Build an effective referral network

What’s at the heart of a referral network?  Romey Ghadially, of The PACE Partnership, looks at the key activities needed to build such networks.

A couple of years ago a friend of mine parted ways with a long-standing girlfriend.  When word circulated dinner party invitations, blind date offers and the like proliferated. But my friend was reluctant to go along with many suggestions. That was until one of his friends, Jack, introduced him to Anna, who he immediately hit it off with.

But why was Jack’s offer different? Well, he knew my friend very, very well and he felt he understood the kind of person he would connect with.  More importantly my friend trusted Jack’s judgement implicitly and so met with Anna.  

What’s at the heart of a referral network?
If you think why clients buy advice from professional services, more often than not the expert opinion sought is being used to mitigate a degree of risk. The risk could be within a decision they need to make, or to prevent them undertaking an activity in the wrong way.

When risk is behind a purchasing decision, a key driver is to reduce or eradicate it.  How do clients do this?  Like my friend, they go for people they trust.  If they don’t know who the best advisers are, they canvass opinion from their contacts.

And trust is also essential for those doing the referring.  Their judgement is under the spotlight here in making that recommendation.

Leave it to chance?
This may imply that referral networks are more incidental by design.  They rely on a professional doing a good job for someone, then that person’s opinion being sought by another needing similar expertise. And yes that person who is being asked to refer has to be happy to do so.

Whilst it is definitely true that you have to do a good or excellent job if you want referrals, professional services firms do not necessarily have to leave it to chance to get referrals.  They can build and manage very effective referral networks that bring in a steady flow of good quality leads.

We have seen successful firms build such networks through three key activities. We would like to share these with you.

Activity 1: Formulating the blueprint
The first thing the successful firms do is to sit back and take stock. Using their marketers, business development professionals and fee-earners, they look at their current referral patterns, but not just in terms of the quantity and quality of leads over a given time period.  The firms also look at the dynamics of each individual referrer.  What personality traits are dominant? What motivates them? What reward/recognition they seek in referring etc?  With this information, they build a profile of their most prolific and beneficial referrers.

They then consider the future.  They set targets for the volume and quality of leads they want to generate from their network and the type of projects this will result in.  Where there is a gap between what they receive now and the future, they plot the following:

  1. Who in their current contact base will refer such work?
  2. Are the profiles of their most effective referrers recognisable in other contacts that operate in their market?
  3. Do any of their contacts know people who fit these profiles?
  4. Are there any associations or groups in their clients’ markets where they might meet similar individuals?

This creates a network blueprint.  It outlines the key people who will be central to achieving the referral targets and the potential new referrers that need to be cultivated.

Activity 2: Constructing the network
To turn the blueprint into a reality, the question ‘why should contacts refer business to us in the first place?’ needs to be asked.  From the successful firms we’ve seen, this is because of 5 factors:

  • They have got themselves on the referrer’s ‘radar’
  • The referrer trusts them
  • They have actively encouraged referrers to refer business to them
  • They do an excellent job
  • The referrers gain something in return

Putting yourself on a referrer’s ‘radar’
Some of your referrers will know you very well; others will know some of your capabilities.  Your potential referrers probably know very little about you. Ideally you want to motivate all of them to want to enter into a dialogue with you to start to uncover potential opportunities.  Speaking face to face is going to be crucial to building that vital trust.

One way to motivate referrers to want to talk is through targeted campaigns – ones that address their interests and motivations (remember the profiles you defined). We have seen great campaigns feed referrers with articles on topics which interest to them, news clippings, books and publications. 

Behaviours which build trust
Having sent several communications to them over several weeks, you can suggest a meeting.  In this, avoid spending the whole time extolling the virtues of your firm.  Your focus should really be on getting to know the referrer.  This knowledge will enable you to explore a suitable way forward, one, which the referrer is comfortable with.

How successful the meeting is will depend on whether you have managed to build or start to build a position of trust.  We have found that to earn such a position in a referrer’s eyes, professionals need to build an image of credibility, competence and compatibility.  Each relies on a number of key behaviors, which contribute collectively to this positive impression. Most of these can be learned or developed through training, coaching and mentoring.

  • Credibility – by having confidence, creating a good initial impact, being honest, delivering as promised
  • Competence – by demonstrating knowledge, having a good track record and expertise, asking searching but non-manipulative questions
  • Compatibility – by demonstrating genuine interest, active listening, adapting behavior, showing you care and showing vulnerability.

How to encourage referrals
Human nature in many professionals often makes them bashful when it comes to encouraging referrals.  They do not want to appear pushy, hungry or desperate for work.  These are all very legitimate concerns and being any of these 3 will be off-putting to a referrer.  However, if your firm has done a great job, or has helped a client in a difficult or challenging situation, or has saved a client lots of hassle or money, why not extend that help and expertise to others?

