How to ask for Referrals That Help Grow Your Business?

How did you find your hairstylist? Your doctor? A babysitter for your children? The chances are strong that you do business with someone a  friend recommended. More than any other type of advertising, we universally trust the opinions of friends and acquaintances. 84% of people surveyed in fifty-eight different countries by Nielsen said they trust recommendations from people they know. We even trust people we don't know, with 68% of respondents reporting confidence in online reviews.

How to ask for referrals that help grow your business?

Gaining referrals can be one of the most effective strategies for acquiring new customers and growing your business—with one caveat. You have to ask for them. Think back to the time your friend recommended her plumber. She probably didn't start raving about her new bathroom in the middle of brunch. More likely, you asked for recommendations when you needed them. a new plumber. But what if the plumber had asked your friend to identify possible new customers? Or better yet, what if he had offered your friend a gift card for doing so? Maybe the plumber referral would have made for brunch conversation, after all.

Referrals aren't always a natural occurrence, even when customers are happy with your product or service. Case in point: In a study by Advisor Impact, Charles Schwab, and Texas Tech University, 93% of customers said they'd likely continue working with their financial advisor. But despite their satisfaction, only 29% than d given a referral in the past twelve months.

We'll cover:

  • Why referred customers are so valuable for your business—and why you shouldn't ask every customer for a referral
  • How marketing automation software like HubSpot can help you ask for referrals consistently and strategically
  • Incentives that encourage customers to refer
  • How to make the most of online reviews
  • Stories of small businesses that used referrals to grow their business

Why Referrals Matter

More referrals can translate to more customers. But even more importantly, referrals mean better customers. A study published in the American Marketing Association's Journal of Marketing examined 10,000 customers of a German bank—half who were referred through a 25€ incentive for existing customers and half who customers acquired through other marketing efforts.

The referred customers, researchers, learned, were more valuable because:

They were 25% more profitable for the bank

They were 18% more likely to stay with the bank

They had a 16% higher lifetime value

The explanation, researchers said: The referred customers were a "superior match" for the bank. Customers know who would benefit from your company's services better than you ever could. They're also likely to discuss your company as they make referrals, helping you better inform new customers about your services. As a result, referred customers are both more loyal and more profitable for the business. Less time and money is required to acquire them.

How to Get Referrals Automatically

You're always thinking about how to get more leads for your business. But are your customers? The answer is a resounding "no"—even if they love your company. Many customers are more than willing to help, but you have to ask. Automation software can help you proactively approach customers for referrals instead of waiting and hoping for a customer to recommend you. When you automate the referral process, you ensure that referral requests go to the right customers at the right time without thinking about it.

Read on to learn how to use automation to make the referral process easier for you and your customers.

Ask the right people for a referral.

When you ask a customer for a referral, like asking someone on a date or applying for a job, you become vulnerable to an uncomfortable possibility: rejection. And even worse, if a customer doesn't like your company enough to give you a referral, you may have alienated him further by asking for one.

The solution: Only ask for referrals from customers who like you. But how do you know for sure whether or not a customer is happy with you?

With automation software, you can arrange for a survey to be automatically sent as part of the post-sale process. Consider surveying the customer about a week after his purchase when his feelings about your company—positive or negative—are vivid in his mind. While any survey will help you understand your customers' sentiments, a question like this is valuable for referrals: "How likely is it that you would recommend [your company] to a friend or colleague?"

Give respondents a scale of zero to ten, with ten being the most likely to recommend. According to the guidelines of the Net Promoter Score, measurement companies use to determine growth and performance, here's what the scores mean:

  • 9 or 10 = Promoter: A loyalist who will continue buying and refer others to your business
  • 7 or 8 = Passive: A customer who is satisfied but not to the extent that he wouldn't leave your company for a competitor
  • 0 to 6 = Detractor: An unhappy customer who can harm your business through negative word-of-mouth

You can set up automation software to facilitate your response to each type of customer feedback. For example:

  • Detractor: The software issues a task for you to call the customer and find out how to improve his experience.
  • Passive: The customer is added to an automated email series that offers more help and educational resources related to your company.
  • Promoter: The customer automatically receives a thank-you email that asks for the referral he already said he'd give.

Ask for a referral the right way.

