Written by: Victoria Yu
Victoria Yu is a Business Writer with expertise in Business Organization, Marketing, and Sales, holding a Bachelor’s Degree in Business Administration from the University of California, Irvine’s Paul Merage School of Business.
Edited by: Sallie Middlebrook
Sallie, holding a Ph.D. from Walden University, is an experienced writing coach and editor with a background in marketing. She has served roles in corporate communications and taught at institutions like the University of Florida.
Updated on February 12, 2024
If your business is just starting out, drumming up enough customers to keep your business’s gears turning can be tough. Similarly, your business might operate in a smaller industry where qualified customers are few and far between.
One way to rejuvenate a dried-up sales funnel is to ask for referrals: in other words, asking former customers to recommend your business to others in their network.
But how exactly do you go about asking customers for referrals? If done wrong, your company might come off as entitled and desperate. Never fear – here are the best strategies and tips to up your referral game and keep new customers coming in.
Key Takeaways
In referral marketing, existing customers recommend a business to their friends, family, and network.
Referral marketing is a low-cost method of generating new high-quality customers and improving your company’s reputation.
Three strategies for generating referrals are starting a referral program, supporting different referral channels, and building referrals into your business’s sales process.
Three tips for generating referrals are to have an amazing product and customer experience, to keep in touch with old customers, and to track key metrics for your referral campaign.
Referrals are when existing customers recommend your business to others in their network, such as friends, family, and business partners. Promoting a business’s products and services to new customers through these recommendations is called “referral marketing.”
Referrals are an amazing way to get new quality prospects – after all, your customers are the people most familiar with the value of your product! They know exactly what pain points your product or service solves and who in their network will most likely benefit from it.
More than eight out of ten B2B buyers begin their purchasing process by asking for referrals, according to the Harvard Business Review. Being a customer’s go-to referral could turn one sale into a dozen, making it an extremely effective lead generation strategy.
Plus, consumers are more willing to trust the word of other consumers than they are the word of a company, a concept known as social proof. One well-placed endorsement could attract more customers than a hundred paid advertisements.
If your business provides quality goods and services, referrals should happen organically over time as happy customers gush over their experiences. But if your business can’t wait, here are some concrete strategies to help nurture referrals faster.
A referral program rewards customers for sharing the company with their network, usually by providing them with special links to spread online. In exchange for every new customer they bring in, the existing customer receives valuable benefits such as discounts, coupons, or freebies.
A valuable reward incentivizes former customers to actively scour their network for people to send referrals to, rather than waiting for a referral opportunity to come up naturally in conversation. This speeds along the referral process.
You could even offer a reward to the new customer, making it a win-win situation for both parties!
A customer might be willing to offer an endorsement but might balk at the method. For example, your chosen review website hassles them to make an account, they don’t have an account on your chosen social media, or they’re simply too busy to deal with a three-page questionnaire and review process.
The simple solution is to offer many different referral methods and platforms to match every kind of customer. Allow them to leave reviews and send referrals through various social media accounts, product follow-up emails, and on your website, to name a few channels.
The faster and easier it is for customers to leave a review or spread an endorsement, the more likely they’ll do it.
A whopping 91% —almost all— of customers are willing to provide a referral, but only 11% of salespeople ask for them directly, in an oft-quoted study by sales expert Dale Carnegie.
Simply put, the best way to get referrals is to make a habit of asking for them. Naturally work the question into your sales reps’ post-purchase script, order fulfillment email, or customer service phone calls. Fresh off an amazing sales experience, customers will usually be happy to oblige.
As we said earlier, referrals will happen naturally as satisfied, loyal customers become brand advocates for your company.
That means the first step to gaining any referral is to have a product and customer experience that will knock customers’ socks off and make them want to spread the good word. So don’t put the cart before the horse – invest heavily in your product and reps to create an amazing customer experience before even thinking about referrals.
If your business focuses on one-and-done transactions such as real estate, locksmithing, or legal services, old clients might have fond memories of your stellar service and be chomping at the bit to refer you – if only they could remember your name.
Companies hoping for referrals should send emails, newsletters, and small gifts to former customers to maintain top-of-mind awareness and update them on the company’s current offerings. That way, when the customer wants to refer you to a friend, they’ll immediately remember who you are and know exactly what you do, no matter how many years have passed.
Like any other sales or marketing campaign, track key performance indicators (KPIs) and other metrics for your referral campaign. Are you generating more referrals by email or phone? What reward incentives motivate customers the most? What pain points and products do customers speak about the most in their referrals?
With this knowledge, your company can shore up its weaknesses and improve its strengths, optimizing its referral campaign strategy to get the most referrals from your customer base.
Asking for referrals is a powerful, effective, and cost-efficient way to get new customers by leveraging your existing customers’ recommendations.
Some best practices to tap into this lead generation method are to start a referral program, support referrals through different channels, and automatically include referral prospecting into the sales process. Then, to make the most of your referral campaign, you should offer a truly wonderful customer experience, send frequent updates to customers, and track your campaign’s KPIs.
With luck, your referral campaign will take off lightning-quick, each customer bringing in a dozen more until your sales funnel is packed full of eager new customers.
Referral marketing is when current customers promote your brand to their friends and family in exchange for rewards. On the other hand, affiliate marketing is when a person known as an affiliate is paid to promote your brand to their audience. Influencers online promoting sponsors are an example of affiliate marketing.
With a referral service business, consumers pay to gain a referral for a chosen product or service, saving them from researching or asking for referrals themselves. This is commonly used for local services such as doctors and home contractors – industries where another person’s endorsement is invaluable.
As a form of affiliate marketing, your company could partner with the referral service business to be one of the first in line to be referred to a new customer shopping in your industry.
No. It’s best to stick to an in-house referral campaign, which speaks directly to customers who know your business well.
Rather than spending money on a referral service business’ tenuous recommendation, customers nowadays increasingly turn to the internet —fast and free— when they need recommendations. This means that though partnering with a referral service might net you a few referrals with older clients, you’re unlikely to see a significant boost in your sales funnel.
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