The Forgotten Sales Channel - The Importance of Business Referrals

Many businesses invest very heavily in marketing activities attracting new customers to their websites or free phone numbers, etc. Many businesses invest heavily in their customer service and validating that their customers really do value what they do for them to maximise client retention. If the saying "you are only 6 people away from being introduced to anyone in the world" is true, why do so many businesses forget to ask their customers for referrals? To understand what makes an effective business referral we have asked 2 businesses that depend on referrals for their success: The FD Centre who primarily provide part-time Finance Directors to mid-sized businesses and Shirlaws who are one of the leading multinational business coaching companies in the world.

Colin Mills of The FD Centre comments, "We have always worked very hard to maximise the referrals we give to and receive from other businesses that share a similar target customer profile, eg. banks. However, we were nervous about asking our clients for referrals to other businesses that might need our services. However, it soon became apparent that every time our customers said that we had done a good job we started to ask if they could recommend us to anyone else. Much to our surprise, they did and our customers made comments like "why yes, why didn't you ask before". Of course this has not come easily to all of our 100 finance directors - as a breed we are modest and asking for referrals does not come easily. For us it was such a small change in the way we do things with minimal investment but the return has been fantastic."

Darryl Bates-Brownsword of Shirlaws Coaching has more expertise on the subject. "Many of our professional services clients maintain that "word of mouth" is an important source of business and yet they do not invest time and money in increasing the business capability to generate the additional revenue that this sales channel could deliver. This skill in identifying and building aligned relationships is a key area where we coach our clients. We also practice what we preach; client referrals represent between 80% to 90% of the enquiries we receive at Shirlaws. We have achieved this by following our own processes with our clients to understand what makes a successful referring relationship and working with them to build such a relationship. This includes proactively creating the opportunity to introduce our clients to each other where a mutual relationship could be beneficial to both clients and we also ask our clients who else do they know that could benefit from these strategies?" 

What seems abundantly clear from the above is that many companies invest significantly in customer satisfaction as a client retention strategy but fail to follow through to maximise it as a sales channel. With the need to generate more good customers for most businesses, this forgotten sales channel is worthy of investigation by most organisations.

Entrepreneurial Vision - October 2009 - Contents Page