The Power of Referrals

2009 | May 20 in Home Page News , Lead Generation

By E-Myth Business Coach,

It is a well known truism that the best customer is a happy customer. It follows that the best leads are referrals from happy customers. Referral leads are almost always the best prospects because a recommendation from one customer to another provides credibility, a positive impression and reduces doubt in the prospect's mind. And a bonus for you is that is an incredibly cost-effective means of generating new business!

Some common misconceptions about referrals that I've heard from my clients:

  • Customers don't want to give referrals.
  • You can't plan or influence referral business - it just happens on its own.
  • Advertising and sales requires too much of our attention; there aren't enough resources for a referral process.

The truth is that customers do want to give you referrals. They like to see themselves as an authority, a helper or someone "in the know." And you can plan and influence the amount of referrals in much the same way you do traditional leads. Once you realize the value of referrals, you won't want to take a passive approach.

From the E-Myth Point of View, generating a referral is a Lead Generation activity that occurs at the end of your Lead Conversion process.And, since referral leads are typically highly-qualified leads, the process will be simpler and probably more cost-effective than your traditional Lead Generation methods.

Don't Be Shy

You'll never get referrals unless you ask. Yes, it can be that simple. In fact, asking for referrals can be a natural part of the sales process.

Often the best time to ask is right after you've delivered your product, service or solution and your customer has experienced the value they were expecting — and more. For example, one of my clients simply asked for a referral in the signature line of their confirmation e-mail.

Referrals are important to us. If you know of anyone who would benefit from our services, please contact me. We would appreciate the opportunity to work with them.

By asking your customer for a referral, you are not asking them to take a risk. Instead you are asking them for a factual observation. You're not asking them to qualify or pre-sell the referral; you're simply asking them if they know someone who could benefit like they have.

Treat Them Like Gold

Another key to a continued and successful referral process is to thank and reward those who refer you. Everyone wants to feel acknowledged and appreciated. How you do this depends on your type of business, the image you want to project with your business and the value of each prospect. Many service providers use small cash rewards as a token of appreciation incentive to drive referrals. An alternative could be a bonus such as free additional services, a small gift or a gift certificate to a local restaurant or theater. Remember, generosity needn't always be monetary, be creative in your approach.

The referral, too, needs to be acknowledged and appreciated since they too have the potential to be a ready source of referrals for you. Reciprocating the generosity of referrals is key to keeping the cycle going and building the goodwill and relationships that will help your ongoing Lead Conversions. Your Lead Conversion approach for referrals should be tailored for them.

Get Them Talking

Satisfied and delighted customers are your unpaid sales force. Along with these you can include family, friends, old classmates and faculty, vendors, suppliers and other service providers who share your target market. Educate these potential advocates about your products and services by providing them with information and news about your business. Encourage them to talk about you and to "spread the word."

Expanding awareness of your company is easier and less expensive today than ever thanks to the Internet and the ever-growing variety of online tools. But don't overlook the power of simple "word-of-mouth." The goal is to get people talking about their wonderful experience with you and your company — and to actively and intentionally send people your way!

Share Your Story

How have you implemented a referral system into your Lead Conversion process? What worked, what didn't? Post a comment and tell us about it.


  1. .Joe F. says:

    Don't you have to have established a customer base?  Why not discuss that as a ramp up process?

    Submitted May 20, 2009 1:36 PM

  2. .mark R. says:

    First and foremost. Ask for the referral and don't be shy about it. Have a card or contact list and be ready to take down names. Don't react negatively if they are not given, just ask the customer to call you if they think of anyone. Be gracious for any help your customers give you. The one thing I have found most important about referrals is to be sure to use the name of the person who referred you, it has power.

    POWER ON-Mark


    Submitted May 20, 2009 1:37 PM

  3. .Jennifer R. says:

    Referrals the way to great business leads. A happy customer is your best advocate, they will do the pitch on your behalf. The best way of increasing your business is by working on referrals. One does not have to do the hard sales pitch, because your customer who has experienced your outstanding service is already convinced. Our business is run on referrals and it works with amazing results. This creates a niche for yourself, when people ask you how do you do your sales, we more than once say, we were referred. It is a good place to be. It only shows how good a job you are doing and then you learn with your customer as well. Learn to give more than you get. that is the secret of success and that is what causes referral to stream in.

