Sales: Tuning Up Your Referral Engine

For all the hype and buzz, social media is really the 21st century incarnation of word-of-mouth marketing. Using the power of technology, consumers can exponentially "tell-a-friend" about what they like — and what they don't. Obviously, the key for business owners is to put your customers to work for you, encouraging them to evangelize your company, your products and your brand. In other words, you need to create a referral engine to power your business.

That may sound like an intimidating task, but marketing expert John Jantsch not only believes all small business owners can do it, he says you must do it to grow your business. Luckily, Jantsch tells us how in his new book (out today) The Referral Engine. Author of the best-selling Duct Tape Marketing, Jantsch was partly inspired to write his latest book after taking an informal survey of business owners. He found that 63 percent of business owners received over half of their business from referrals, but 80 percent had "no system to generate them."

Last week while Jantsch and I were in Dallas working together at an eBay event, we talked about how entrepreneurs can build a referral engine and why it's vital to your success.

Rieva Lesonsky: You say humans are essentially compelled to make referrals.

John Jantsch: There's plenty of psychological, social and even physiological evidence that suggests that. Making referrals makes us feel good, like we're part of a community, part of something bigger than just ourselves.

Lesonsky: How do business owners create the systemized approach you say is necessary to build a referral engine?

Jantsch: First, be referable. Look at how you do and don't touch customers. Second, you need to develop the right marketing strategy, which is built around knowing who your ideal customer is. And third, you need to have something worth talking about. What is your core differentiator? You need to find (or create) it, ramp it up and amplify it. The point is to educate your customers, to teach them how to make a referral.

Lesonsky: Is there a "best" way to approach your customers?

Jantsch: You can't just chuck the responsibility for this into the sales stream. You have to make human contact, call your customers, put a human face to the sale. Build the level of engagement. The more involved you get with your customers the better. After the sale, ask your customers if they got the results they expected. If the answer is "yes," ask for a referral. If it's "no," fix the problem. Your sales and customer service teams should be on the same page.

[Another way] is taking your existing customer base and creating a more exciting opportunity for them. Build a network of strategic partners. 

Lesonsky: You really emphasize calling your customers? Why is that so important?

Jantsch: When you hear what they have to say in their own words, how they describe [your products or services], then you know what it is you're doing that really works.

Lesonsky: For years entrepreneurs have been told to "ask for the sale." But essentially you're saying ask for the relationship and the sale will come. This goes along with your longtime mantra: "know, like, trust."

Jantsch: Exactly. Trust is the single most important reason a recommendation is made, and conversely, a lack of trust is the single greatest reason referrals don't happen.

Lesonsky: What's the best referral you ever received?

Jantsch: Years ago Michael Gerber of E-Myth fame referred me to a literary agent at LevelFiveMedia. I'm still with them and that's made a big difference.

Follow Rieva on Twitter @Rieva and read more of her insights on SmallBizDaily.com.