Why Referral Marketing Programs Fail

by Judy Murdoch

Published on this site: September 14th, 2006 - See more articles from this month

True or False: Referral marketing is the easiest way to get the word out about your small business? The answer is...

False

Don't feel bad if you answered, "true." Most people do.

So often, I've seen someone start a new business, with the assumption that their friends and colleagues would send lots of new business their way. Three months, sometimes six months later, these new business owners are still waiting for the phone to ring. And even if the phone does ring, only a small percentage of those calling end up converting to real paying customers. Sadly, many of these businesses don't make it.

The owners of these failed businesses aren't dumb or naive. Many have owned successful small businesses in the past or had successful corporate careers. They know how to get things done.

So what's going wrong? Why do referral marketing programs so often fail to produce results?

First, business owners simply don't ask for referrals. Often this is because the business owner assumes that others "know" they need more customers. Unfortunately, the folks outside their business often assume the opposite; that if a business owner isn't asking for customers, they probably don't need any! It's easy to see how this dynamic undermines the referral marketing process.

Business owners may also resist asking for referrals because they think they're "bugging" people or haven't earned the right to ask for referrals.

Regardless of the reason, the consequence is the same:

If you don't ask for referrals, you won't get them.

The second reason referral marketing programs fail is because when we do ask, we leave it up to our referral source to figure out who to send us. So often, we ask for referrals in a vague, general way ("uh, do you know anyone who needs my services?").

Asked in this way, people almost always say, "no, can't think of anyone." Why? Because they're running through their mental contact list, a list so large for most folks, that they rarely think of someone specific when asked.

The third reason referral marketing program fail is because people forget your request. Let's say someone has agreed to send you referrals and they are completely sincere in their desire to help you. Unless they immediately call the person they want to refer to you, chances are that they will forget because they're busy and there are more urgent things demanding their attention.

Unfortunately, if they don't remember you, they won't send you referrals.

At this point you may be thinking, "Sheesh, this is harder than I thought, maybe I should tattoo my company logo on my forehead after all," don't be discouraged. With the right skills, know-how, and a little creativity, your referral marketing program can thrive. Read on for strategies that will take the number of referrals you receive from "blah" to "VROOM."

Four strategies to getting more referrals:

1. Don't assume anyone knows what your business needs. Ask for referrals.
   
   
2. Understand why people give referrals and, in particular, why they will give you referrals.
   
   Put simply, people give referrals to look good.
   
   Think about when you are the referrer. Have you ever referred a friend to your favorite restaurant and your friend ends up loving the place? They probably thank you every time they see you and you feel pretty great-like you let someone in on something very cool and special.
   
   That's why people give referrals for everything--plumbers, realtors, pediatricians, electrical contractors, you name it--they get to be a hero in a small but significant way.
   
   
3. Make it easy for people to refer you.
   
   To send you referrals, your referral sources need to remember you when opportunities arise and they need to know what to tell the person about your business.For example,

   compare these two referrals:
   
   "My friend, Ann is a realtor"
   
   "My friend Marion is a realtor who will buy your house if it doesn't sell within 90-days."

   See the difference? Which is more memorable? In a tough seller's market, who would you rather refer? If this were all I knew about the two realtors, Marion is the one I'd refer.

4. Follow up and acknowledge.
   
   If you assume people don't care whether or not you say thank you, you assume wrong. When you call your referral source and let them know how your meeting went with the prospective customer they sent you, it reinforces their involvement in your success and their ablity to make things happen.
   
   In addition, sending a note of appreciation regardless of whether the referral works out, encourages your referral source to send more.

When done right, referral marketing is, without a doubt, the most inexpensive and most effective way to get the word out about your small business. Although it requires more of your time upfront in terms of planning, developing a strong message, and educating your referral sources, remember that-every dollar-every minute-you spend on your referral marketing program will pay for itself many times over in terms of the high quality new business you attract.

Judy Murdoch - helps small business owners create low-cost, effective marketing campaigns using word-of-mouth referrals, guerrilla marketing activities, and selected strategic alliances. To download a free copy of the workbook, "Where Does it Hurt? Marketing Solutions to the problems that Drive Your Customers Crazy!" go to http://www.judymurdoch.com/workbook.htm You can contact Judy at 303-475-2015 or [email protected]