Even when you already know a customer likes your company, asking for a referral can still feel awkward. You don't want to be seen as pushing for another sale (even though that's precisely what you're doing). You can soften the sales-y tone by focusing less on how customers can help your company and more on how you can help customers and their friends.

After receiving positive feedback from a customer, you might write something like:

I'm so glad to hear you were happy with your experience. Helping customers with [the problems your company solves] is the reason I got into the business, and I'm always looking for more people to help. If anyone comes to mind, could you send them my way? As a way to say thanks, I'd love to offer you a discount on your next purchase.

Put the burden of facilitating the referral on you instead of the customer. Ask her to submit her friend's contact information in a web form, send her a link to be shared via social media, or even offer a copy-and-paste message she can easily send to a friend. Please don't get too excited about sending him emails when you get a referred contact's email address. Email service providers (ESPs), like HubSpot, require a permission-based email strategy to protect their sender reputation and prevent emails from being marked as spam. The safest bet is to call the referred customer or send him a one-off email introducing yourself and requesting permission to send further communication.

3 Keys to an Effective Referral Programme

Just as real estate agents thrive on referrals, the same is valid for Keeping Current Matters (KCM). This monthly subscription service provides content and educational resources to more than 12,000 real estate professionals. More than a third of KCM's free trials—the precursor to all paid memberships—stem from referrals. And most of those referrals come through the strategic use of automation and incentives, not by chance. CEO Bill Harney explains three reasons why his referral programme works.

  1. An inspiring call-to-action
    1. KCM provides real estate market guides, blog content personalised with the agent's information, and other resources to help agents help their clients. The content is more geared toward education than making a sale—and the way KCM approaches referrals is no different. KCM doesn't promote how great its resources are or ask customers to help them sell more memberships in an email asking for referrals. Instead, KCM tells customers that they're now part of the company's mission of inspiring "the movement to change the way real estate professionals educate and serve their clients."
      1. The email says:
        1. I hope you won't mind helping us expand the reach of this movement by referring another agent to KCM. Maybe you can pay back a favour by introducing someone to a tool you know can help them, or perhaps you'd like to pay it forward by supporting a new agent who could use your expert guidance.
    2. Harney says that members want to help other agents learn about the industry, even when they're competing for business.

      "The more educated we can make the entire industry, the better it is for every consumer and every agent," he said. "If agents on both sides are more knowledgable, the whole the process goes more smoothly—and agents can help more families find the right homes."

  2. Automatic referral requests
    1. KCM uses marketing automation software to automate a series of emails; after a member finishes the free of eight or higher, the referral email is sent. Meanwhile, customers who score lower are sent a personal email asking how the company can improve their experience. The business asks for feedback using NPS scores (see page seven for more information). If a member scores as a "promoter" with a score
  3. An enticing and cost-effective incentive
    1. Every time an agent joins KCM using a member's referral link, the member receives a free month of membership. KCM makes it easy to share the referral link: From a Referral Partner Center in marketing automation software, a password-protected portal, the member can post it to social media or send a pre-written email that includes the link. The link is also embedded in the personalised blog posts so that the member gets credit for someone who signs up using the link. Some members have made so many referrals that you'll spare them monthly fees for more than a year. But Harney knows he can afford to give away a payment of $19.95: The average member stays with KCM for more than 20 months, during which time they pay nearly $400 in dues.

Rewarding Referrals Works

When you ask for a referral, some customers will happily oblige your request. Others will think, "What's in it for me?"

Research confirms, not surprisingly, that money talks. 39% of people surveyed by the consultancy Software Advice said that a financial incentive would make them "much more likely" to refer someone to a brand they love.

Many successful companies have grown, in part, by incentivising referrals. For example, Stitch Fix, the women's fashion subscription service, uses referral links that allow members to collect $25 every time a friend signs up and places an order. Other companies incentivise both parties involved in the referral: Airbnb encourages customers to send a $20 credit to a new user; in return, the referring customer receives $20 when that person rents a home.

But non-financial offers can entice referrals, too: In the Software Advice survey, 30% of respondents said they'd be more likely to give a referral in exchange for social media recognition. In comparison, 26% would do so to enrol in a loyalty program.

