How to Ask for Referrals

As a follow-up to the discussion in the previous episode, Blair has some criteria for firms that would beneift from prioritizing and codifying an effective referral strategy as a way to gain new business.

Links

“The Best Referral Machine I Have Ever Seen”

Transcript

David Baker: Blair, we did an episode where I ranted about do I pay for referrals that people send me, and you thought I was writing about this, right?

Blair Enns: You called it a referral system, building a referral system. Oh, yes, everybody wants a system to get more referrals, but no. Your system is how to give referrals. You're always upside down on everything.

[laughter]

David: You decided let's do one on how to ask for referrals. You read all these books, and you discovered, somewhere you say in here, "These shouldn't have been books. They should have been blog posts." Do we have enough for a podcast episode, then?

Blair: So much for a podcast, but yes, as I was reading these books, and a couple I'd read before-- When I say read--

David: Oh, yes. I know what you mean. It took you about 15 minutes a book.

Blair: Well, not 15 minutes. Who is it? I think it's Ryan Holiday has got three different methods for reading a book. He calls it an A book, a B book and a C book. An A book you read cover to cover. All fiction books I would read cover to cover. Maybe 20% of business books I would read cover to cover. Some of them I intend to skim, and I forget the categorizations, but some you just read first chapter, last chapter, last paragraph of each chapter. That's one version of skimming it.

Some books you start out thinking, "Okay, I'll just skim this," and you end up reading everything. Greg Alexander's book, The Boutique, was like that for me. I read it cover to cover, word for word. All of these referral books, as I was reading them quickly and rereading some of them, I was texting you saying, and I'm not going to name names, but, "None of these books should have been books," because they were mostly filler.

One of them has the word "referrals" in the title. It doesn't even talk about referrals. It conflates the idea of a lead with a referral. The whole book promises something that it doesn't pay off. Some of these books are actually very good, but they could have been 20-page books instead of 250-page books. What's the lesson? It's not a deep topic, and yet I feel like we could probably talk about this for an hour. We won't.

David: It's not a deep topic, but it is the primary legion plan for a lot of firms out there.

Blair: Yes. I'm sure you experience this, too, where, as I do, I ask a client of ours, an agency, "Where do you get new clients from?" The most common answer is referrals and word of mouth. To me, that's code for, "No idea, no plan." You hear that?

David: Yes. What's the distinction between referrals and word of mouth? Referrals to me almost sounds intentional, where you have a plan. Word of mouth sounds even sloppier. It's like somebody sat down at a browser, it's like an organic search, right?

Blair: Yes. It's really reputation. We could unpack that, all of the things that you do to increase your reputation, to drive inbound inquiries. I guess we've touched on this in various episodes. Referrals are direct. The idea implicit in the subject of referrals is a program for soliciting referrals, for formalizing how you go about getting referrals. I hear this a lot, "Oh, we get work from referrals and word of mouth," or just referrals, and you dig deep, and you realize, oh, there is no plan, there's nothing codified here. They can't point to where these referrals come from.

On the other hand, every once in a while you meet a firm that is a referral-generating machine, where they generate most of their new business from referrals, and those firms are worth paying attention to.

David: Do you remember Dick Truitt of the PR World?

Blair: Yes. 20 years ago, when you first invited me to speak at NYOB in Cabo San Lucas, he was also speaking, and he was the former speech writer for Richard Nixon, I think, right?

David: Yes. He has a very good approach to referrals. It will be interesting to compare what you come up with what he did. To your point, I've met a lot of people who rely on referrals, but I've never met anybody other than Dick who had a plan for it.

Blair: I have a friend who runs a solo consulting practice. He does over $1 million a year, has no employees. Every piece of new business is from a referral.

David: There's a plan behind it?

Blair: Yes, absolutely.

David: That's interesting. All right. Before we get into some specific suggestions that you might have, you found you think that referral strategies make sense for a certain type of firm more than others, right?