    Jennifer Randive Managing Director Focus Direct Management Consultants, Dubai. UAE

    Submitted May 20, 2009 1:39 PM

  4. .Jackie O. says:

    Find a BNI chapter and as the whole premise of these groups is referral business, it takes some of the awkwardness away from learning to ask. You also get so used to being in a referral mindset it becomes second nature.  

    Submitted May 20, 2009 2:19 PM

  5. .Andrea S. says:

    We include a personalized thank you card in each invoice which also asks for referrals. We include 2 business cards. It works! It's a good idea to track your referral sources, whether it be ads, phone book, othre clients etc. We have a relational database to keep track of who referred whom and we also reward clients who refer us multiple times with little gifts like chocolate.

    Submitted May 20, 2009 2:31 PM

  6. .Partrick S. says:

    One of my business's is drug testing and performing CDL physicals for truck drivers. The way I got started was a company called me and had an emergency and the driver's certificate was going to expire on a Monday so I did the physical on Sunday and I do there drug testing as well. Since then, this service has expanded exponentially. I have learned to ask for referral's in every situation and I was very shy person, no more. Asking for a referral is a very natural experience now

    Submitted May 20, 2009 4:22 PM

  7. .Neil O. says:

    I would agree 100% with this as I use it all the time. There is one other thing that I do which heps the process.

    I ask a customer for names and if they give me 3 names I take down all the contact details. I then ask my customer if they can phone their 3 referrals, tell them briefly how I helped him/her and ask is it ok if I call them. I agree a date to phone my customer back (normally a few days later) and normally the referrals are expecting my call so I phone them straight away. This usually results in a sales meeting with a warm prospect and my conversion rate is very high.

    Submitted May 20, 2009 11:46 PM

  8. .roxanne w. says:

    In our business referrals are the best source of business.  If a person is happy with you and the product you have to offer you will get referrals.  Remember the client must like and trust you in order to get their business.  Offer them a form with many lines for names and phone numbers and suggstions for that lead.  Friend, family, neighbor, etc.  If you only ask for one referral that is all you will get.  Make sure the document you give them has many lines to fill out.

    Roxy Whiteside National Sales Director Academy of Learning Corp.

    Submitted May 21, 2009 8:54 AM

  9. .Audrey H. says:

    Thanks all of you how take the time to comment! I find that so helpful to me.

    Submitted May 21, 2009 9:42 AM

  10. .gary s. says:

    I own an insurance agency and we have initiated a referral contest.  We give a $10 gift card for each referral and have a $500 grand prize drawing each Dec.

    Each month we send out some kind of card to our best clients to thank them for their business and their referrals (soft sell).  Thsi month we did a Happy Mothers Day card.  I use a great web based system for sendng out the cards.

    Check out www.sendoutcards.com/gsides

    Submitted May 21, 2009 10:53 AM

  11. .George L. says:

    The examples of systems above are good.  However, when you have an opportunity to ask for a referral, why not tell your referring source what kind of referral you would really like, i.e. who your Most Probable Customer is?  If you can give them a brief description of the demographic and psychographic profile of your ideal customer, your chances of converting a lead into a great customer go way up.

    Submitted May 21, 2009 3:14 PM

  12. .Jane M. says:

    How does a referral system work for dental practices (and medical practices). At the end of the appointment patients are often not in the best frame of mind to be raving about the service you have provided - since they have often been 'drilled and filled' and/or may be in pain.  Or they may have received 'bad news' about the state of their mouth and the cost of an "expensive" treatment plan. Any thoughts/ideas on what others have found works effectively for private dental practices?

    Jane M. Melbourne, Australia

    Submitted May 21, 2009 5:16 PM

  13. .Hugh G. says:

    Dr. Misner who started BNI asks "Truth or Delusion? Customers are your best source of referrals."

    Delusion: a referral source will bring you more referrals than customers! The referral source is already selling to your target market and will refer you more often if you are in a credible and mutually profitable (systematic) relationship.

    Example: the massage therapist and chiropractor. Yes, both will get referrals from satisfied clients, but they can refer each other, more often to prospects already in their target market. Plus, both are proficient selling to that target market where customers are generally weaker salespeople/marketers.

    Do you agree or disagree?

    If you don't have a profitable referral source you need training from the Referral Institute founded by Dr. Misner the leading expert on referral marketing.

    Submitted May 21, 2009 6:52 PM

  14. .Satinder C. says:

    A hello call checking about the condition, after a few days of treatment, if possible, would be very good! I have not come across any doctor doing that here in India atleast but as a patient, I would feel great if I were to get a call like this from a doctor..Re referals, if they seem too upfront (asking over the phone or face to face), a small print or emailer can be created and sent which asks for a referance!! A reward system which may include a free dental checkup or cleaning etc would be helpful..

