Common Referral Network Mistakes and How to Avoid Them

Building a referral network with other businesses sure seems like a cherry proposition doesn’t it? It is true, a solid referral network can yield dividends that exceed even your wildest expectations, but building that solid referral network isn’t as simple as just willing it into existence. It’s going to require a lot of work and due diligence, and somewhere along the line to building it, you might make a few mistakes. Because of the interrelatedness of a referral network, though, those mistakes can quickly become magnified, and can, if left untreated, have dire consequences for your business.
For this reason, we’ve decided to highlight some of the most common referral network mistakes that people can make. And, we’ve gone ahead and offered some suggestion for how you and your business can avoid them. Hopefully, if you keep these things in mind, you’ll be able to successfully avoid getting yourself into too much trouble as your grow your referral network outward.

Mistake #1: Not Trying In the First Place
We know we scared you off with the idea of mistakes, but the biggest one you can make is not trying to build a referral network in the first place. The reason is simple. A referral network might just be the most powerful marketing tool that you have in your tool chest. With it, you’ll be able to generate new customers and clients who are already predisposed to approve of your services and offerings. Moreover, by referring your customers to other businesses, you’ll be stoking the level of trust they place in your brand. All of this, as you might imagine, leads to more sales and greater profits.
So, take the plunge. Try to identify other businesses and clients with whom you can form a symbiotic referral partnership. As they say, nothing ventured, nothing gained. You might be surprised to find how easy it is to identify other businesses that can help you – and that you can help as well.
Mistake #2: Poor Timing
Like any other kind of business proposition, you’ve got to lay the groundwork first. Too many times, businesses simply go about trying to build referral partnerships and referral networks as if they’re cold calling for sales. Don’t do this. It’s a surefire way to turn off other businesses and clients to your products and services.
Instead, you’ll want to focus on building your reputation around the business community. Rather than simply approaching another business about entering into a referral partnership, why not send some free clients their way? When that business discovers that you’ve been sending your customers to them for certain products and services, that’s something they’re bound to remember. So, when you finally do get on the horn to call the business owner and attempt to formalize a relationship, it will be one that’s built upon an already established background, one which underscores the potential benefits of entering into a referral partnership with you.

Mistake #3: Not Being Unique
In order for other businesses and clients to refer customers and clients to you with confidence, you’ve got to provide a product or service that is unlike anything else in the marketplace. You need your referral partners to be able to say with confidence that what you’re offering is what their existing customers and clients need.
So don’t simply skate by and think that having other businesses pass their customers on to you is a recipe for success. Remember that a referral partnership is a two-way street. In the same way that you want to refer your customers to other quality businesses, your referral partners want to do the same. So, ensure that your business is offering best-in-class service or products for the sector that you work in.

Mistake #4: Not Defining the Clients and Customers You Need
If you’ve successfully managed to develop a referral partnership or two, this can be the one thing that derails the entire enterprise. Too often, businesses will adopt the “more is better” mentality. With a referral network, this isn’t the case. The real benefit of having customers referred to you is that they are already prequalified. They already want what you’re selling, and their satisfaction with what you sell them is almost guaranteed provided you’re delivering them the quality your referral partner has told them to expect.
So, when you’re seeking out referral partnerships, make sure that you and the other business establish a clear picture of your mutual target customers. What do they want? What do they expect? What are you capable of providing them? There’s no greater mistake you can make in this kind of relationship than failing to meet the expectations of your referred customers and clients. This will reflect poorly on you, and it will reflect poorly on your referral partner. Instead, both partners should have a clear picture of the kinds of customers each business is looking for, and they should only refer those types of customers.

