5 steps to successful referral marketing

How to

Making the most of your advocates


If you run a service-based business, there's a good chance you depend on word of mouth to bring new clients to your firm. Because services are so intangible and there's often little chance to try before you buy, a referral from a happy customer will attract new prospects who are more likely to use your services. Plus, the trust that referrals create may help in them using your services more often.

But there's a big difference between getting clients through word of mouth, which may happen regardless of whether you manage it or not, and a formal referral program.

In general, referred clients are up to six times more likely to convert, according to author and sales guru Tom Hopkins.1 According to Macquarie's 2014 Residential Real Estate Benchmarking Report2, referrals account for 22 per cent of new business opportunities, while Macquarie's 2013 Legal Best Practice Benchmarking Report3 highlighted 26% for legal firms. That's a lot more than websites or advertising campaigns, and only just behind repeat customers (29 per cent of new leads for real estate) – who are most likely the sources of those referrals.

So how do you build a successful referral marketing program for your business? Here are five key success factors you should consider.

  1. Set a framework

    You need some consistent rules, without making it too complex. For example, how will you identify the right clients? Consider your top 20 per cent, your most enthusiastic advocates, and then look at who's in their network. Is this where your best prospects could be?

    Think about how you will measure the results. Hard results include the number of new clients per quarter through referrals versus the cost of running the program. Soft results include how your referrers feel about the program – is it easy and are they satisfied?
  2. Reward your referees

    This will certainly increase the likelihood of the referral and is an important part of your framework. Consider escalating the reward level the more they refer you - for example, personal recognition and additional incentives once you convert five leads through their recommendations.

    Examples of rewards include:

    • discounted rates with your business
    • discounts they can pass onto their networks
    • exclusive access to premium services (such as training or events)
    • donation to a not-for-profit organisation
    • a thoughtful gift that creates a buzz in their office
    • a simple, personalised thank you letter or card.
  3. Include referral sources in your contact management system

    This will help you manage and measure the success of your program, and ensure you're recognising the right people.
  4. Have a dedicated referral program manager

    According to Macquarie's latest legal benchmarking report3, 8 per cent of legal firms have staff dedicated to this role. They could be responsible for setting up the referral program and the ongoing management and measurement on a regular basis. Set them clear targets – for example, increase referral business by 10 per cent in the next 10 weeks.
  5. Communicate the program with your staff and clients

    A successful referral program requires an internal mindset change. Make sure staff understand why the program is important and how their efforts will be measured (and possibly also rewarded). They need to have the confidence to ask for a referral and the tools to capture one. This could include thank you letters, flyers or personalised letters requesting referrals, as well as the ability to record details in your contact management system.

    Explain the program to your clients too. Make sure they understand the type of clients you are looking for and make it as easy as possible for them to pass on your details.

    If you provide excellent service, you may be generating referrals without even realising it. Consider how much more your business could grow if you acknowledge this strength internally with staff and externally with your very satisfied clients by proactively asking for referrals and then rewarding them for helping your business to prosper.

5 key success factors

  • Consistent framework
  • Tangible rewards
  • Contact management system
  • Referral program manager
  • Communication strategy
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1 Source: 7 Sure-Fire Ways to Build Your Referral Business.

2 Source: 2014 Residential Real Estate Benchmarking Report.

3 Source: 2013 Legal Best Practice Benchmarking Report.

Except for Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502 (MBL), any Macquarie entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.