Inevitably customers will ask for things that you cannot deliver. Instead of trying to figure out how to serve the customer yourself, consider referring your customer to another business that can help. Before making the referral make sure that the other business can in fact help, and ensure that the customer is appropriate for that business.
When you make a referral, make it as easy as possible for both your customer and the other business. This will involve providing the other business with appropriate information about your customer and vice versa. Everyone benefits from this arrangement. Your customer is properly taken care of. The other business obtains new business without marketing effort. And you enhance your relationships with your customer and the other business and also have the satisfaction of providing help (through the referral) to your customer when needed. And what is even better, you might get paid for making the referral and perhaps get referrals from the other business.
Continue to Help Your Customer...
Make a Qualified Referral
As your business grows and you get better at looking after your customers, there will invariably come a time when someone requests a product or service that you simply cannot supply. Because you want to continue to look after your customer, or because you really need the money, you will be tempted to do what your customer requests, even though deep down you know you can’t.
Common sense demands that you decline your customer’s request. You can, however, still help your customer. You can make a referral to another business, perhaps a competitor that you think can help your customer.
Be careful, though. Making referrals can be risky. Will making the referral be the best thing for you and for your customer? There is a risk of alienating, and potentially losing, your customer. Your customer might be upset that you are unable to help or be unwilling to deal with a new and unfamiliar business. Or, unsatisfied with the service of the other business, the customer may be annoyed that you made a bad referral and decide not to resume doing business with you. Also, the business to which you make the referral may try to woo the customer away from you. It is entirely possible that the referral results in no significant benefit to either you or your customer and only the business to which you make the referral will benefit.
Entrepreneur Beware
To minimize risks of a referral, ensure that the referral is a win-win-win scenario in which all parties benefit. You do this by making a qualified referral. In effect, this means ensuring that the other business is qualified to help your customer. It also means that your customer is suitable for the other business.
Qualifying Other Businesses and Your Customers
Qualifying other businesses is all about making sure that they have the resources to serve your customers. This process is similar to what you do when you are selecting a business from which you propose to purchase goods or services. Just as you make sure that a prospective supplier can meet your needs and wants, you will want to ensure that the one that you refer can help your customer. You will consider questions such as, What are its strengths? What does it do well? What is its reputation? Are its customers satisfied with its goods and services? And so on. It might also be appropriate to check references—talk to others who have dealt with the business to find out how satisfied they were.
It is also critical to make sure that the business to which you refer a customer will not try to woo the customer away from you. Make sure that the referral is not an opportunity for the other business to entice your customers away from you. Do not just assume that the other business will not actively pursue your customer. Ensure that there is an explicit agreement that this will not happen. As part of the agreement, you, of course, will reciprocate: You will not actively pursue customers that other businesses refer to you for specific work.
Once you find a qualified business for referral purposes, ask for a supply of promotional material, including business cards. You can give this material to your customers when you make a referral, smoothing the referral process.
Hot Tip
When you make a referral, you will also want to assess the likelihood of the business making referrals back to you. Referring customers is a two-way street: Why refer your customers to another business if that business is not prepared to make referrals to you? If you don’t know whether the business will make referrals to you, ask. It’s better to ask and be sure than to assume and be surprised and possibly disappointed.
There are two kinds of businesses to which you can make referrals:
1. Businesses That You Know
These are the businesses owned by people you know through your normal activities. They are your network of contacts: suppliers, customers, and other folks that you see regularly at Chamber of Commerce events, service club meetings, and other business and community activities. Be warned, however, that just because you know these people and the businesses that they run,
it doesn’t mean that they are qualified to serve your customers. If you are not prepared to do business with them, don’t expect your customers to be happy doing business with them either.
Hot Tip
As part of developing your business, build a network of contacts to whom you can make referrals. It’s easier to locate referral businesses ahead of time instead of waiting for a pressing problem or concern to occur. With a network of qualified contacts in place, you can easily make effective referrals when an appropriate situation arises.
2. Businesses That You Don’t Know
Just because you don’t know about a
business, it does not mean that the business cannot help you or your customers. What better way to get to know about an unfamiliar business than to check it out for referral purposes?
As well as qualifying businesses to which you plan to make referrals, you will also want to qualify the customers whom you are referring. In making the referral, exercise the same care and caution that you would if you were considering looking after the customer yourself. Ask questions such as, Can the customers’ needs and wants be met by the other business? How will the customer get along with the other business and its way of doing things? Can the customer afford the cost of what is to be provided? How timely is the customer likely to pay its bill?
