The Ultimate Guide to Getting More Referrals and Increasing Word-of-Mouth

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You can talk to anyone from first–time freelancers to seasoned business executives and they will tell you how important word–of–mouth buzz is for their businesses.

If you can get people talking about your products, services, and ideas — and, more importantly, referring potential customers to you — then you can grow your bottom line at an alarming rate.

Now, you might be saying, “Alright, I get it. Referrals are important for my business. But how do I get more of them? How do I get people sending me customers?”

Here are some proven and powerful methods you can start using today.

Partners matter

If you want to gain more referrals, then having the right business partners is crucial.

Most people think that you need to become a well–respected and established presence in the marketplace before people start talking about you.

I disagree. You don’t need to become an influencer, you just need to connect with one.

Generating more referrals starts with building relationships and finding relevant business partners for your work. This means networking and self–promotion are critical.

Let’s take a small example that could apply to every business imaginable.

Let’s say you run a freelance dog walking business. Now, you could try to become known as the best dog walker in your community and go door–to–door and get to know everyone in your neighborhood with a dog. It might take months, but if you’re really good, then it could work.

Or, you could save time and money, and reach out to the local pet store owner. Get to know them. Drop off a free gift to them. Take them out to lunch once or twice. Then, ask if they are willing to refer your services to people who come into the pet store. Maybe they will even let you put up a flyer or business cards at the checkout counter.

Which option sounds more effective and efficient? Connect with one pet store owner or connect with hundreds of dog owners?

That same principle applies to any business. If you want more referrals, then you need to connect with the right partners.

We will come back to this example later because there is a powerful technique you can use to build partnerships like this one.

But for now, I want you to think about the following: Someone already has access to the people you want to reach. How can you connect with that influencer?

Pay for customers, not referrals

The classic referral strategy is simply to ask for someone to send you a lead.

“Do you know anyone else who might be interested in my services?”

The problem with leads is that they aren’t paying customers, they are potential customers. That means sometimes they buy and sometimes they don’t buy.

Some businesses try to increase referrals by paying for leads. Instead, I suggest that you pay for customers. Allow me to explain…

Customer Lifetime Value is where the money is at

The first thing that you need to do to increase referrals — and your bottom line — is to discover the Customer Lifetime Value of your typical customer.

Customer Lifetime Value is simply what a new customer is usually worth to your business in the long-run.

When you know this amount, then you’ll know what you can pay for a new customer.

I’ll give you an example from the online world.

There is a popular dating advice marketer named David DeAngelo. (You may know him by his real name, Eben Pagan.)

David offers 200% commission on his entry level dating ebook. In other words, you can be an affiliate for his product, sell the ebook to a new customer for $20, and then you will get a $40 check in the mail.

On the surface, that kind of business move seems crazy. Why would he pay out $2 for every $1 he gets?

It’s because he understands Customer Lifetime Value. If he gets a new customer that buys his ebook, then that customer usually ends up buying much, much more from him in the long-run.

In other words, he is happy to pay $40 for a new customer because that customer will typically pay him far more than that over time. Remember, we are talking about what you will pay for a new customer, not a new lead.

Once you understand this principle and have data to back it up, you can grow at an unbelievable rate. In fact, click the play button below and listen to personal development master Tony Robbins and marketing guru Jay Abraham tell a quick 4–minute story about Icy Hot’s incredible growth.

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In my opinion, the Customer Lifetime Value strategy that Jay describes in the interview above is the best way to grow your referral business. People and businesses are happy to refer related products when they are paid to do so.

But there are other ways to gain referrals as well, so let’s look at those…

The Law of Reciprocity

The Law of Reciprocity says that we respond to positive actions with positive actions and negative actions with negative actions. To say it another way, we love paying people back for what they do to us — good or bad.

The good news is that this law holds true in business as well as in everyday life.

When it comes to generating more referrals, you can use this principle to create business partnerships that are mutually beneficial.

I told you we would return to the dog walking example, so let’s do that now.

If you’re a dog walker and you want to put your business cards at the checkout counter of the local pet store, then the Law of Reciprocity might come in handy.

