The Coach's Bulletin - Missing out on Referral-based Growth?

The impact of one customer's connections

How did you find out where to have your hair cut, or where to find reliable and reasonably priced auto service? Have you noticed lawn signs in your neighborhood showing that the same company is painting five adjacent houses?

You probably rely on referrals to trusted product and service providers more than you realize. When you need to purchase something important you go to someone you trust and find out who they trust to provide it. (Of course you'll also be warned off of replicating their bad experiences, and these stories might be quicker to come to the surface!)

You and your business could be generating more new business from referrals. But if you're like many businesses, you haven't developed and implemented a strategy to make it happen. Here are some of the reasons we've been told:

"I just don't ask routinely."
"I don't want them to think that I need the business and am begging."
"What if they didn't like what I did all that much? I'm a little worried that they wouldn't refer me."
"I don't know whether I should pay them in some way, or whether that's even ethical."

The foundation for customer referrals

If you want referrals you need to start by creating service experiences that are referable. Service that consistently goes above and beyond the call of duty can create positive buzz about your business. Sometimes showmanship in how you serve customers creates a reason for people to choose to buy from you rather than from Brand X. If you don't have your quality buttoned down, start there. Fix the things that you know right now might not be showing you in your best light.

If you're throwing up your hands because of some recent boo-boo that has gotten you down, relax. You don't have to be perfect to generate more referrals. You will have some customers that love you because you work hard on their behalf, even if things don't go exactly right every time. You can even solidify a relationship by being good at recovery when mistakes do happen. Of course recovery is no substitute for quality - it only demonstrates to the customer the value of their relationship to you. Even good recovery gets old after a while when a company can't seem to get it right.

Setting customer referrals up from the outset

Let prospective clients know from the beginning that your goal is to provide the kind of experience and results for them that will make them want to tell somebody else about you. By doing this you're creating a positive expectation, and the expectation will help your client notice the good things you're doing. If there are specific standards that you strive to meet, tell them - like "We ship within 24 hours of receiving your order." But only promise what you will consistently deliver.

If you intend to ask them who they know that might benefit from your services, give them a heads up. You might even go as far as to make that part of your deal. A coach we know quotes the investment for his coaching services as "$_______ plus two referrals." And he's specific about what the word referral means. "A referral isn't a sales lead. A referral is when you make my phone ring two times from someone who is seriously considering using my services."

If you're setting up the referral expectation at the outset, follow through on the expectation along the way by asking your customer who they think might benefit from the same thing that they purchased from you. Of course it's only reasonable to expect a referral if they like what you're doing, so you might have to be partway through your process before they are comfortable enough to vouch for you with somebody in their circle.

Non-customer referrals

Sometimes a helpful prospect or a center of influence will provide a referral to you even if they are not in the position to buy. For this to happen the referral will be on the basis of you and your relationship with them, not on the service or product you provide. If you want a referral you will need to ask for one, and since this individual will not have bought from you (yet,) you will help them refer to you more effectively - and help to jog their thought process - if you provide a description of your ideal client. Tell them the circumstances that lead people to buy from you, or demographic or psychographic information about your customer base that will help them sort their contacts for a good fit with you.

Paying for referrals

This is a matter of taste in some instances, and a matter of ethics in others. For retail services you might provide an across-the-board referral bonus. For professional services though, consider this: does the referral lose some of its credibility if the referrer stands to gain financially? We have a policy not to refer in exchange for money specifically because of that conflict of interest.

Managing the Experience

Carnival Ride., a photo by Tom Kaszuba on Flickr.The firs

When the discussion of quality arises, companies often (perhaps most of the time) turn their attention to their products. They follow measurements like the number of defective parts shipped, the dollar amount of warranty cost that is being incurred, or defective parts per million produced are impacted, and so on.

What often goes by with far less notice, however, is the quality of the customer's experience. Quality is rarely the differentiator any more; it's expected in order for your company to have a seat at the table. In some categories the differences between the physical products are indistinguishable by customers. But the response time, the courtesy of the customer service representatives, the easy understandability of the invoices - these become the differentiators that create one of three outcomes:

long-term customer relationships that bring repeat purchases and referrals,
unenthusiastic customers that buy only until they see what they think is a better deal, or
one-time tryouts that walk back out the door. never to return
Management of the customer experience requires a shift from product thinking to process thinking. Focus is placed on the customer's points of connection with the company - its people, methods for accomplishing work, documents, website - even its phone system, signage and front lobby.

What sort of experience do your customers expect? What experience would give you a competitive advantage? Are your customers looking for any of these? Are you consistently delivering them?
Excitement - great for an amusement park, probably not great for a hospital
Comfort and Security - sought in many financial institutions, perhaps not so much in movie making
Reliability - a cornerstone of customer loyalty. Whatever the customer expects happens every time without fail.
Confidentiality - nobody but you knows your information, and that's the way you want it
This list could be endless, and your list could be different from these four. The important thing is that you determine what the expectations are and then manage processes to help to fulfill them. The corollary to this is that you don't invent the expectations - you find out from your loyal customers just what it is about their experience with you that they value, and what they would like to see more of or less of in their points of connection.

You might also ask potential customers what they look for, because they may be looking for something that nobody is providing yet. Remember the advent of the television in the dentist's office? How much easier it has become for a parent to take a young child to have teeth cleaned when they can be distracted from the procedure (or any discomfort) by watching Spongebob Squarepants? It has become almost a standard now, but the first dentist to do it in his or her market had a competitive advantage based upon nothing to do with dental capability.

Your customers may not expect a carnival ride from your company experience. They probably don't want to be on a rollercoaster of sorts with you, with ups and downs and sudden changes in direction. But start thinking beyond improving your products. Start looking at your processes, particularly the ones that involve customer points of connection, and you will find opportunities for competitive advantage.

Summit helps companies generate optimal customer experience and customer loyalty by partnering with them in the areas of planning, process improvement, and people development.