The position of trust you have built will make the asking a lot easier.  Timing is also very important, so when is it good to ask?  Quite a number of successful firms we’ve come across do so just after they have completed a particular project.  But really, your knowledge of the referrer and their clients/contacts will also guide you as to when the time is right to seek a referral.  If you can offer help ‘just in time’ in a particular situation, a referrer is more likely to broker an introduction.  If you know the referrer’s client and contact base, keep an eye out for them in the business press.  You might spot an opportunity that helps the referrer to look good in their eyes (even win more business) and is a trigger to offer your help and expertise.

And then there’s the asking.  The best firms find their own words here and are guided by the referrer’s likes and dislikes.  If you have done work for a referrer’s contact, ask if there’s anyone else in the same situation who could do with the help.  Always have in the back of your mind that, in referring your firm, the referrer needs to maintain their position of trust with their clients and contacts.  If you can suggest anything that builds their own competence, compatibility and credibility do so.

Doing an excellent job
Once a referrer brings you a piece of business, it’s crucial that you do an excellent job.  They will be watching you closely (albeit from the sidelines) to see that you do not damage their reputation or their relationship with that client or contact.

Understandably, referrers have a degree of nervousness when an adviser undertakes the first piece of work for one of their clients or contacts.  The more effective firms help allay this by keeping them ‘in the loop’ and communicating to them as well as their client (content as appropriate) during the project’s progress.  It is wise to double-check with your referrer (and also the client) in advance whether they are happy with this, as some may not.  Once that first piece of work has been completed do thank your referrer – either verbally or in a way that rewards their support of you.

Rewards and reciprocity
There will be some referrers to whom just a ‘thank you’ for the leads they pass on will be enough, however these will be few and far between.  Those referrers who continue to bring a steady flow of good quality work will do so because they gain something out of the experience.  It might not necessarily be because you give them leads in return.  The type of reward the referrer wants will very much depend on who they are and what motivates them.  If they are after personal fame, you can find ways within your firm’s contact base to bring them into touch with more people.  If they are interested in a financial reward, you could explore a commission-based system.

Activity 3: Maintaining and fine-tuning the network

A referral network won’t provide a steady flow of good quality leads unless it is regularly maintained and fine-tuned.  What do we mean by this? Well, you need to keep in touch with the people in the network so that you are ‘front of mind’ when an opportunity arises.  Similarly, referrers need to be kept informed of what you do so they understand the breadth of your capabilities.

The best networks are also constantly monitored and measured so the firms concerned can spot who is proving to be good or bad referrer.

Keeping in touch
A relationship with a referrer needs regular attention (even when you are not necessarily working on projects for their clients and contacts).  Most successful firms understand the fine-line between maintaining visibility and becoming a pest.  They avoid the latter by diarising fixed points of contact.  It depends on the referrer concerned as to how frequent these are, although on average firms tend to touch base every couple of months in some way.  Referrers do not feel they are being pestered if they receive something of value – this can be something physical (eg. an article, news clipping etc) or something verbal (a piece of advice or some insight).  Even better – a lead!

Keep them informed of what you do
A referrer’s knowledge of what you do will largely be dictated by their experience of you.  This, however, can risk you being pigeon-holed for offering a specific piece of expertise.  We have seen some great examples of firms expanding their referrers’ knowledge about what they do. On a simple level, it can be a dialogue to explain a recent project undertaken.  Where the subject-matter is interesting and relevant to the referrer, others have used their firm’s events, newsletters and other marketing resources/expertise.

And similarly, try not to regard your referrer in a narrow light.  Encourage them to keep you up to date of the type of work/activities they are pursuing.  You may spot mutually beneficial opportunities.

Monitor your network
The best referral networks are always in a state of evolution.  Despite efforts to select good referrers, some do not deliver the quality or quantity of leads that was hoped.  It is therefore sensible to track leads, the quality of the business that they generate and how they are rewarded.  It will help you to identify what improvements are needed.

For example, one of the major banks we work with found that they were referring a lot of business to the Big 4 accountancy firms.  When they took stock of which accountancy firms were referring work back, they found that none came from the top tier.  Instead the bulk of leads came from mid-tier firms.  As a result they have changed the firms they refer business to, so that they can offer reciprocity to their most lucrative referrers.

Good networks also keep a lookout for new referrers.  Over time, some of your contacts will move on to other things that prevent them from bringing you leads.  Like your client portfolio, you need to replenish your referral network periodically.

Measure your progress
The only way you can tell if your network is effective is to periodically measure its progress (ideally no less than twice a year, so there is a chance to take corrective action).  Your initial targets are the benchmarks against which progress can be measured.  There’s nothing wrong in revisiting them to see if they are realistic given your firm’s current economic and business factors.  If things are proving difficult, find out why and adjust the plans to tackle them.  All the successful firms we have spoken to say this is tough and requires a team approach bringing in marketing, business development and fee-earner expertise.  Discipline and focus are essential here, as is the energy to make the blueprint a reality and reap the rewards it offers.


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