4 Steps to Attracting More Referral Business

June 29th 2023

Despite all the money businesses spend to attract new business, one of the best ways to gain new customers and clients is through referrals, or having others recommend your product, service, or company to someone else. Used synonymously with “word of mouth marketing,” referrals and recommendations actually generate $6 trillion in consumer spending each year. 

Referrals are big business. 

A study done in 2013 by consulting firm Boston Consulting Group (BCG) reported that referrals, or word of mouth marketing, are between 2 and 10 times more effective than paid advertising at generating sales. 

More recently, Nielsen’s 2021 Trust in Advertising Study found that 88% of consumers trust referrals from people they know more than all other types of marketing. Because we trust the opinion of people we know, like, and trust, we are also more likely to act on a recommendation made by someone in our circle of friends and family.

Yet while 83% of your customers and clients may be more than willing to refer you more business, the sad truth is that only 29% actually will, according to an article in Texas Tech Today. But because referred customers are four times more likely to buy, says Nielsen, they are the best kind of prospect.

So, what can you do to boost the number of referrals you receive?

Educate your customers about your target clientele

People are more likely to refer business to you when they know your ideal customer and understand what you can do for them. Your customers may be familiar with what you do for them but not realize the scope and breadth of all your services, for example. They may associate you with one type of product but not another. 

It’s up to you to inform and educate the market about what you can do. Make sure they’re on your email list and connected with you on social media so they can be exposed to all your marketing messages.

Ask for them

Given that referred customers can increase your profit margin and improve your sales conversion rate by up to 70%, it’s surprising that many small businesses don’t have a referral program in place. 

In order to get referrals, you need to be sure your customer base knows you welcome them. That means asking for them.

Many marketers advise waiting until a project is completed and the client is happy and relieved with the finished product to indicate that you would welcome any business they could refer your way, although some suggest you shouldn’t wait until the very end. 

When customers are appreciative of your hard work is generally the best time to ask for their assistance.

Invest in marketing

Once you’ve asked your current clients to consider referring their colleagues, friends, and/or family your way for similar products or services, the next step is staying top-of-mind. They can only refer you business if they’re thinking of you.

That means pursuing publicity and investing in advertising and promotional tactics that will keep you in front of current and potential customers regularly. Offer to write guest blog posts for organizations where your target customers are members, look for podcasts in need of guests, or put some money into Google Ads so that prospects are regularly exposed to your company name and message.

If your type of product, service, or business is often in the public eye, the chances of conversations occurring that mention you increase. Which means that opportunities for clients to recommend you also increase.

Partner with complementary businesses

Another way to nurture referrals is to identify other businesses that your target customers also likely have a need for. Then start sending them business. 

Before you ask others to refer you their customers, send them some new ones first.

For example, if you’re a caterer, you could refer bridal parties to a wedding cake bakery or reception space. If you’re a hair stylist, you could refer clients to your favorite nail artist. If you’re a management consultant, you could refer colleagues to your go-to graphic designer.

Think about the products and services your target client is likely to have a need for and try to align yourself with them to generate sales for both of you.

Because referred business comes to you often pre-qualified and pre-sold, such customers can be higher profit. They are certainly worth pursuing.