For example, you could tell the pet store owner that you love referring your customers to their brand of dog food. Perhaps the two of you could set up a mutual referral system. You keep sending customers back to them for dog food, they keep telling dog owners to use you as a pet sitter.

Once again, this principle can work for any business. How can you work with the other party so that you both can benefit?

There is a phrase that heard from seasoned marketer, John Jantsch, that makes this entire process very easy. That phrase is, “What is the best way for me to introduce you to my audience?”

Another way of saying this would be, “What is the best way to tell my customers about you?”

Do you know any business that wouldn’t be interested in telling potential customers about their work? Once this conversation gets started, it’s only natural to tell your potential partner what you do and ask if it’s a good fit to share your products/services/ideas with their customers as well. Frame it as a mutually beneficial partnership and the Law of Reciprocity will usually do the rest.

Now, make sure to do your homework beforehand. You can’t dish this phrase out to everyone in your industry. Besides, your goal is only to connect with a few influencers anyway.

That said, this principle can work in small teams as well as between two people.

For example, I’ve heard of web designers linking up with three or four other digital professionals and then referring clients among the group. One person might be an expert in design, another in web-based applications, another in mobile applications, and so on. When a client mentions a need for one of the services, the other group members point them in the right direction.

Asking for referrals

The previous strategies in this article will allow you to build a system that continually generates referrals, but it can still be worth your time to ask for them on your own. After all, if you’re talking to someone who could send you potential customers, then you might as well take advantage of the opportunity.

There are two things you need to focus on when asking for referrals.

1. Timing

Remember the Law of Reciprocity? Well, people are much more likely to send referrals your way if you have recently created value for them. The time to ask for referrals is right after people are feeling great about you and your work.

For example, if you design websites and a client loves the project you just finished for them, then that would be the perfect time to ask for a referral. Or if you just referred two new customers to a referral partner, then that would be a great time to ask them if they have any new leads for you.

2. Wording

The words you use to describe your work matter.

The key that most people forget is that you need to state things in your customer’s terms. I call this addressing buying symptoms. In other words, what are the symptoms the people display and the phrases that people use before they buy from you?

If you are a chiropractor, for example, it might be phrases like, “My back hurts” or “I have lower back pain.”

Knowing these phrases will help you ask for referrals in a more effective manner.

Let’s say you’re a web designer. Your usual approach might be to ask previous clients, “Do you know anyone who needs a website designed?”

The only problem is that potential customers rarely use that phrase.

Instead, you could say, “Most of the people I work with say things like, “I wish we could add ____ to our website.” Or, “I’m not really happy with how our site looks.” If you hear someone say that, will you give them my card?”

To put it simply, you need to target your referral requests to the needs of your customers.

A quick tip for those who are just getting started

If you’re just starting a business, then it might be worth your time to actually work for referrals instead of cash.

Admittedly, this isn’t something you can do all of the time, but if there is a client that can get you access to some big fish in your industry, then it could very well be worth the effort.

Just make sure that there is a clear understanding of the expectations from the beginning. Your client should know that you’re expecting them to put you in touch with potential clients for the work you are doing. (This referral tip, and some other good ones, are shared in this story about a marketing consultant.)

The true secret behind word–of–mouth

Regardless of the strategies you use to get more referrals, the real secret behind generating more buzz about your work is the following: Do the best work possible and find the best partners you can.

It isn’t easy, but it is simple. Build the best product you can. Offer the best service in the industry. And then tell the right people about it. In fact, that’s the idea behind another brilliant sales technique.

To put it another way, the best way to get people talking is to build a business worth talking about.

Where can I get more tips like this?

If you enjoyed this article, then you should sign up for Passive Panda’s free newsletter.

20 Responses to The Ultimate Guide to Getting More Referrals and Increasing Word-of-Mouth

  1. Chase says:

    The Law of Reciprocity…

    “You can have everything in life that you want if you just give enough other people what they want.”
    — Zig Ziglar

    Cheers.

  2. John Kester III says:

    Great article James. These are all concrete and practical approaches to gaining momentum through building connections.