The type of incentive that will work best for you depends on your business, your customers, and what you can afford to give them. Here are five ideas for incentivising referrals:

1. A discount on a future purchase

Offer referring customers—and, if you choose, the people they refer—a promotional code for a discount on their next purchase. It's a win-win-win for your business. The customer and her friend are inspired to buy while you generate sales that might not have otherwise occurred.

2. A gift from a third party

Discounts on future purchases don't make sense for some companies. If your business is geared toward one-time or infrequent purchases, consider sending a third-party gift, like movie passes or a gift card, to a retailer, coffee shop, or restaurant.

Pro tip: To create a sense of urgency, put an expiration date on your promo code. Using automation software, you can send automated reminders that inspire customers to take advantage of the discount before it's too late.

3. A chance to win

You can still offer a financial incentive without having to pay every referring customer. In exchange for referrals, enter customers into a drawing for a big-ticket item, whether it's a product you sell or a gadget like a tablet or fitness tracker.

4. VIP access

Give referring customers special treatment, like an invitation to an event or early access to a sale or new product. Or send perks their way regularly by me enrolling them in a loyalty or VIP programme.

5. A social shout-out

Would a retweet on Twitter or a tag on Facebook or Instagram be incentive enough for a customer to give a referral? It might be if your customers are part of a generation that practically lives on social media. In the Software Advice survey, 44% of respondents aged 18-34 said social recognition would make them much more likely to refer.

Turning Referrals into Online Reviews

Michael King hopes he never gets repeat business. If all goes to plan, laser-eye surgery is a once-in-a-lifetime experience. That makes referrals vitally crucial to the growth of King LASIK, a group of centres led by his brother, Dr Joseph King. King LASIK uses marketing automation software to automate the referral process, offering customers a $50 gift card as thanks for the first referral, $100 for the second, and a pair of Maui Jim sunglasses for the third.

But friends, Michael King realised, are only one source of referrals these days, especially for the demographic that makes up nearly a third of King LASIK's business: 30-somethings. "What you hear all the time is, 'I looked at your reviews, and they were amazing,'" he said. King began using automation to encourage more customer reviews—but only the best ones. "You could figure out how to get 40% more reviews," he said. "But if you're still giving a bad service, you're just amplifying a problem." A week after surgery, every patient automatically receives an email requesting feedback on the experience. On an internal website powered by Reputation Loop, an app that integrates with their marketing automation software, patients can write a review and rate their experience with one to five stars.

From there, only the patients who rate King LASIK with four or five stars land on a page in which Dr King appears in a thankyou video, asking if they'd be willing to help others by sharing their review. (Less-satisfied patients, meanwhile, are shown an apology video). A button for copying the review is conveniently located, as are links to sites like Yelp and Google+. But if the patient doesn't click the link, he later receives an automated reminder about the review—and an incentive, a gift card, to post it. The process works: In one year, the number of Google reviews for King LASIK doubled, and Yelp reviews more than tripled. And King credits the automated review process with increasing the company's annual revenue by 28% in one year.

Tipsheet: How to Ask for Referrals

Referrals can be a crucial source of growth for your business—as long as you ask for them. Follow these tips to ask for a referral proactively.

Ask the right people for a referral.

  • Email the customer an automated survey a week after the purchase
  • Ask "How likely is it that you would recommend [the company] to a friend or colleague?" and give a scale of 0 to 10, with 10 being the most likely to recommend

Respond to survey results

  • For a 9 or 10, send a thank-you email that asks for a referral
  • For a 7 or 8, add the customer to an automated email series offering additional support and educational resources
  • For a 0 to 6, call the customer to find out how to improve the experience

Ask for a referral the right way

  • Soften a sales-y tone by focusing less on how customers can help your company and more on how you can help customers and their friends
  • Make the referral process easy on customers: Ask them to submit contact information via a web form, send a link to be shared on social media, or offer a copy-and-paste message to send to a friend.
  • Call the referred customer or send a one-off email requesting permission to send further communication to prevent emails from being marked as spam.

Choose an incentive

  • Offer a discount on a future purchase for referring customers and, if you choose, for the people they refer.
  • If your business is geared toward infrequent purchases, send a third-party gift, like movie passes or a retail gift card.
  • Enter referring customers into a drawing for a product
  • Offer VIP access, like an event invitation, early access to a sale, or enrollment in a loyalty program
  • Give a shout-out on social media

Is it time to systematise your business and become more effective, increase your revenue and expand your customer base?