Referrals are hands down the best leads and they are typically one of the cheapest ways to acquire new customers.  Plus, they’re a great ego boost :)

Think about how excited and proud you get when a prospect says something like, “John referred me to you and said you provide excellent service” or, “I heard you’re the best person to talk to about this sort of thing.”

You’re excited because it’s pretty much a done deal at that point.  Referrals already trust you and consider your business the best option, so as long as your price is somewhere close to the prospect’s budget, then you should have a new customer.

You’re proud because you just received confirmation that your customers are so satisfied they are recommending you to friends and family.

But if you’re like most business owners, then referrals probably don’t happen too often. The fact is if you don’t have a system set up in your business to consistently generate referrals month after month, then you’re missing out on a huge opportunity.

And even worse, you could be sabotaging future referrals if you don’t have a system to reward or thank people for referring you business.  If someone goes out of her way to give you a customer and does not even get a thank you, then you can be sure you will not get another referral.


The 3-Step System

So as the title of this article suggests, I’m now going to reveal the simple 3 step system you can use to get referrals.  This system was created from Dan Kennedy’s E.A.R. strategy, which is an acronym for:

  1. Earn
  2. Ask
  3. Reward


1. Earn

The first step in this system should be the easiest.  I’m assuming that you already provide excellent products and services, but if you’re falling short then you need to fix this ASAP.  You can’t expect to get referrals without 100% satisfaction.

But 100% satisfaction is really the lowest goal to strive for.  It’s like getting a B in grade school.  It’s good, but it’s not remarkable.

When your customer experience, your products and your services are above and beyond what is typically expected in the industry, then you’re going to have a much easier time generating referrals.  People will naturally want to refer you business.

Walt Disney used to ask , “how can we do what we do so well, that our customers can’t help but tell their friends about us?”

Answer that question and then make sure you’re delivering on the promise to EVERY customer.  This is a critical step so don’t take this lightly or skip over it.  Take some time to really think through what it would take to compel your customers to tell their friends about your business.

When you’re done, move on to step 2.


2. Ask

The second step is to ask for the referral and oddly enough this is typically the hardest part for most people.  It always feels awkward the first time you ask for a referral, but if you’ve completed step 1 and you genuinely deserve a referral, then it really should not be an issue.

So the big questions are when and how to ask for a referral so that it sounds natural.

When To Ask

The best time to ask for a referral is when your customer is most happy with you.  You may remember from my previous article, How to Get Tons of Happy Customer Reviews, this is the same time to ask for a review.

The timing is different depending on what type of business you’re in.

For example, if you’re a career coach and your client just accepted an offer for her dream job, then that’s the perfect time to ask for a referral.  That may be a few weeks to many months after you started working together.

It’s important to think about when your customers are most happy with you, but you probably already know because they’ll tell you.  So just make a note when you get the most compliments and that is the time to ask for your referral.

If for some reason you’re not getting occasional praise, then you need to go back to step 1 and determine how to earn it.

How To Ask

There are many ways to ask for a referral and it’s important to find a script that feels natural to you.  Again, the first time you ask you’ll probably feel awkward, but don’t worry about it.  Your happy customer wants to help you so get out of your own way and let her help you!

Here are some example scripts that you can edit and then test out:

  • John as you know, most of our customers come as referrals from other customers and we appreciate that and try to encourage it. If you have any friends, family or co-workers that suffer from lower back pain, you can introduce them to us and we’ll give them a free 15-minute back examination. This way we can advise them about the best course of action to relieve their pain.
  • Jane, we’re trying to grow our business… and instead of spending tons of money on advertising, we have decided to invest in our clients. If you have any friends, family or co-workers who need help planning their wedding, you can introduce them to us and we’ll give them a free 15-minute wedding planning consultation.

In both of the examples above you’ll see a logical reason why you’re asking for the referral and a free offer for the referred friend or family member. Obviously, feel free to substitute your own reason why and offer to fit your business.

This works well because your customer feels like they are both helping you grow your business AND helping their friend get a nice discount or free offer.

You may be tempted at this point to also offer your customer a gift in exchange for the referral.  My suggestion is to resist this temptation because you risk coming across as bribing your customer.  As soon as you introduce a gift to the customer, then you take away from the customer’s sense of satisfaction from helping you and her friend.  It’s no longer a selfless act at that point.

To be clear, I’m not against affiliate or structured referral programs, which can be great marketing strategies and are clear about rewarding referrals.

The difference is in who you’re targeting and in the complexity of the system.

My suggestion is to create a system to generate referrals from your happy customers first because it’s faster and easier to set up and can produce results immediately.

Then when you’re ready to target non-customers like related businesses and affiliate marketers,  you’ll need to set up an affiliate or structured referral program that has the ability to track sales and rewards referrals.  This strategy is outside the scope of this article.


3. Reward

Now let’s talk about rewarding your customers for referrals, which is just about as important as asking for the referral in the first place.  If you fail to acknowledge a referral then you can be sure you’ll never get another one.

You’re probably wondering why I just went on and on about why you should NOT offer a gift to your customer in exchange for referrals and now I’m saying you MUST reward or acknowledge your customer…

Well the difference is that you don’t offer a gift when you ask because you don’t want to bribe your customer for the referral.  However, you DO actually give a gift or at the very least a thank you card if your customer sends you a referral.

It’s a subtle difference, but it has a huge impact.

When you acknowledge the referral with a gift or a thank you card, then your customer will feel appreciated and reassured that she made the right decision.  This will lead to more referrals down the road.

You will be amazed at how much business just ONE happy customer can generate if you take the time to reward her.

So what is a good gift and how much should you spend?

The answer to this really depends on the value of the referral.  If the referral turns into $1,000 profit for your business, then you can afford to give more than if the referral was only worth $100.  Remember that a referral didn’t cost you any advertising dollars so be generous in your gift.  The goal is to encourage more referrals month after month.

In case you can’t think of any good gift ideas, here are few that have worked well for other businesses:

  • fruit or candy basket
  • movie or theater tickets
  • dinner for two at a nice restaurant
  • nice bottle of wine (if you’re sure the customer drinks)
  • $50 gas card

In addition to the gift, I recommend a personal phone call to the customer to say thank you and to tell her a gift is on the way.  This personal touch will go a long way and it will make sure the customer doesn’t throw away your card.

If you have any questions or need suggestions about how to implement this strategy, then post them as comments below.