    I would just add in a note on the importance of perseverance and follow-up. When connecting with these new relationships, there is a lot of behind-the-scenes development that is not always apparent on the surface. It takes time for these relationships to grow and the fruition of benefits is not always immediate. The important thing is to keep seeking out connections and places to get the word out. Find those like-minded and pursuing similar goals to strengthen this network.

    Then making sure to follow up with those contacts for thank yous and offers to help as your mention of reciprocity encourages.

    It is so great when that email or phone call comes through when you least expect it, that’s when you know your hard work has paid off and all your effort to make connections is making a difference.

    Keep up the good work Panda!

    • James Clear says:

      Excellent point my man. It’s nice to have your smarts to fill in the gaps in my writing with these timely reminders.

      • John Kester III says:

        Oh and this may already be in line with Reciprocity in your article, but accountability is crucial as well.

        When someone makes that referral, his or her name, character, and own business is intertwined with how you come through. That’s why building that track record is so important and stresses the importance of a strong beginning to any venture.

        When someone refers me, I always think about the responsibility I have to the person making the referral and how they need to trust me to represent them well. Building that trust in a timely manner (within the first meeting or two) is crucial. You address this in your other articles, just thought it was relative.

  3. Joey says:

    I love this and I will be using this:

    Starting the referral process:
    “What is the best way for me to introduce you to my audience?”

    Explaining who you’re for:
    “Most of the people I work with say things like, “I wish we could add ____ to our website.” Or, “I’m not really happy with how our site looks.” If you hear someone say that, will you give them my card?”

    Incredibly valuable information.

    Thanks buddy.

  4. Lach says:

    Hey James! I don’t say this often, but great article, man—especially the tips about wording referral requests. Picked up some good tools here. Where’d you dig up that Jay Abraham interview? I had that on cassette tape like 10+ years ago :)

  5. AJ says:

    Nice job James. I knew there was a reason I signed up for your list. :)
    The customer lifetime value is key knowledge.
    Thanks,
    AJ

  6. Ellen says:

    What a fantastic article James! Loved it. Hit the nail right on the head with this one. So, what would be the best way for me to introduce my audience to you? :)

  7. Michael says:

    For myself, creating new business…getting referrals is about the partnership. Trust is the key element. That is what my work relationship is based on. It includes integrity, honesty, excellence and hard, purposeful work. All things we love! I know I can trust the person I work with completely, so the business that we work on together, the referrals we get are real and profitable. From those referrals and the success we produce — because we know we will come through — other clients follow. Word of mouth from results and then the creation of additonal results builds our business. This also includes being selective. We don’t work with every perspective client. We screen to find our ideal client which again sets standards and supports success.

    Another simple but essential element is gratitude. We thank our clients with top level customer service. Organically thanking a client for the business over and over again comes naturally. We are reachable — readily available to speak to our clients. We write personal notes and send our business cards encouraging our clients to pass them along to other people who would benefit from our service. We take the time to connect. This includes individual, personal emails and more. Sincere creativity and appreciation. Referrals deserve tremendous respect and respect felt encourages new business. Confidence, confidentiality and genuine care are essential.

    Also — get a testimonial or recommendation of results. Use them to promote yourself and your business with a happy clients name, title, business and location…then you can send it out in a vast way to their colleagues, competition and more.

  8. Lovely Chu says:

    Very useful and informative writing u have here. You smile in my face. Meaning I will not worry too much if I open this small business very soon. Yes, word of mouth really matters. But still, focusing on good quality and telling it to best people will help me succeed. And of course not to forget to pay the customers.

  9. Richard says:

    Oh man I feel like I’m sitting in on College Courses I never took before. This stuff is so interesting to me as I ramp up with my own project. This is awesome, thanks for putting all this content up for free!

  10. Brit says:

    Great, thanks. :’)

  11. Lou says:

    Since coming across Passive Panda, my understanding of interactions, importance of relationship building, and so on has grown tremendously.

    My recent side work for a crossfit facility is based on referrals. My payment for referrals: access to workouts free of charge (which I enjoy tremendously)
    I know the clients we’re wanting, and I understand the jewels in this article. I’m having a difficult time zoning in how I can make it work for us.

    Do I check out possibilities of teaming up with a sports store? A major or mom &pops one? Any suggestions would be appreciated

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