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Business referrals are recommendations that your current or former customers, or contacts within your network, make about your business to their connections. When they refer you to someone who trusts them, they create and warm a lead for you, and you can convert the prospect more quickly. There are many verified ways to generate business referrals, which include asking outright, offering stellar service, and creating a referral program.
The top seven ways to get business referrals include the following:
Targeting referrals for your business is a lead generation tactic that can result in high-value prospects. In fact, 83% of consumers say they are willing to refer your business after a positive experience. This means that all salespeople and businesses should focus on referrals in some capacity. Let's check out the top ways to do so and the steps necessary to be successful at each:
What It Is: A direct request to your customers and/or network to help you spread the word about your product or service.
Who Should Use It: Salespeople who have built strong relationships, especially with those who have connections to potential customers who fit their ideal customer profile.
First and foremost, the best way to get referrals is to explicitly ask for them. Because people are busy, they usually won't offer them unprompted, but those with whom you have good relationships should say yes if you simply ask. When you do, make the process as easy as possible by telling your connection whether you'd like them to give their contact's information or make an introduction; if it's the latter, provide them with an email template or talking points to use.
The steps involved in earning these referrals are to first provide a great experience for each customer, then approach your current and past customers for referrals, and finally reach out to your network (even those who are not customers) to ask them to vouch for you or your company. We'll dive into all three steps below.
Before you can make a direct ask to a customer, it's crucial to provide them with a good experience and build a relationship. A customer is far more likely to refer when they feel respected and supported during the sales process. To accomplish this, you need to be focused on making each sale feel personal and helpful to the customer. There are a few basic ways to get this done:
All of these elements add to the personal side of a sale, and make it clear that you’re listening and making a personal connection. People love bringing friends together, and if you can become a friend to your customer, they'll be more likely to recommend you to others.
If you feel you’ve developed enough goodwill with your customer by this point, make your direct ask for a referral. The best times to ask are right before or while closing, within a month after closing (after they've had time to experience the value of your product or service), or immediately after receiving positive feedback, but you can also ask past customers for these referrals.
Here are some professional ways to ask a customer for referrals:
No matter when you ask, do so in a way that tells the customer you're expecting a response. For example, "If you think of anyone, let me know" is easier to ignore than "Is there anyone you know who would be a good fit?" Also ask in person or over the phone whenever possible; if you ask via email, the customer might miss it or forget to respond.
After you've contacted your customers, start reaching out to your network. Find your network's connections on LinkedIn, then research both the person you want to ask for a referral and their contacts who you believe could be a fit. This will help you personalize your ask and will do the heavy lifting for them.
When you reach out, you can say, “I noticed you're connected with {Potential Customer's Name} at {Potential Customer's Company}. I think we'd be a great fit to help them because {Reason}. Would you be willing to connect us or send me their email address and allow me to mention you?”
Cherry-picking and researching the person's contacts shows them you respect their time. However, you can also ask whether they can think of anyone else who might be struggling with the main pain point your product or service solves.
What It Is: A less direct referral ask included in a questionnaire that a business sends to a new or existing customer to learn about their experience with their sales rep and the business thus far.
Who Should Use It: Companies that have a large client base and/or acquire new customers often.
Beyond a direct ask, one of the first ways you can earn a referral from a client is by including an ask in a customer experience survey you send within a week after the sale. These surveys are commonplace in sales because they can let you know what to work on and make the customer feel heard, but they're also a great way to gather positive feedback and ask for a referral. This isn't a direct ask, but a more passive one that the lead can either answer or ignore.
To send an effective survey, use a program like Google Forms. Create and send custom surveys that ask multiple-choice questions and allow customers to write supporting information for each. You can send one link to all your customers for aggregated feedback.
Include these questions in your survey, plus any others that make sense for your business:
These questions focus on the customer's experience and can help them realize that they've had a great one with your company and you as the salesperson. Once they realize this, they're more likely to provide a referral. Even if they don't complete the referral field of the survey, they may end up recommending you to their contacts because you've planted the idea in their head.
As you get comfortable with this new customer survey, you can also create one for your existing customers that asks questions about their experience working with you rather than just their experience signing up. Customers are most likely to complete the survey immediately after the sale, so start with this new client survey and add the second later on.
What It Is: Recommendations your customers make about your business to their network without being asked or receiving any benefits in return, usually because you've impressed them and delivered on all of your promises.
Who Should Use It: While businesses can't necessarily control the organic referrals their customers give them, all should provide great service to increase their chances of receiving them.
Organic word-of-mouth referrals are perhaps the best types of referrals you can earn. They don't require you to give anything to your customers in return for the referral, other than exceptional service. This not only means that you'll save time and money, it also means that the way your referring customers talk about your product to others will likely seem more genuine because they're doing so altruistically rather than to earn a reward.
You can earn organic recommendations by providing stellar service to a customer. When you impress them with your product or service, you'll be more likely to come up in conversation between the customer and their contacts. Some customers will mention your business to their peers after finding out they're experiencing a pain point you helped the customer solve, and others might even recommend you without being prompted.