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Building a Referral Network: The Bare Necessities

So, you’re sold on the idea of building referral partnerships and a referral network with other businesses, but you don’t know where to start? Well, you’ve come to the right place, because we’re going to give you the down and dirty information you need to get started with a referral network.
Identify the Kinds of Businesses You Should be Working With
Part of building a referral network is in understanding your own business and where its blind spots are. There are always going to be places where customers will need to seek out supplemental products and services for those that you provide. In seeking businesses to enter into referral partnerships with, you want to find businesses that offer these supplemental products and services. In order to find them, you can do the research yourself, or you can ask your customers to tell you where they’re taking their business. Naturally, though, you will not want to enter into a partnership with a business that offers products or services that are similar to yours (in addition to those that are supplemental), as this would be counterproductive.
Make Sure That Those Businesses Are Qualified
When you enter into a referral partnership and begin to form a referral network, it’s important to understand that, while your businesses remain separate, they do become interrelated in the eyes of your customers and clients. For this reason, you’ll want to appropriately vet any business that you enter into a referral partnership with. Because you’re already a part of the industry, this shouldn’t be too hard. You’ll know which businesses offer quality products and services and which don’t. For this reason, avoid entering into arrangements with businesses that you feel offer shoddy work or are less than reputable. While the short-term gain of garnering new customers, regardless of where they’re coming from, can be enticing, the damage a bad partner can do to your brand image can be catastrophic.
Come to a Mutual Understanding with One Another
So, you’ve agreed in principle to begin a referral partnership, but what does this partnership entail? Contrary to what you might think, it’s a lot more complicated than just sending every Dick and Jane that walks through your door in the direction of your referral partner.
Instead, you should come to think of the act of referring as an additional service that you’re providing your customer. In the same way that you want to give your customers the very best products and services that you provide as a business, you’ll also want to provide them with the best referrals. But how can you accomplish this?
That primarily comes down to establishing a clear picture of the kinds of customers and clients that each business is looking for. It’s important that each partner in the relationship have a clear understanding of what each business is to provide (and capable of providing) and what customers those services and products are meant for. Still, while you’re coming to a clearer understanding of this, be sure to bring an open mind to the table. Listen to your referral partner. It’s possible that they serve a certain segment of customers that you’d never thought to market toward. Perhaps you have just the thing that those customers are looking for? If so, then this referral partnership might be the ticket to radically expanding your customer base.
Monitor the Progress of Your Referral Partnership
If you’ve agreed in principle to the partnership, then you should also take the time to consider what you and your partner are hoping to gain from it. Periodically, you’ll want to get together in order to consider how you’re both performing against what you were expecting. If things aren’t lining up, then maybe it’s time to tweak or adjust your strategy. If things really aren’t going well, then maybe it’s time to cancel the arrangement? You’ll only be able to make this determination if you’re watching the numbers, so make sure that you’re making the effort to do so.
To that end, also remember that a referral partnership is a business relationship. As with any other business relationship you might have, you’ll want to make sure that you’re following up regularly with your partner. It’s important that both parties feel as if the other has their best interests in mind, and this level of trust can only be establish through regular contact and follow up.
Get Started With Your Referral Network Today
With these as a guideline, you should have the basic understanding you need to get started in building a referral network for your business. Remember, though, that Rome wasn’t built in a day. While all of this might sound easy on paper, it can be much different in practice. Take the time to work on it, and try not to be too pushy. You know how hard you work to grow your business, so remember that other businesses might not always have the time to talk about a referral partnership with you right away.

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Are You New to Referral Networks and Referral Partnerships?

