For many businesses, the number one source of new revenue comes from referrals. Anyone who has worked in business development will tell you that referrals are the holy grail of lead generation. They come with an understanding of what you do, a clear idea of the problem they need solved, and a built-in positive view of your capabilities, as someone has already vetted them for you. However, building a consistent source of referrals is a challenging task.
At Ralli Marketing, we use a straightforward yet powerful equation to help our clients understand the two main factors that contribute to whether someone feels confident sending a referral your way:
Product + Relationship = Referral.
Understanding the Referral Equation
Product Score
Your product score is determined by how novel your product is or how well it works compared to your competition. Simply put, it’s how good your “mouse trap” is. The more innovative or superior your product, the higher your product score.
Relationship Score
The relationship score measures the depth of your relationship with the referee. This includes how well they know you, how much they trust you, and the history of your interactions. Strong, trustworthy relationships can significantly boost your chances of getting referrals, even if your product is not the most unique on the market.
Balancing the Equation
Your product and relationship scores need to combine to give you a net score high enough to justify a referral. The stronger your product, the less critical the relationship needs to be. Conversely, the stronger the relationship, the less critical it is for your product to stand out.
For example:
- John’s Out-of-this-World Product: If John is selling an exceptional product that no one else can offer, he doesn’t need a deep relationship to earn referrals. His product’s excellence speaks for itself.
- Sally’s Reliable Relationship: If Sally’s product is similar to many others on the market, her long-standing relationships and consistent reliability can still earn her referrals. People trust her and know she delivers, which can outweigh the lack of product uniqueness.
The Secret to Effective Referrals
The critical insight here is to accurately assess where you stand from both a relationship and product perspective. Importantly, it’s not your assessment that matters—it’s the perception of the person making the referral. Their view of your product and relationship is the only thing that counts.
Action Steps
- Evaluate Your Product: Honestly assess how your product compares to others. Is it novel? Superior? If not, consider how you can innovate or improve it.
- Strengthen Relationships: Invest time in building and nurturing relationships with your clients and contacts. Trust and reliability can make all the difference.
- Gather Feedback: Understand how your clients perceive your product and relationship. Use their feedback to guide your improvements.
- Invest Wisely: Based on your evaluations, invest in the areas that need growth. Whether it’s enhancing your product or deepening your relationships, focus your efforts where they will have the most impact.
By reflecting on where you stand and strategically investing in the areas needing growth, you can begin to build a robust and sustainable source of referrals. Remember, the key to unlocking referrals lies in the perfect blend of a great product and strong relationships.