What It Is: Written or otherwise documented referrals that are made available to the public online.
Who Should Use It: Businesses with a strong online presence and/or ones that contribute (or want to contribute) to their community through sponsorships, philanthropy, or volunteerism.
When you earn client testimonials, reviews (which are essentially testimonials plus a numerical or star rating) and publicity, they can work together to provide potential customers with a positive view of your brand. These three assets can support organic recommendations or serve as referrals on their own.
For example, if your customer recommends you to their contact, that contact will likely verify the customer's opinion by looking up your reviews online. Even if they hear about your company and then forget the recommendation, they'll likely recognize your brand and remember it as a quality company if they rediscover you through publicity. If you don't receive organic referrals, all three of these can help potential customers get to know and trust your brand.
You can earn these in the following ways:
Start by gathering reviews and testimonials, and add in publicity when you have the bandwidth to do so. Earning exposure can take some trial and error and relationship building with journalists and other professionals who can help you, so prioritize working with your customers first and adding in outside sources later.
Below is an example of a Google review that includes a star rating plus a written testimonial:
What It Is: A program that gives customers a discount if somebody they refer makes a purchase.
Who Should Use It: Any business that sees a lot of repeat customers, where a discount on future products would benefit their customers.
Referral discount programs are popular in the retail industry but can be used by any business where customers typically make more than one purchase. All you have to do is include an offer that allows new customers to give a referral code to their contacts. The referral code will operate as a discount code for the referred customer, and the initial customer can be sent a discount to use on future purchases with your business.
The three steps to implementing a referral discount program are:
Check out this referral discount program example:
A referral discount program works on two fronts: it incentivizes customers to refer their contacts, and it encourages them to come back and spend more money with their discount. So, not only do you get more business, but your customers get to save money on a product they want to purchase — everybody wins. To implement a referral discount program, you'll choose your discount amount, decide who gets it, and generate your codes.
Because this discount program requires the customer to purchase from you, it can be financially forgiving. You can be liberal with discount programs since they tend to increase repeat business and only work if you’re actually selling your products or services. This means that you can offer a discount that might lose you money in the short term but increase long-term sales.
So, in order to make your discount enticing, you’ll typically want to make it at least 10%. Or, you can instead offer a certain dollar amount of store credit like Soylent does in the example above, which can seem more tangible to your customer. The more money you spend on the right incentives, the more you should make back in referral revenue.
There are discount programs that offer only the original or the new customer a discount, and those that offer the original and referred customer a discount. To maximize referrals, we recommend giving discounts to both parties. While it may cost more, it creates an incentive for both customers to continue purchasing and referring. It also creates an environment where both feel like they are “in on something” in regard to saving money with your business.
Finally, it's time to create your discount codes and deliver them to your existing customers. You can do this manually and store the codes in your customers' records within your CRM software, or you can generate them through a partner relationship management software such as PartnerStack or a referral marketing software like Ambassador. We recommend implementing software unless you have few participating customers.
If you're with an ecommerce business or another B2C company that makes sales online, be sure to add a field to your checkout page that allows your new customer to enter the referrer's discount code. If salespeople are heavily involved in the sales you make, which is common for B2B companies, have your new customer send the discount code to you via email or read it to you verbally, or include a field for it in your contract.
What It Is: A program that offers an external incentive (e.g., cash prize, gift card, merchandise) in exchange for a certain number of quality referrals. This program is also often referred to as, or closely compared to, affiliate marketing.
Who Should Use It: Businesses with one-off purchases that need a steady influx of leads.
If your business doesn’t experience frequent repeat business, then a referral discount program may not incentivize your network or customers enough. In these cases, you can offer an incentive that takes the form of a direct payout based on the number of leads someone refers. This can include small rewards like a free sample product for each referral, all the way to a cash commission for a higher number of referrals.
There are five steps to this referral rewards program strategy:
In affiliate marketing, the incentive is usually cash, and the referred party typically must make a purchase through a unique link to count. Let's take a closer look at each step specifically for a referral rewards program.
Choosing an incentive is the act of deciding on the payout method and overall amount. Options include cash offerings as well as gift cards or even physical goods like an iPhone. Ultimately, choose something your customers value and stick to it. Then, set a budget for your referral campaign by considering the average revenue you make from each sale, the cost of your incentive, and the frequency of repeat business.
If you don’t land much repeat business, your referral incentive needs to cost less than what you make on your average sale. On the other hand, if your customers tend to buy frequently, you can offer a more enticing incentive since your referral will likely turn into a repeat customer. So, for businesses with a lot of repeat business, you spend money to make money.
Check out this referral rewards program example:
Make sure you and your referrers are clear on what constitutes a referral. In the example above, Casper's referral program rewards referrers when their contacts actually make a purchase, but some programs simply require proof that you've shared key information about your company to someone who might be a good fit. Choose whether your business considers a referral to be a lead or a customer, and make that clear to your referrers.