There are, of course, all the normal methods you can employ to grow your business and expand your client base. You can advertise, market, cold call, and do any of a number of things to get your brand out in front of customers. But, there’s one kind of marketing that can often be overlooked by business, and that’s building a referral network.
What Is a Referral Network?
If you’re not already familiar, then let us break it down for you. A referral network is a collection of businesses that pass around clients to one another. Say, for example, you’re a business that sells ice cream. Now, your customers may love ice cream, but maybe they want some delicious waffle cones to go along with it. Well, it just so happens that Joe Cone down the street makes some of the tastiest waffle cones around. Naturally, you might be inclined to direct your customers in his direction. They go see Joe Cone and get their waffle cones, and your customers are happy. But, does Joe Cone know where these new customers came from?
That’s why, before you start sending people down the street, you need to go pay Joe Cone a visit yourself. Between the two of you, you both make a pretty delicious ice cream come, and maybe you can help each other grow your respective businesses by helping each other. When customers show up at Joe Cone’s shop, he can tell them to come see you for ice cream to fill their cones up with. When customers come into your shop, you can tell them to go see Joe Cone for a delicious waffle cone to put their ice cream in.
What Are the Benefits of a Referral Network?
Naturally, it’s a win-win for you both! As you can see from the example above, this referral network between yourself and Joe Cone helps you both to generate customers that you might otherwise not have had. More than that, though, it has an effect on the customers that both of you share.
As everyone knows, ice cream is better with a cone, and a cone is better with ice cream. By referring your customers to someone else for their cones, you’re helping them to improve the quality of the product that they’ve purchased from you. Because of this, you’re increasing your customer’s level of satisfaction with your business. Even more, you’re also instilling trust for your brand and service in your customers. They know that when they come to see you for their ice cream, that they’re getting a level of service that they won’t find elsewhere. And the same goes for Joe Cone, too.
This last point may be the best part about using a referral network. Obviously, real business is more complicated than ice cream and waffle cones. But the metaphor holds! Any business must naturally narrow the scope of its offerings in order to maintain the quality of its service and products. While you may strive to be all-inclusive in your offerings, there will always be places where someone else might better serve your customers. Rather than looking at this as a potential weakness, look at it as a potential strength – it presents an opportunity for you to generate more qualified leads, while also increasing the level of satisfaction your customers have with your company. Additionally, setting up referral partnerships with other businesses also increases your profile within the business community, which can have long-lasting and beneficial effects that go well beyond customers and profit margins.
How Can I Get Started With a Referral Network?
Here you’ll need to engage in a little bit of corporate introspection. You may wish to speak with your customers in order to find out what kinds of products and services they’re using in order to supplement those that you provide them with. Once you have a clearer idea of what those products and services might be, become a consumer yourself and see what’s out there. Because you’re already in the industry, you’ll have a much better smell test for a quality business than your customers do.
And that, as a final word, is perhaps the most important part of building your referral network. You’ll want to ensure that the businesses with which you agree to transact clients are likeminded and offer the same level of quality that your business does. In some way or another, every member of a referral network reflects upon the other members of the network. Although still separate businesses, your customers will begin to view your brands as interrelated. For this reason, choose to set up referral partnerships only with businesses you’d use yourself and that you’d feel comfortable having your customers use. If you follow that dictum, you should be well on your way to building a powerful referral network that can have a lasting and positive impact on your business and bottom line.
Source:

http://www.cba.org/cba/practicelink/mt/referral.aspx

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The Number One Trait Of A Master Networker

Excellent article by BNI founder Ivan Misner and one of the main reasons we created Hello Referrals. The follow up on received referrals is made abundantly clear here and it’s importance is key.

http://networking.entrepreneur.com/2009/11/05/what-is-the-number-one-trait-of-a-master-networker/

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Small Business Marketing

http://www.youtube.com/watch?v=WUeeiCNqGwk

We just completed our new video that explains business networking – an undeniably effective method of small business marketing.

We made the video to articulate an inherent problem for business networks – the management of referrals and business opportunities – but that’s not the only thing that they collaboratively trade. Business networks also exchange ideas and information, and those are in most cases the elements that act as kind of the initial building block of many referral relationships and business partnerships.

Establishing or joining a network of other professionals to exchange referrals with is one of the quickest and most inexpensive ways to get a business off the ground. When compared to other approaches to starting the sales engine – business networking is a low cost and high yield method to gaining customers and typically generates a higher and faster return than other small business marketing efforts. Some people join business networking groups like BNI, or BRX. Others prefer more casual environments and many people just simply either have or develop their own personal business networks of partners where everyone collectively builds their businesses and mutually benefits. Whatever way you choose to do this – it’s a great idea.

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Posted in Business By Referral, Business Networking, Lead Management, Referral Marketing, Referral Networks, Thoughts, Word Of Mouth Marketing | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment