Think about the last time you went out for brunch, signed your business up for a software, or bought a membership at a new studio. Chances are you didn’t simply see an ad and then make a purchase. More likely, someone you know recommended you check it out, and you investigated further from there.
You’re not alone. The buyer’s journey is long and complex, and yet 75 per cent of purchasers say they’ve made a decision about a brand based on a conversation with a peer, according to Edelman Trust Barometer. Referrals are powerful because they don’t come directly from a business that is trying to sell you their product; instead, they come from someone whose opinion you trust, be that a friend, family member or service provider who’s already won your business.
At a time when 42 percent of consumers distrust brands and 69 percent distrust advertising, this kind of testimonial is more valuable than ever before.
So what is a referral network, and why do you need one?
Recommendations don’t always appear out of thin air, even if your existing customers love the services you provide. Instead, you need to build a referral network. Usually formed out of a group of local non-competitive businesses and entrepreneurs, a referral network generates new business for its members through word-of-mouth recommendations and incentive programs. These businesses are often going after the same customers, but provide different services, making it a win-win for everyone involved.
Setting up a referral network is an important step for any business, and it doesn’t have to be complicated. Follow these three steps to quickly have yours up and running — and watch the new leads roll in.
Pick your partners
The first move anyone should make when establishing a referral networking is to outline their top prospects. Make a list of other non-competitive businesses whose ideal customer persona matches your own. Odds are they’re in the same position as you and would be happy to join forces to target these individuals with relevant offers and information. After all, if they can be seen as a helpful company, they’re more likely to win those customers’ business, too.
If you’re struggling to make your list, assess what Ivan Misner, Founder of BNI, called “Contact Spheres.” These define businesses that operate around the same customers, but don’t offer the same services. For example, the Health and Wellness sphere includes chiropractors, personal trainers and nutritionists, while the Real Estate sphere includes mortgage brokers, landscapers and interior designers. See where you fit and who your natural allies are.
Meet them where they mingle
Now that you’ve decided who to approach, you need to actually get in touch with them. Think of events or activities your ideal partners attend and meet them at those functions. Those locations can exist online too — think Facebook groups, LinkedIn Groups or Quora message boards.
When you begin outreach, make sure your value proposition is clear and you’ve thought through how you can add value to your contact’s business. Provide them with any resources they need to promote your product or services, too. If the benefits are obvious and you’ve given them the tools they need, they’ll have every reason to pass that information along to their networks.
Reward and refer in kind
When setting up a referral partnership, it’s important to remember that it’s a two-way street. You need to give something in order to get something later on. Make it your goal to send a lead to your new partner business before they direct anyone to you. This establishes you as a thoughtful collaborator who is just as concerned about growing your teammate’s business as you are about growing your own.
Providing discounts and incentives to both the businesses in your referral network and their leads will also help ensure a full funnel. The businesses win because they’re providing their clients with new value, and you win because you’re getting a highly qualified lead. Incentives can look different depending on your industry, but don’t be afraid to get creative. Some examples of rewards and discounts include:
- Providing your partners with personalized join links that they can share with their networks. If someone clicks through and signs up, they get rewarded in the form of gift cards, direct deposits into their bank account, you name it.
- Offering dual-discounts — one for your associate and one for your new customer — so both parties feel good about the knowledge share. This could take the form of discounts on your software or free trials at your studio.
- Gamifying the referral process. If your partners sign up larger clients, they should get incrementally larger rewards. It encourages them to land bigger fish (and more qualified customers) to help prevent churn and let you better focus your resources.
Building a referral network of brand ambassadors comes highly recommended. After all, the more champions you have in the market, the more buzz about your company, and the more people who can support your business goals.