The interval of referrals is the number of referrals it takes to get an incentive. If you want to offer a high-end incentive, consider having the customer refer three or five people before they get it. You could even offer tiers of incentives for one, three, and five referrals so you essentially create a mini commission structure for your customers.
This is a great way to save money and launch an incentive program people love. You can set an interval out of the gate, or you can wait until you’ve seen results from your incentive program before you dial it back by requiring more referrals. That tactic ties into our next step.
Figure out how you'd like to track the referrals that come in and from which referrers. This can be a code similar to those used in referral discount programs, or it can be a unique link that leads to a landing page. If your program is small enough, you can even have the prospective customer give you the name of the referrer when making a purchase online or speaking with you directly.
The benefit of using a landing page is that the referrer can simply send new leads to the page, where you can give all the key information about your company in the way you'd like. In addition to their help with tracking, referral rewards program landing pages are an excellent place to grab the new lead's attention immediately and help increase the chances that they convert.
Even the best incentive programs have to be modified, or even eliminated, after a while. As you start to monitor the results of your program, tweak the details to ensure that it’s efficient.
Here are a few questions to analyze your results and inform how you proceed:
If you’re losing money but seeing growth, consider adding an interval to save cash. If you aren’t seeing growth, change your incentive by asking your referrers what would motivate them. Finally, if you’re losing money and seeing growth but no longer need to grow, you can end your program and focus on maximizing profits from your current customer base now that your program has met its goals.
What It Is: A written arrangement between two businesses in which one agrees to refer the other to their own customers in exchange for cross-promotion or monetary compensation.
Who Should Use It: Companies that have fostered relationships with businesses that provide different products or services to the same customers.
Another way to get referrals is to create a referral agreement with a partner. A referral agreement is a contract between your company and somebody else (usually another business) where one business agrees to compensate the other in exchange for business referrals. This is commonly seen in the car business, for example, with dealerships referring customers to different paint and body shops in exchange for kickbacks.
Since referral agreements are legal documents, we can’t tell you exactly how they need to be written. So, we've included a referral agreement template from SignWell, and we encourage you to use it as a reference and consult a lawyer before finalizing any agreements. Check out the template below, then read on to learn about the common sections included and how to approach them.
There are a few steps that need to take place in order to create an official legal referral agreement. You’ll need to cover the basic legal details like company names and relationship, what constitutes a referral, and how/when compensation will take place. We'll explain each below.
Just like any other legal document, you need to note all pertinent identification information. This includes the below plus anything else that would be helpful for your business to have on record:
All of this will be at the top of the agreement. It makes clear who's involved, what function they provide in the agreement, and when exactly the agreement is active.
This is where the contract specifies what kind of leads the equity holder will pay for. Not all referral agreements are as simple as “send someone over, and we will pay you.” Each agreement has its own qualification criteria for a “lead” in terms of compensation. There are two choices here: any referral that shows up or contacts the equity holder will count, or referrals must convert to customers in order to count.
The choice you go with will affect the value of compensation. If you’re paying for any referral that shows up or contacts you, you don’t want to pay as much per lead. If you only pay for leads that convert, then the external party will demand a higher price. If the lead must convert, decide on a timeframe within which they must convert in order to be counted.
There are a few different compensation details that need to be hammered out on the referral agreement. Both parties need to know how the external party will be paid, the amount they'll be paid, and when they'll be paid. Additionally, there is the question of recurring conversions, which we'll cover below.
You’ll need to figure out how the external party will be paid. Are you paying with products and services or with cash? Once you decide how the external party’s paid, decide how much. The value of products and services varies widely, but payment in cash is usually either a flat rate per lead, or a percentage of what that lead spends with the equity holder.
When you've figured out what will be paid, you'll then decide when it will be paid. This one is pretty simple: How long after the lead reaches out or makes a purchase will the external party be paid? Also determine whether the external party will be paid again for recurring purchases, which would incentivize more lucrative leads.
As with any financial agreement, it’s important to confirm in writing whether or not the agreement is exclusive. This is a major deal breaker for a lot of these agreements. You want to make sure, as the equity holder, that you are getting the highest-quality leads possible — ones that aren't being shared with other companies.
A confidentiality or privacy statement is more of a “dotting i’s, crossing t’s” section of the document. Basically, you are covering yourself legally from any sensitive details being shared, or any intellectual property theft.
If you'd like to try this method to earn referrals, see Get The Referral's article on making a referral agreement. Then when you're finished writing your agreement draft, have an attorney look it over before you share it with any potential partners.
Referrals are a vital aspect of sustaining any business because your existing clients are helping your sales prospecting. With these strategies, you’re able to generate and maintain a steady stream of referrals that’ll keep income for you and your business consistent. Put the work in and your network will want to help you. When they do, show your appreciation. If customers decline, practice objection handling and gather feedback so they’re likely to give you referrals in the future.
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