Increase Sales Through Great Referrals

How Can I Increase Referrals?

Nine Ways to Build a Referral Based Business
By David Carter, MBA

Referrals are one of the most powerful lead generators in the world. We all know that referrals cost you very little and usually (if a good client has referred them) the new client is of relative good quality. Ask any business owner where the vast majority of new clients come from and they say “Word of Mouth” or “Referrals.” The $64,000 question is “what systems do you have in place to make sure the referral happens?”

Obviously, this can be achieved by offering exceptional value and service, but it can be further promoted by building your system to generate referrals. Here are nine steps to building a referral based business…

1. Decide who is your ideal client, and who you actually want referred to your business.

Remember the saying “be careful of what you ask for, you will probably get it?” You must decide up front, before you even start to look at how you get referrals—who it is you ideally want to be referred to you. If you don’t set the rules, your new customers will set them for you. Another way of saying this is that you’ll always get the customers you are willing to accept.

2. Go through your current customer list with your ideal customer criteria.

Now that you have set your customer criteria, review your customer list and rank them in the ABCD system: Awesome, Basic, Can’t Deal With, and Dead! A’s and B’s should meet most of your criteria, and they will refer you like customers. C’s and D’s will not meet your criteria and you don’t want them to refer you like customers.

Your strategy here is twofold. 1) Focus on the A’s and B’s. Let them know exactly the benefits of doing business with you and that they are your “A” class customers. 2) Develop an exit plan for you C’s and D’s. You want referral from your “A” class customers. These are the people you love to do business with, the people who meet your criteria for being a customer, and the people with “A” class referrals.

3. Keep in touch with your customers at least every three months.

A key component of a marketing plan is to increase the “lifetime” value of your customers—to increase the revenue generated from a client over the length of their relationship with you. You want them to keep coming back. The best way to do this is to keep in touch with them. If you don’t keep in touch with your past customers at least every three months, they are no longer your customer.

4. Teach your customers why it is good for them to give you referrals.

Your customers want to know why they should do things for you, they want to know how they will be affected when they take action and most of all, what they will get in return. You will have to educate them about how referring people to you can and will help them. By referring new customers to you they are helping you save marketing dollars, and that allows you to pass on greater savings to them, give greater rewards, or even better service; they are making sure you have a strong and healthy business, so you are around in the future when they might need you again; and they are helping you work with only the best level of customers so you can always determine new ways of serving them better.

5. Thank your customers.

The easiest and best way to really make your customers feel special, to ask them to come back, and to ask them to refer their friends to you is just to say “Thank You.” Always send the thank you card and/or gift several days after the purchase—to re-spark that original purchase excitement that may have worn off. Remember … if you don’t take good care of your customers, then someone else most certainly will.

6. Give awesome service that creates delighted advocates.

There are only two reasons you will tell your friends about a business you have dealt with—because of the bad service, or because of service that was outstanding. To really delight people, to have them really want to “rave” about you, you need to give them more than they expect, more than they ever thought you could give them … you must give them AWSOME SERVICE.

7. Be daring…ask people when they buy and people who don’t buy.

Ask the question and you will always get the right answer. Sometimes it may take a few questions, but you will get there when you test the questions you use. I am still amazed at the number of people who simply don’t ask for referrals when a prospect or customer’s emotions are running high and they are the happiest to give a referral

8. Make giving referrals a condition of doing business with you.

When you set up your business you make the rules for people doing business with you. If you really want to have a business that runs on just referrals then make it a rule—for people to do business with you they “have “to give you referrals. Let your customers know this rule by telling them upfront before you make the sale. Making referrals a condition of doing business with you generally means that you are giving awesome service, selling value rather than discount, and your customers are not competitors with each other.

9. Reward your customers if they give you qualified referrals.

If you are going to buy new customers for your business (generally through marketing and advertising expenditures), why not buy them from your past customers? In other words, give your past and new customers the rewards as a direct discount on their purchase. This is done by giving them a discount up front, or sending them a gift check for each referral, or crediting their account when you make each sale. Buying referrals is a better option than buying a new prospect through marketing since you can tell the people referred that one of their friends asked you to call them.


Referrals are one of the most powerful lead generators in the world. What systems do you have in place to make sure the referral happens? Utilize these nine steps to grow your business by leaps and bounds!

David Carter is the President of ActionCOACH in Philadelphia.

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