Blair: Yes. I'll be honest that I've been thinking about referrals for years. We're a sales training organization. We should have a point of view, let alone a training module on referrals, and we haven't because, to me, at the end of the day, I think the model for soliciting referrals is really simple. We'll get to that in a little bit, but in preparation for this, I also wrote a post on this on winwithoutpitching.com.

We'll post the link in the show notes. I was thinking about why is it that some firms, referrals aren't even on their ladder of lead generation, they're not in their lead generation plan. Then you have these other firms that live and die by referrals. It occurred to me, after thinking through this a while, that certain firms are more ripe for referrals as a lead generation source. I've identified four characteristics of firms that are able to leverage referrals well.

David: That starts with?

Blair: The first characteristic is they sell strategic services to senior people. Now, years ago, I heard you say, either directly to me in a conversation or something you wrote, or something you said from a stage, that there's a declining effective referrals because referrals get handed down or across laterally over time. We only take recommendations from people that we look up to or, at the very least, we see as equals.

We don't take referrals from people that we see as beneath us socio-economically, the status in the sector we serve, whatever it is. There is this declining effect. Therefore, the more senior the person that you're dealing with, the higher their esteem in yours and other people's eyes, the better the referral source. Therefore, if you're selling to entrepreneurs and senior executives, you're more likely to get referrals from existing clients. If you're selling design to brand managers, you're less likely to get referrals. If you do it, the value of those referrals are going to decline, actually, quite quickly. The more senior the people you're dealing with, the more likely it is that referrals are effective for you.

David: If you'd asked me to predict that one, I probably would have predicted the opposite, where I would have said referrals are more likely when you're just starting out and so on, but I think you're onto something, which it would not have occurred to me before. The more well-positioned you are, the more referrals make sense. I would have guessed the opposite.

Blair: Well, if you think of the most senior clients out there, so people who are in very senior positions at large companies, you think about what are the marketing channels that work for these people? They're not spending time on Twitter, they're probably not reading much on LinkedIn, they're reading the Wall Street Journal, they're reading Harvard Business Review, maybe they're going to some very select conferences. They're in this really elite strata of individuals that pass secrets back and forth to each other.

David: Here's a good example of what I think you just said. I hadn't drawn that line until you were talking. When I'm advising a firm around their positioning, if we're anywhere near something that's related to the PE field, you want to have a great relationship with the PE funders because at some point they're going to say, "All right, we'd like to fund your startup, but we really would feel better about this if you would work with this marketing firm to help you with the go-to-market strategy."

That would be an example of a referral from a very high-level source where, in some cases, the funding is at least seems to be partially contingent on that. I have probably four or five clients where that's true, where they don't have a sales plan to all of those startups. They try to be known by them, but they try to have a referral plan or a marketing plan to the PE funders, and now they're getting multiple clients from one source. More than that, it's not just about efficiency, it's about the weight of the referral too.

Blair: Again, there's a certain strata. I know a lot of firms that have tried to crack that nut and only a few that have where you get this endorsement from the private equity firm, or sometimes it's venture capital, too. At the end of the day, if you're dealing with really senior people, when it comes to lead generation, you really only have two strategies. One is to get famous.

David: I'll take that one. Whatever the second one is, I'll take that one.

Blair: Or get referrals. I don't mean small f, famous, I mean New York Times bestseller famous, I mean being interviewed on television show famous, I mean really big famous. Getting invited to maybe not necessarily Davos, but the rung of stages right below the very top. Of course, including the very top, like an actual TED Talk. A TEDx is helpful, but at an actual TED Talk, you're either that level of famous where the senior people reach out to you, or your name is getting handed from person-to-person via referrals.

David: Well, you just dashed my dreams, but thank you very much for all of those.

Blair: That's why I'm here.

David: All right. The first one, just to repeat, is about selling strategic services to senior people. If you do that, if you're connected at a pretty high level, then referrals could make more sense as a strategy. The second one is, if you are in a market where your clients talk to each other and thus the word spreads more easily, I call this the water cooler effect. Sometimes you have to think about vertical versus horizontal, and you've actually thought about this in those terms as well as some others too.

