Boost your sales with business referrals

Why are referrals important?

When a customer, supplier or partner refers your business, it carries trust and credibility. Referrals indicate a positive transactional or service experience—expectations have been met or exceeded, and there is a solid relationship. Leveraging referrals is a cost-effective way to gain new clients and differentiate yourself from competitors.

According to a report by Heinz/Influitive, 84% percent of B2B decision-makers start the buying process with a referral, and companies with referral programs report 71% higher conversion rates.

• Referrals build strong relationships with new and existing clients. Potential clients are more likely to act on recommendations from a trusted source, which leads to higher conversion rates and a shortened sales cycle.
• A positive perception contributes to creating an environment for a lasting business relationship.
• Referrals mean that your clients, suppliers and associates are satisfied with your product, service, and the way you conduct business.

Be candid and ask your clients for a referral. The optimal time to ask is when your client is happiest, such as when they give you positive feedback or when a successful project or transaction has been completed.

Referrals are a low-cost marketing strategy which utilizes your existing customer base to attract new business.

Research from Texas Tech shows that 83% of satisfied customers are willing to give referrals, but only 29% do because they were never asked. This represents significant untapped potential and valuable word-of-mouth marketing which can lead to substantial growth opportunities.

“Referrals are an effective way to expand your customer base,” El-Kayed says. “With each successful referral, you grow your business and create a network of satisfied clients.”

What are good sources of referrals?

There are several types of referrals—the best source is from satisfied clients. Other solid referrals include professionals within your industry, strategic partners, and endorsements on social media platforms such as LinkedIn.

Client referrals

Your clients understand what you do because they have experienced it first-hand. If they’re pleased with your product/service, trust has been established. Referrals from satisfied clients increase the likelihood that a potential customer will choose your product or service. These referrals can be strategic in identifying others who would benefit from your service or product.

El Kayed says that when clients refer your business, it validates that you’re taking good care of your existing portfolio, and that they think highly of you and your products or services. “The fact that they’re willing to refer you to their network—it’s probably some of the most meaningful feedback from your clients.”

Partner referrals

It’s mutually beneficial to refer clients to your strategic partners as both parties can grow their customer base. Partner referrals expand your reach by leveraging their client network, giving you access to new markets. This relationship can lead to new opportunities for collaboration.

Supplier referrals

If the supplier has credibility within the industry, the referral will be a powerful tool and a conduit to new market opportunities.

Influencer referrals

An influencer with high engagement who endorses your brand, product or service, can boost your visibility significantly. This leads to a wider audience reach and access to a pool of new, potential customers.

How can a business generate referrals?

Asking for referrals seems basic but it’s the best way to generate them. Unfortunately, many business owners don’t ask, representing missed business opportunities. There are many ways small businesses can generate referrals.

Build a referral program

Incentivize clients to refer your business to potential customers. For example, you could offer a gift card or discount to both the new customer and the client who provided the referral. Just remember to keep it clear and simple so that making the referrals require minimal effort.

Digitize your referral process

Use a Customer Relationship Management system (CRM) or software to automate the process of asking for referrals. Conduct some research to see which is the best one for your needs.

Learn referral best practices from others

• Conduct outreach to like-minded individuals in your industry or like-minded colleagues in other industries and lean on them for advice. This can be done when attending trade shows, conferences and networking events.
• Join a business group which meets regularly to exchange ideas, referrals and professionals. This is an excellent forum to find guidance and expertise. You don’t have to necessarily be in the same industry to benefit from the experience and contacts of others.
• Join professional associations that share information, case studies and best practices. El-Kayed says that when you talk about the work you’re doing, use examples of how past referrals have benefited the end-user.

Leverage your marketing channels to generate referrals

• Promote your referral program on social media and your website. Track and monitor the program to measure its effectiveness so you can identify what works and what doesn’t.
• Request feedback from customers via email or survey to learn about their experiences. Include a clear question that asks about their likelihood of referring your business.

Look beyond customers for referrals

• Request referrals from fellow industry professionals. These referrals have a lasting impact because they showcase the extensive reach of your brand and services within your network of providers.
• Ask professionals to endorse you by writing with positive reviews, testimonials on social media platforms, or commenting on your curated content.

What are elements of a good referral?

The best referrals come from individuals who understand your customers’ needs and how your business meets them.

Authenticity is crucial

A referral should accurately represent the product or service. It should also include a clear description of the goals your business met without exaggerating the deliverables.

It’s about quality, not quantity

You might receive referrals that don’t align with your target market. Consider adjusting your marketing efforts if you’re not getting referrals from the right client base.

Willingness is key

When it comes to contacting potential customers directly, both parties should agree to the referral—that is, the person referring your business should be willing to make contact and the potential customer should be willing to be contacted. Once the referral has been made, be sure to follow-up with the prospect to close the loop.

What if you’re not getting quality referrals?

Calculate your Net Promoter Score (NPS)

Developed by Fred Reichheld and initially published in a 2003 Harvard Business Review article, NPS is a widely used metric that measures customer satisfaction and loyalty. It involves asking clients how likely they are to recommend your business on a scale from 0 to 10.

NPS customer satisfaction levels

NPS is then calculated by subtracting the percentage of Detractors from the percentage of Promoters. Passives are excluded from the calculation.

Calculating NPS allows you to:

• Identify strengths and weaknesses—customers will score you on your product and service which enables you to determine where improvements are needed and where you shine.
• Benchmark against others—compare your company’s NPS to industry standards and see where you rank. A high rank can be leveraged in your marketing materials to further increase sales.
• Foster employee engagement—share results with your employees so they can be a part of your successes and continuous improvement. Recognize employees who’ve directly impacted high NPS scores.

What’s the difference between NPS and referrals?

Both are important, but they relate to different aspects of the customer experience. NPS provides a broad view of customer loyalty—the likelihood that someone will refer your company.

Referrals are a direct, active endorsement of your business.

How can a business use referrals?

Showcase your referrals so they are easily visible on your website and social media channels. The first thing a potential customer will do is research your business reviews, impacting the perception of your brand.

The Heinz/Influitive report found that 59% of companies with referral programs have higher lifetime value clients, and 69% report faster closing cycles.

When clients feel that you’ve gone that extra mile for them, referrals can happen organically, through word of mouth, without having to ask, which highlights your efforts and performance.

“Referrals are like a superpower, helping businesses expedite growth, expand their network and establish a loyal client base,” says El-Kayed.

Next step

CRM system: How it can help grow your business.