece of your reputation every time you give a referral to someone. When you tell a valued customer that a friend of yours is going to take good care of them, you must have confidence in that friend.

But what happens if your friend lets your customer down? It comes back to haunt you. Your customer begins to lose faith in you, and because of that loss of faith, you just might lose that customer down the road. This is why it's so important to develop strong relationships with those to whom you're referring business and vice versa. Once those strong connections are forged, you can rest easy, knowing when you tell someone a business associate or networking partner is going to take good care of him or her, that will happen.

These are just a few of the "truth or delusion" examples we've come up with. If you can think of others, feel free to them to me.