Understand Why People Make Referrals And You May Just Attract More Of Them

Thursday, March 29, 2012 08:50
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Understand Why People Make Referrals And You May Just  Attract More Of Them

Tags: Anatomy of the Referral | Julie Littlechild | marketing | referrals | Scott DeGraffenreid

 

I specifically say “make a referral to you” and not “give you a referral” because, when it happens naturally, a referral is not something a client gives you; a referral is something he gives a friend. 

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I make referrals all the time, although I would usually call them suggestions or recommendations. Here are a few that I have made recently or make fairly regularly:
·         Since I work with financial advisors, I will often get questions about tools and resources. I recommend the client relationship management system I use, Redtail.
·         A client of mine needed some short-term financing, and I was happy to recommend and coordinate a loan through a regional bank.
·         I love the software applications Evernote and Nozbe. As a busy consultant who struggles with ADD, I have found that these programs improve my life.
·         I am a fan of Mark Sisson and The Primal Blueprint. If I get into a conversation about diet or health, I direct them to Mark’s book or website.
·         I recommend my auto mechanic pretty regularly. There have been many times when he has directed me back to the dealership because he believed that my problem was covered under warranty. Other times he has talked me out of repairs on a beat-up Jeep or van I used to own to carry things around for home improvement projects because they were too expensive relative to the value of the vehicle. I believe he won’t charge me to do something unless it’s necessary.
·         My wife and I love food and wine and frequently talk about local restaurants and vineyards in the Finger Lakes area of New York where we live.
 
Once you reflect on it, you may realize that you make referrals pretty regularly. Your clients do, too. They likely refer people to you more than you realize. In her study “Anatomy of the Referral,” Julie Littlechild found that 91% of clients were comfortable providing a referral to their financial advisor, and 29% had made a referral. I am intrigued by the 29%. Most of the advisors I know would be thrilled to receive referrals from almost one-third of their client base.
The study found that the top two reasons for offering a referral is because a friend asked for a referral or a friend expressed a financial challenge. In his book The New Art and Science of Referral Marketing, Scott DeGraffenreid determined through social network analysis that people make referrals to improve their standing among their peers. Your client is telling his friend about you not because he wants to benefit you, but because he wants to benefit the friend and to benefit himself. 
Who have you recommended to friends over the past month? Why? Why do I tell people about my auto mechanic, or those software applications, or Mark Sisson? My mechanic does not pay me to tell people about him; he provides me no incentive to recommend him—no discounts or coupons or certificates for a steak dinner if I send three people his way. And I assure you Mark Sisson does not even know I exist, much less that I am a fan. I encourage friends to patronize those businesses because I care about them, my friends. I do it because I want them to have a better experience taking care of their car, because I want them to avoid getting ripped off, and because I want them to be healthier and live longer. And I want them to think better of me for having turned them on to something that was useful to them.
So, if people want to realize the benefits of providing a referral (obtain social currency, expand influence, etc.) and can accomplish that by directing a friend to you because they believe you will help them solve a problem, they will refer people to you. Attracting referrals, then, becomes largely a matter of training clients to remember to mention you at the right time. It’s all about helping people remember you when they can benefit from mentioning you. It’s not about giving you names when you ask, it’s about remembering to refer you when the opportunity arises, so you have to prepare clients for that opportunity. “Who can you think of that could use my services?” is about asking your client to help you. “I know someone who can help you solve that problem” is about a client helping a friend.

 

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