Blair: If you think of this as a characteristic of firms that can leverage referrals, their clients talk to each other, it doesn't mean that they necessarily do the second part, which is refer easily. You would assume a firm that is focused on a vertical, like automotive or retail or something, even banking, hospital care, whatever it is, you would assume that those clients in those verticals talk to each other. That's probably true, but it does not naturally follow that they are referring firms like yours to each other.

Let me ask you, have you ever been in a situation where a client of yours, either you had asked for a quote or a referral, or something where it just came up in conversation, where they said, "I really want you to be a secret. I don't want other firms in my space to know about you."

David: "Because you're so bad, I don't want you to impact other firms I love."

Blair: No, they've said that. I don't think any of them have been serious. They've joked about it, but I guess I don't have enough experience to know, but it seems like the industry you and I serve, they're so generous with each other. They want what's best for other people, but certainly, they've joked about it.

I think in my field, selling, it can be a little bit more competitive. I have heard many times, "I really don't want my competitor to just know about you," but I don't hear it so much anymore. I think this is a function of firms being more specialized these days. If you're in a peer group with other agency owners, the idea that you would compete with each other, even if you're in the same geographic location, is far less likely today, therefore, you're more likely to refer.

I think there's certain verticals that actually do refer easily. The first ones that come to mind are those that sell non-rival risk goods or services, like entertainment. I don't know if this meets the technical, economic definition of a non-rival risk good or service, but a movie is a non-rival risk. You might go to a movie about vampires, and then I come along as another studio, and I make another movie about vampires. It doesn't mean that you're not going to go to my movie as well. In fact, you're likely to go to my movie as well.

In that space, movies, and television shows, et cetera, they do compete with each other, but the consumers of those goods or services are not in a position where they can only consume one of them. In fact, if they consume one, they're more likely to consume another. Therefore, it's mutually beneficial for us to be working with the same quality players. Does that make sense?

David: Yes. It's not a zero-sum game. It's almost like N plus one just goes forever and ever. I don't tend to define this one based on vertical or horizontal, I tend to define it based on whether there are conferences, and to me, that's the best indicator of whether referral strategies are going to work. Most conferences are organized around a vertical focus, but some of the largest, in fact, the very largest one in the world, Dreamforce, is a horizontal conference. If there's a conference for what you do, then I think probably referrals make more sense, just logically anyway.

Blair: I think that's a good way to think about it. Basically, if your clients talk to each other and refer easily, obviously, then that makes sense for you to think about leveraging referrals.

David: The third one that you note here is that sometimes it makes sense if there's a personal component to the service or value. Is that because if you're putting some of your personal reputation behind it? Is that part of it, or what?

Blair: Yes. There's something about this personal component to the value of your service that makes somebody more willing to talk about it and refer you. I always think of the CEOs of these corporations who tend to be pretty good at screening out all of the noise, social media, a lot of the channels that many of the listeners would push their content through. They take the recommendation of their peers, as we've already talked about, but there's something about--

If you're in the finance space-- I said to you before we pressed record that I just popped into a private workshop. We're delivering for a large financial planning organization, which is not in our target market, but we do a lot of work in this space. They see that our work translates. In that space, they lean heavily on referrals as a lead source. I've referred my financial advisor to others, and he was referred to me. There's just something about that space where it's not just business success.

This person has had an impact on my life, and I think you should know about it. There's something more meaningful there, rather than just somebody who will perform a business task.

David: This person didn't just remodel my kitchen. I've trusted our family investments with this person.

Blair: Sometimes there's a privacy component or a discretion component about it where it's like, "Hey, I know when it comes to personal finance, I live in a small town. I know he is not going to talk to other people," et cetera. I think that applies to the famous and the wealthy as well. It's like, "Hey, I've got this guy. He's used to dealing with people like us. He comes with my stamp of approval."

It's not absolutely necessary that there be this personal component to your service or a value for you to leverage referrals, but when you do, it seems to become easier.

