Why you should have a referral strategy

For many of us the hardest thing to learn about in business is sales and marketing.   If it is not something you did before you started your business it can come as a complete shock to discover just how much you need to do before customers are ready to pay you money.

It can seem hard to imagine that later on you will be turning customers away.

Why should you turn customers away?

Successful marketing is all about defining your audience or target market and delivering content and services to them in a way that works.

We all start off trying to sell all things to everyone but sooner or later we refine our market and services.

This fairly swiftly leads to two novel problems:

  1. What to do with customers who want things we don’t offer?
  2. What to do with customers we can’t service because we are already fully booked?

Is it time for a referral strategy?

You put all that time and effort into making people want to do business with you so it seems a pity to let it all go to waste by saying –

  • “No I don’t do that”, or
  • “No I don’t do that any more” or
  • “No I am too busy”

It is at this point that many business owners start to refer business to other providers.

At the very least it generates good will and helps to solve your customer’s problem.

But you could do more than that.   Having a referral strategy can help you in a variety of ways.

Will they refer you back?

Many people refer without any thought for commission or reciprocity.   Business coaches are fond of teaching that ‘givers gain’ and somehow people you refer to will refer back to you when the time is right.

This does work some of the time.  But from experience this only works if the person you want to refer work back to you has:

  • a clear idea of what you do
  • a compatible client base
  • a clear method of identifying a suitable prospect at the right time

If you are simply hoping that somehow this will all work for you, prepare to be disappointed as often as not.    Often the people who refer back to you send you inappropriate contacts and leads that take you time to evaluate and respond to.

Without a clear strategy and briefing it can turn into a time waster.

If you are in a regulated profession where you are not allowed to charge commission on referrals, or you really don’t feel comfortable with charging for referrals this may be your only option.   In which case you really do need a process for identifying who you will refer to and how they will refer people to you.

Should you charge commision on referrals?

It can be quite legitimate to charge organisations to send them referrals.   This can be a side line, or a highly lucrative part of your business.  Some businesses do nothing else but find leads and charge commission for referring them.

Unless you are a genius of sales and marketing, this is unlikely to be your major income stream, but just like affiliate marketing, this can make a useful addition to your monthly revenue.

But you need to be clear with the person you refer to.  It is easy to misunderstand:

  • when commission is due
  • what qualifies for commission
  • what period of time commisssion is paid for
  • how commission is to be calculated
  • and a lot more

Data Privacy and Referrals

It is important that your potential client knows beforehand that you want to share their contact details and their need with a provider who is not part of your organisation.  The end client should never be surprised when someone contacts them.  Check out our blog on what can go wrong when they are.  Click here 

You should also make sure that any referrals and contact details are securely shared and recorded.

And don’t forget to make sure you referral agreement covers data privacy, GDPR and other things such as tax.

A referral scheme can be a powerful part of your marketing mix

Set up correctly, a referral scheme can by a powerful part of your marketing mix by enabling you to offer service to clients who need things you don’t supply, helping create a larger pool of awareness about your services, and even create a revenue stream in its own right.

referral agreementCheck out our referral agreements here 


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