    Submitted May 22, 2009 8:09 AM

  15. .Robert N. says:

    For Dental Practices, a great way to use referrals is to talk about the process BEFORE you do any work, so the new patient comes in and you say "You know, Linda, we get a lot of nice patients referred by our happy existing patients.  If we provide you with service you are happy with, would you refer us your family and friends?  Wait for the "yes" response...now you've got the agreement, and the patient will want to stay consistent with what they've stated.  So, you complete the dentistry, and they are happy with your service (maybe you choose to do this at a recare visit after the drilling), and you say, Hey Linda, remember you told me you would be happy to refer friends when you were satisfied with our service....

    Another thing is to THANK them when they do refer...a hand written note is nice, and next time you see them, acknowledge the effort.

    Submitted May 22, 2009 12:42 PM

  16. .Angela H. says:

    With doctors office could also ask each client how they found you.  Are they new to the area?  Were you the closest doctor to their home or office?  Were you the only doctor that accepts their insurance?  This information will lead you to use relocation information from the Chamber of Commerce in your area or real estate agents.  Developing plans or incentives  with local employers.  Can you cator to them?  Can you give them appointments before or after work on certain days?  Can you be a resource to the employer giving out free tips or website info on better health or dental care?  Do you have something you can offer their children?  Do you offer a weight-loss program?


    Submitted May 26, 2009 1:50 AM

  17. .Paul K. says:

    In my line of work, marriage and family therapy, cold calling to a referral is unethical. One spin I can put on this is to encourage the happy client to refer clients to me, not visa-versa. A couple business cards in the hands of a happy client pays astronomical dividends!

    Submitted May 28, 2009 8:01 AM

  18. .Greg M. says:

    Although I'm not shy about asking for referrals, I find going above and beyond client expectations results in the greatest number of referrals. But, and this is key, staying "top of mind" with your clients is essential. Having a relationship building "marketing system" is a high priority for my company. Do what you know - we happen to know social media so we use it daily.

    Leveraging social media technology (i.e., social networks, email marketing, etc.) using the right strategy is extremely cost effective, albeit time consuming. Consider outsourcing as a viable option for high ROI if you're not benefiting from the technology largely paid for by others (the social network developers).

    Hat Tip to AdviCoach, Mike Byrne (www.advicoachva.com) for pointing me to this article - thanks Mike!

    Submitted May 28, 2009 4:26 PM

  19. .Keith M. says:

    I agree, referrals are a great way to get new business and as above:

    • Don't be shy
    • Ask and you will get
    • Don't be tempted to cut corners

    All this has helped me in business



    Submitted Jun 23, 2009 2:37 AM

  20. .Bob W. says:

    As a Financial Planner part of my process of finding information about clients is to ask Hmmmm questions ( After you ask the question the clinet thinks Hmmmm) One of these type of question is my Eulogy question.

    In western civilization we have a tradition that when we pass away someone speaks for us. This person is not a parent spouse or child but some one else who knows us well. If you were to pass away tomorow who would you want to give your Eulogy. The second question is what would they say about you. I then explain to the client that I find clients are not comfortable using adjectives about themselves but they are more comfortable explaning what  My best freind ____ would say. I then tell them I also ask this question to get my first referal from them. If this person is that important to them I would love to meet them.I tell the client this is the first person that I wil ask them to bring to one of my company events. I usually get 80 to 120 referals a year this way

    Submitted Jul 1, 2009 1:44 PM

  21. .Lynn S. says:

    Andrea S.

    Please tell me what database you use that is "relational."  I've been looking far and wide for a Customer Relationship Management system that will handle referrals.

    Submitted Dec 19, 2009 3:50 PM

  22. .Derek L. says:

    Did someone mention BNI? 

    I joined BNI once. A bunch of BNI members immediately hired me to build them a website. I thought I was on the path to easy street.

    But because most of the business in my BNI chapter weren't businesses but rather self-employed individuals, BNI was their main source for generating leads.

    Because not many members had leads, everyone was looking to someone else to solve their lead problems. 

    Because the BNI members that hired me (including the chapter vice-president) couldn't afford to pay me, I was eventually kicked out of the chapter because I couldn't afford to pay the high monthly dues.


    I'm now I'm halfway through the Mastery Impact program. They teach you how to fish.

    Submitted Feb 5, 2012 9:57 AM

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