David: It may not apply to a firm that does CPG packaging, but if a firm does change management or culture work or something where the failure attaches to the person individually, then you could see how a referral would make more sense in that other environment. You could see a referral making sense with either, but in your world, what you're describing here is that if there's a personal component to it, it's something worth pursuing. Then the last one you have is even if none of these things necessarily apply, you might have a disciplined approach to it, in which case you could apply it to most anything or not.

Blair: I don't know about most anything, but when we started diving into, can we come up with something on referrals that has a novel point of view that is more than what everybody else is just doing out there? I couldn't find anything other than Robert Cialdini's work on reciprocity, I think is really applicable to the work of referrals. The point of when do you ask for a referral. If you want the universal framework for how to get more referrals, it's three steps.

I learned this from Strategic Coach. In the post that I wrote recently, and again, we'll post a link in the show notes, I talked about my experience with Strategic Coach and how I saw them do this. Here's the three-step framework that I learned for leveraging referrals. Number one, do good work.

David: We could stop right there.

Blair: Number two, say please. Number three, say thank you. We're not going to unpack that here. I unpack that in the post in quite amount of detail, but really, at the end of the day, that's it. First of all, people don't refer work that isn't good. The table stakes are you have to do good work, and then you ask and say please, and then you say thank you at the end. Now these two steps of say please say thank you, there can be a lot of nuance around that.

How do you ask? When do you ask? How do you say thank you? When do you say thank you? The variables in those two steps are important. Really, at the end of the day, you want a business that has some of the characteristics that we've already talked about before. You're selling strategic services to senior people. Your clients talk to each other and refer easily. It's ideal if there's a personal component to the service or the value you deliver.

Then, if some of those variables are in place, follow this three-step framework. Do good work, say please, say thank you, and formalize it. Work out the details of when and how do you ask and when and how do you say thank you, formalize it, and even gamify it, if you can, for your staff and maybe even your clients. I talk a little bit about that in the post as well.

David: When you look back over the work you've done with clients, how many people would you say have regularly sent you referrals, even without you asking them, like multiple instances of the same person sending you a referral over the last decade or so? I've got a number from my side.

Blair: It's common to hear that somebody was referred by somebody. The idea that steady referral source where you hear from this person over and over again, it's pretty rare. I would say less than five.

David: Five is my number. I've reached out to each one of these and said thank you because all of the referrals, I didn't ask for any of them. They were all great referrals and sent a gift, a thank-you gift, and tried to get inside their head. What's interested me in each case is that none of these referral sources think it's really all that unusual. It's just something they do naturally. It's what they do with everybody, and they don't think it's unusual. It's just interesting to get inside their head about it.

Blair: To our previous episode on this point, you're very good at that. When I was thinking of individuals, I was thinking of just clients. There are people outside of our client space, professional colleagues and friends, and you being one of them, maybe even at the top of that list. I do get a lot of referrals from you, and you're very good at giving referrals, hence the previous episode. [laughter] I guess I owe you a gift. God dammit, Baker.

David: Well, that's kind of what I've been beating around the bush about.

Blair: Fine, fine.

David: It sure took you a while to figure it out. Should we pay fees to people that send us great referrals?

Blair: Well, we talked about this in the previous episode. I personally don't think there's anything intrinsically wrong with referral fees, and we didn't say that there was in the last episode. I think the danger with referral fees is hiding it. I've said in that episode, my father used to work in commercial crime, and he used to say to me, "A kickback," which is a crime, "the definition is a secret commission."

I feel like if there's a commission being paid, if there's a fee being paid, you shouldn't be shy about disclosing that fact, you shouldn't hide that fact. Now, if you're paying a referral fee, the party to whom you were referring this other party says, "Hey, do you guys have a financial relationship?" You absolutely have to declare that you do.

If they ask you, "Well, how much are you paying that person?" I personally don't think you have an obligation to say that. I think that obligation is on the person you're referring in. Now, that's just me. I might be wrong. One of my last points on this is like all issues of money, this is highly personal. My interpretation of it, and your interpretation and the listeners' interpretation of what's wrong, what's ethical, what's unethical, I think they all might be different.

