By Jack Anzarouth
Word-of-mouth referrals are one of the best ways to grow a small business. Eighty-two percent of people across 60 different countries say they check recommendations from family and friends before buying products or services, making them more powerful than any type of advertising out there.
While the people who are close to customers are the main source of recommendations, they aren’t the only source. Customers will also take into consideration the suggestions they receive from other companies they do business with. Since they already trust these companies, they are more prone to follow a recommendation from them. And a customer that finds your business via a referral already has a head start in creating that bond of trust between brand and customer, which means having to spend less to procure them as a lead.
This is why establishing a referral network with companies in non-competing industries is a great lead-generating tool for your business.
Just like with your customers, entering into a referral agreement with another business requires a relationship built on trust. Asking another small business to risk its reputation (and risking yours in turn) by giving each other’s customers recommendations is no small feat for a small business.
You have to trust that the other business is going to uphold their end of the bargain and provide stellar service to the customer you’ve given the recommendation to. If the other business fails and the customer has a bad experience, it’s going to look bad for your business, too.
If you’re okay with taking on this risk, mutual referrals can lead to a steady flow of leads that are already primed to do business with your company. The four main elements of building an effective referral network include:
1. Qualified referral sources
Look for businesses that your client base would visit prior to them visiting your company. They go to that other business because they require something it offers, but they also require something that you offer that is related. For example, a web design business’s customers often need IT services right around the same time they’re getting their business website created. For a physiotherapist, it might be a chiropractor or a medical facility that specializes in sports injuries.
How to do it: Trade shows, conferences, and community service clubs can be good places to find other businesses to network with. When approaching another business for referral purposes, you will want to see for yourself what their services are like. Put on your detective hat and do some undercover work, either posing as a customer or, even better, enlist the help of someone you know to use the service and tell you how it is.
Read the online reviews of the other business to make sure they offer consistently good service, and if they pass your scrutiny, reach out in person or over the phone to schedule a meeting with the right person. Emails are far too easy to ignore.