Building a referral network can be one of the best ways to increase your revenue and grow your business. If you have a service-based business such as real estate, financial planning/advisement, an insurance brokerage, etc., referrals are likely your lifeblood. But something as important as that shouldn't be left to simply grow organically. You want to nurture and invest in building your referral network. You can't do that if you don't find some way to track what is working and what isn't.
Plus, your working hours are limited. What you do with them is extremely important. If you are trying to build your service-based business, you want to make sure that you focus on the things that are most effective and have the greatest return on investment. The same is true of referrals. Some people and some referral groups are just more valuable to your referral engine than others. Tracking this information can help you understand how you're getting your referrals and who is helping you with that.
What Is a Referral Engine?
To optimize referrals, think of building a referral engine or a system for bringing in referrals. There are many components of a referral engine, but you’ll want to concentrate your efforts and energy on the ones that bring you the most positive results in your target market. You’re not looking for sheer numbers. Those could be purchased but you don’t want to waste your time with leads that don’t convert. You want to isolate and work the leads that will most likely evolve into sales. According to Nielsen, 72% of people are more likely to buy when they've been referred by a friend or acquaintance. That’s why referral networks are powerful.
Building a referral network can be done informally by providing excellent service and results and inviting your customers to refer you to family and friends, sometimes even incentivizing them to do so. Another way to build a referral network is more formal by becoming a part of a group that focuses on referrals. This could be joining a chamber of commerce, a Mastermind group, or some other organized referral group.
But you don’t want to waste time with things that aren’t working so make sure that anything you’re going to give one of your most precious resources to (your time) provides a good return on that investment. You isolate the most worthwhile referral sources by tracking and analyzing them. As motivational coach Valentino Crawford said, “You cannot change what you don’t manage; you cannot manage what you don’t track.”
Things You Need to Track When Building Your Referral Network
Not all referrals are the same. Sure, they may feel the same when they fill you with giddiness on the prospect of growing your business. However, your business isn't the perfect fit or solution for everyone. You have a target market. And because you have a target market, you want to concentrate on the referral engines that help you the most in reaching that group/those who are most likely to buy from you. When analyzing your referral system, you’ll want to track the following things as this data will help you understand which referral sources are providing you with the best return on investment:
- Referrals. You want to track every referral that comes in. You should differentiate between a referral and someone who randomly approaches you for your service. When you contact them, ask the right questions to identify whether they are in your target market or not.
- Referral source. Figure out where the lead came from. You’ll want to track this for several reasons. First, you want to know who is giving you this endorsement. Secondly, you want to track the best” source of referrals or those that are most likely to become sales. If you belong to an organized referral group, these individuals should understand your ideal market so their leads should be valuable. If not, you may want to reevaluate how you are describing your services to this group. After you analyze your best conversion source, you will have a better idea of how to allocate your time to working your referrals.
- Revenue. You won’t close every referral, but tracking revenue will assist you in identifying your most lucrative opportunities. Revenue information helps prioritize what you will allocate time and money to so that you work your leads/referrals efficiently.
While you can track this data in a spreadsheet, it is not the most efficient way, nor is it the easiest way to analyze your referrals. If you’re ready to increase the revenue you’re receiving from your referral network, you want to use robust referral networking software. ChamberForge can help. Contact us today and we’ll show you how you can start making the most of your referrals.