David: Yes, I think they probably would, at least in the little small details, maybe not the heart of it.

Blair: I do think that referral fees are a bit like referrals in that it either works for you or it doesn't. Referrals should be a very big part of your lead generation plan. Maybe like your major lead gen activity is referrals, so it's right at the top of your list, or it might not even be on there at all, or it's way down there as an afterthought. It's one or the other. You're kind of all in, or you're focusing your attention elsewhere.

I think it's the same with referral fees. You either go all in on referral fees or you don't. Now, I know some firms, I can think of one in particular, but I know more that have paid over $500,000 in referral fees to one individual.

David: I know that too. I know a firm that's done more than that, about $800,000.

Blair: They're all in on this idea. Personally, that makes me a little bit uncomfortable. I don't know if I can articulate why, and I don't think that makes it wrong. Maybe I'm just erring on the side of caution here, but I think you're all in on the idea of referral fees, or you're not.

David: Well, in the case of this firm, it turned into the equivalent of a client concentration issue because so much of their work came through that one referral relationship, and then that referral relationship dried up. Not because of anything going wrong, but that person lost their job and wasn't in a position to do it anymore, and all of a sudden, it almost created the firm. It was just like a client concentration issue.

Blair: Well, there's something in that because you said that person lost their job. This is somebody who is in somebody else's employment. That's the situation I was thinking of. Maybe we're thinking of the same firm. This person is employed somewhere else in a senior position and is referring opportunities to this agency, and they're paying this person, who has a job, hundreds of thousands of dollars on the side. It's just a little bit uncomfortable to me, but again, that's just me. Maybe every party in that situation, including this person's employer, is perfectly fine with it.

David: What's the difference between a formal referral plan and an affiliate program?

Blair: An affiliate program is basically really formalized. It's typically tied to more productized services firms. I've got a book Price and Creativity that's priced at between $100 and $320 a year. Every six months or so I get somebody ask, they say, "Hey, I refer this book all the time. Do you have an affiliate program?" Meaning, can I get a special link and every time that I refer buys the book, I get paid, I can log in, I can see what those sales have generated?

There are different ways that you can handle an affiliate program. I rethink it every year, and every year I reject it. I think affiliate programs are also like referral fees and just referrals in general. You go all in on it and build your business around it, or you don't do it at all. I might revisit it next year and change my mind, but currently the way I think about it, my business, it's like, "No, I don't want to dabble in affiliate marketing."

It's either not at all, or maybe one day I'll flick the switch and be all affiliate-based.

David: The government has decided that where our ethics are lacking, they're going to require disclosure of affiliate links, and so on too. That's an interesting twist on things. Tell me if this is a true statement to finish this up. Wherever you are, whatever your focus is, it's good to think about the role of referrals in your marketing strategy.

David: True statement. It'd be a very rare firm that could rely on this as their primary method of new business.

Blair: Yes. If you're in that category, if you're getting a decent amount of referrals, yours might be one of them. Just think of that list of the four different characteristics of firms that leverage referrals, and is that you? Does that sound like you? If it sounds like you, you're probably already benefiting from some referrals. It might be time to go all in and see if you can't make that your primary lead generation source by formalizing it.

David: Right. Relying on referrals as some passive strategy because you don't have a marketing plan is not what we're suggesting here.

Blair: Correct.

David: There was a little hesitation there. [laughter] Next week, we'll--

Blair: Yes, it's correct. If I ask you, where do your clients come from, and you say referrals, you should have that codified. If you haven't codified it, you're either being disingenuous, you really mean, "I have no idea where business comes from," or you're sitting on an opportunity that you really should capitalize on by formalizing it with this simple three-step approach; do good work, say please, say thank you. Formalize how all of that's done.

David: Well, thank you for saving us from a book on referrals by Blair.

Blair: [laughs] I do the reading so you don't have to.

David: Thank you, Blair.

Blair: Thanks, David.