THE BLOG

Using Formalized Referral Systems to Grow Your Sales

03/11/2015 12:30 pm ET | Updated Sep 28, 2015

It's common when we start working with a business coaching client that they tell us that a good portion of their business comes from customer referrals. Yet when we dig a little deeper, we discover that 95 percent of those referrals came to the business by word of mouth. Word of mouth is passive. Your business didn't do anything to spark it other than to deliver on your service or product promises (as if that was an easy thing!).

A formalized referral system is an active referral strategy that you intentionally craft to spark and prompt your existing clients to help you find more prospects.

I was talking with a business owner recently who runs a family-owned business which has been in operation for over 25 years. And to put it bluntly, he was really struggling with lower sales and cash flow issues. It turned out that by implementing several active referral systems he was able to quickly improve his cash flow situation and get back on a solid footing.

Here are six specific referral systems you can use to grow your sales, increase your cash flow, and build up your business.

These ideas are for any business with an existing customer base who feel strong and positive about the value they got from your company.

The key with any of these referral systems is that these are systematic, automatic, reliably run processes that you use to generate referral business versus "one off" individual efforts.

You don't need to use them all. Instead, choose one or two to implement in your business right away. They are low cost or free, and will dramatically enhance your sales and your client base.

Remember, the typical referral client buys more, refers more, and stays with you longer. Plus they are higher net customers since your cost to acquire a referral customer is relatively so much lower.

1. Point of Purchase Straight Referral Request: The best time to ask for a referral is often right at the time your customer buys. Have a scripted out referral question that you AUTOMATICALLY ask every customer who buys.

"Thanks Sam for choosing us to redo your landscaping, we take it as a real compliment that you chose us to work with. May I ask you a question, who are two other people you know who are looking to remake their yard and create a stunning landscaping like you?"

2. Point of Purchase "Gift for Your Friend" Campaign:

"Thanks Susan for shopping with us today. I know you'll love our "Spoil Yourself Bath Kit". Who are two of your friends that you'd like to give a complimentary "Bath Spa Sampler Kit" to? Normally it's $19.95 for the kit, but for a limited time we have two complimentary gift certificates that you can give out to your friends."

3. The "Compliment" Campaign: Every time one of your clients says a nice thing about your business, ask your power referral question. This question should be scripted out and memorized by all your team members. Quiz them on it and if they get it right, give them $10 bucks on the spot.

"Erin, I really appreciate what you just said. It means a lot to us that you get great value from our consulting program. May I ask you, who are two business owners you know who like you are serious about growing their business, and building a business they could one day sell, scale, or even own passively?"

4. Forward to a Friend Campaign: If you do an eletter, ask your clients to forward your eletter to those friends or colleagues they have who they think will benefit from your eletter.

"P.S. Please feel free to forward this eletter to your friends who are interested in buying designer jewelry at wholesale prices."

5. Referral "Tools" Campaign: If you already send physical stuff to your customers, send them a few extra to give out to friends in an attractive "mini kit" or packaging that encourages the friend with some incentive to try your product or service.

E.g. At our live events, we give attendees 3 copies of our latest bestselling book for them to give out to other business owners they know who are seriously interested in growing their businesses the next level.

6. Create Your "Insider's" or "Golden Circle" Club: Stop and ask yourself how it could be in your customers best interest to refer new business to you. Then build a formal system by which you effectively educate and ask your customers to do just that.

E.g. Bill owns a driver's education company that primarily teaches teens safe driving skills through on-the-road, one-to-one driver's instruction. The primary reason parents sign their teens up for and pay for these lessons is because they want to prevent their kids from getting in an accident. We suggested that Bill tap into this desire to protect their teens from auto accidents by creating a "Safety Circle Program." After the second lesson with a teen, Bill meets with their parents and explains that their son or daughter is more likely to be driven by one of their three or four closest friends then they are to be the one driving. To really protect their teens, then it's not enough for their teen to get trained; his or her closest friends need to get the same training so that when their teen is driving with these friends, parents can feel confident that they've done all they can to keep their teens safe. To this end, Bill goes on to explain, his company created the Safety Circle Program. Bill helps the parents identify the four closest friends of their teen and gives them a special coupon certificate that their friends' parents can use when they bring in their teens to get trained. Bill shares the certificate and a simple one-page flyer, then coaches the teen's parents on how to have a direct conversation with the parents of the other teens, suggesting that they work with Bill's company to get their teens trained too. The net result is that Bill turns his customers into an ally in generating more business for his driving school.

The bottom line is for you make sure asking for referrals is a systematized, automatic part of your business.

Take a moment right now and pick one referral idea to start with and task your team to build this into a formal referral system to help your company grow.

For more ideas on growing your business, including a free tool kit with 21 in-depth video trainings to help you scale your business and get your life back, click here.