How to Build a Referral Network From Scratch

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You have a reputation for doing a great job. In fact, people keep talking about you. That’s great, of course. But idle talk doesn’t always lead to referrals—and referrals are golden to any organization.

Why doesn’t talk turn into action? Unfortunately, humans tend to be hardwired to focus on the negative. That’s why customers who have a negative experience will tell a dozen people. However, those who have a positive one only will tell a couple of friends. It’s also the reason that you can’t hope that a referral network will happen organically or magically. Instead, you have to take it upon yourself to set a structured referral system into place.

Why spend the time, energy, and resources to develop a set-in-stone referral system? Many reasons. The first is that you’re bound to lower your cost per lead. More than half of marketing professionals say that quality referrals cost less to acquire than other leads. Additionally, when customers, partners, or colleagues refer you to people they know, you naturally and affordably extend your reach. Remember: Those are leads you don’t have to go out and find.

Finally, a comprehensive referral network can serve as a passive source of steady income. After all, the leads that land in your sales funnel frequently will convert more easily. And that means your salespeople can expect to close more deals with less effort each month or quarter.

Strategic Methods to Develop a Strong, Reliable Referral Network

If you like the idea of getting referrals more often than once in a blue moon, start organizing your network now. The following strategies will help you turn on a regular flow of referrals from a variety of sources.

1. Put tracking measures into place

Like any type of lead generation vehicle, you need to be able to evaluate your referrals objectively. This means developing a system of gleaning, tracking, and analyzing data related to all your referrals. Whether you opt for a simple spreadsheet format or use robust sales software, you’ll be able to gauge your effectiveness.

Over time, your tracking information will give you a baseline number of how many sales are attributable to your referral network. Using the baseline number as a guide, you can make changes as necessary. You can also see at a glance if your referrals are slipping or increasing. Without tracking, you might miss opportunities for referral improvements.

2. Look for referral partners that align with your brand image

Once you have a tracking system in place, you can start to think about where to get your referrals. Don’t assume that your referrals have to come only from satisfied clients. Many professionals, such as Bob Goldwater, founder at the Birth Injury Lawyer Group, actively seek referrals from industry partners.

Specifically, Goldwater looks for professional referral partners whose beliefs align with his own. “I’ve gone about building a network of like-minded attorneys specializing in compassionate representation,” he explains. “When you brand whatever you do effectively, you attract not just the clients you are qualified to serve but also like-minded practitioners who can become part of a growing referral network.”

Not sure what your brand image looks like? Spend time honing it. Knowing your corporate mission and values will help you find similar referral partners to help build your network.

3. Incentivize customers to refer friends

Of course, you can’t set up a referral network without customers. Happy customers will be open to becoming a would-be salesforce for your company. However, you’ll probably have to incentivize them in some way.

Incentivization for referrals can come in many different forms. For instance, Rakuten uses a simple, money-driven approach. The Rakuten Refer-a-Friend bonus program offers cash back rewards for referring others. There’s a catch, of course: The referred friend has to make a qualifying purchase. Nevertheless, the Refer-a-Friend setup provides a tangible “carrot” to Rakuten’s current members.

You don’t have to be so direct with your incentives, though. Consider giving discounts on future purchases to customers who refer to your services. Or donate a sum of money to a charity designated by your customer after a referral. As long as the reward matters to your customers, it will encourage them to talk up your business.

4. Become a master referrer yourself

Referrals are two-way streets, not one-way alleys. As such, you can’t expect people to refer their acquaintances to your company if you don’t practice what you preach. This means you need to put your own system in place for referring people to other organizations.

For instance, perhaps you have a vendor you use consistently. You’ve appreciated the way the vendor does business. All your experiences as a customer have been pleasant, streamlined, and professional. Why not refer your preferred vendor to those in your personal network?

Referring deserving companies and individuals shows you’re not just interested in your own corporate needs. You’re interested in sharing success and performing random acts of kindness. Remember: If you don’t give as good as you get, your referral system will seem one-sided. And it may never get off the ground.

5. Tweak your referral process continuously

A thriving referral network system deserves your attention. Every quarter or so, give your referrals a once-over. Look at all the figures you’ve collected and do a little analysis. Is your referral network design still working? Or is it in need of some re-engineering?

Don’t assume that the way you get referrals this year will be the best way next year. The economic landscape and consumer sentiment can change quickly, which may affect your referral network. This absolutely happened during Covid, and it can—and will—happen in some form again. Therefore, you and your team need to stay up on what’s occurring in your industry and with your customers.

Over time, you may find yourself going back and forth between referral protocols or incentivization methods to stay up with trends. With practice and patience, you can come up with several referral processes that churn out great leads.

Lead generation is essential for any business, but not all leads need to come from advertising campaigns. In addition to your other paid marketing efforts, add a referral system into the mix. You’ll add to your list of prospects and help meet revenue goals.