Do referral programs really work?

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referrals
referrals

Periodically in the past several years I’ve described various initiatives to encourage and induce referrals. These range from client appreciation events and ‘thank you’s’ to more structured referral/bird-dog programs, where you formally reward clients who send new business your way.

However, recently I’ve listened/read some arguments against these structured programs. Notably, Tom Reber in the Contractor Fight and Corey Philip from Homeprosuccess.com have poured cold water on the concept. They say in their years in business, these programs haven’t generated any additional revenue for them, and have in contrast wasted time and even caused some negative client tensions.

The reason: Some people are offended by the “ask”, others do nothing, and the third group — that follow-up, cast their net far too widely, spreading ‘referrals’ to individuals who have no interest in doing business with you. And there’s the added cost of maintaining/managing the CRM system to track and properly attribute the referrals.

Their suggestion of a much better approach: Just really deliver the client experience and fulfill expectations with excellent communication, and the referrals will happen naturally. (And it is quite okay to thank clients for their referrals and business with some gifts/incentives — just don’t make the ‘referral program’ the basis of your operations.)

Are they right? I’m not 100 per cent sure, as “bird dogs” — or business finders — have been a part of the business world for eons, and if a referral program provides an avenue for some of these people, then maybe it is worthwhile. But equally, I agree that the focus should not be on the “referral program” but on your business processes, communications, and relationships. The actual client experience/value will do far more for your business than any sort of artificial referral program.

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