Also assess the likelihood of your customer returning to do business with you after the referral work has been completed. Referrals raise the possibility of customers not returning. If you want a customer to return after the referral work has been completed, make sure that your relationship with the customer is strong before you make the referral. If it is weak, do whatever it takes to strengthen it. You might even arrange to provide some goods and services simultaneously with the referred work. This will allow you to maintain contact with your customer at the same time the other business is providing its goods or services. Unless you are doing an excellent job of looking after your customers, they may see the referral as an opportunity to stop doing business with you, choosing instead to deal with your referral or perhaps even someone else.
Making the Referral
When you make a referral, ease the way for your customer and the other business. Provide your customer with some promotional material about the other business. This will help him or her learn something about the business, if only its address and phone number.
If possible, in the presence of your customer, phone and advise the other business that you would like to make a referral. Also briefly outline what the customer is looking for and how you think the business can help. This demonstrates to the customer that you
cared enough to listen and understand his or her situation. It also helps the other business develop an understanding of what will be involved in looking after your customer.
Once the referral is made, make sure that you keep in touch with your customer. By phoning occasionally, you can monitor how the referral is working. Should problems develop, you can quickly and easily assist in their resolution. By keeping in touch, you are demonstrating to your customer that you still care. It also helps remind the customer that you remain available, especially when the referred work is finished.
Hot Tip
If it is not appropriate to phone the other business with a referral, you can give your customer an introductory letter. The letter will serve the same purposes as a phone call, and will introduce your customer to the other business.
Your Customer Wins
Needs and Wants Are Met
Remember that your customers are coming to you because they have unmet needs or wants that can represent a variety of pains, problems, or potential gains. In having their needs and wants met, customers expect reliability, responsiveness, assurance, and empathy. They do not expect you to do everything yourself. They expect you to make referrals to someone who can deliver goods or services that you cannot, just as they expect their family doctors to make appropriate referrals to specialists.
When you refer your customers to qualified suppliers, you continue to help meet their needs and wants. Your customers will benefit because they will have their needs and wants met by a business that can help them.
Building Block
Do not make a referral without letting the other business know. The other business might simply consider your customer as drop-in trade, and might either decline to help or provide poor service. Alternatively, the customer might be seen as an opportunity to develop a new relationship. This could result in your losing your customer. Also, if the other business knows that you made the referral, that business might later go out of its way to make a referral back to you.
It is not uncommon for business owners to give referred customers an informal preferred status and extra special treatment. They hope to impress the customers enough that they will promote the business, or possibly even return if there is a change in the relationship with you. In treating your customers well, they also want to impress you, encouraging you to make more referrals. Regardless of the motivation for the preferred or extra-special status, your customers will most certainly enjoy it and benefit from it.
Properly handled, referrals can reassure your customers that they are important to you. Simply explain that although you would love to look after them, they will be much better off dealing with someone who is better qualified to help them. This will demonstrate that you care more about helping them than simply collecting their money. The customers will take comfort in the knowledge that you will continue to be there to help them when they need you.
The Other Business Wins
New Business
To survive, all businesses depend upon generating revenue from selling goods and services. Obviously, the business to which you refer your customer will benefit from the referral. The referral represents a new opportunity to sell goods and services.
No Direct Marketing Effort
New revenue-producing opportunities are especially welcome if they arrive out of the blue without the expenditure of any time or money on direct marketing activities. In this case, the business can provide the goods or services without having to use any of its resources to attract the work. Most of us would be delighted if all of our new work came this way.
Peer Recognition
Although very satisfying in and of itself, the referral of customers represents more than just new revenue potential. The fact that you are prepared to refer a customer to another business suggests that you respect the business and its owner. We all like to receive recognition for our work and our efforts. The peer recognition that comes from referrals is always welcome.
And You Win
Expand Capacity
Although it may seem that your customer and the other business receive the major benefits from the referral, you can expect to receive some significant benefits. Not the least of these is the ability to expand your ability to assist your customers without incurring the cost of developing or acquiring new resources.
In practice, you continue to use your resources to serve your customers. However, instead of using internal resources, you draw on external resources; namely, your network of qualified businesses. Someone else does for your customers what you cannot do yourself. Your role is to make the connection. Provided you have qualified other businesses and your customers in making referrals, you can expect to continue existing customer relationships. As a further bonus, you might even be able to benefit financially from this expanded capacity, again without incurring additional expenses. See below for details about referral fees.
Maintain Relationship with Existing Customers
As an active business, one of your most important assets is your customer base. Anything that you do to protect or enhance this asset is time and energy well spent. You can enhance your relationship with your customers by making qualified referrals. What message are you giving your customers if you can’t or won’t help them by making referrals? Also, how would they feel if you referred them to a business that made a mess of things? Not making a referral or, just as detrimental, making a bad referral reflects badly on you. You have worked hard to develop and maintain good relationships with your customers. Why jeopardize these relationships, especially when it so easy to enhance them by making qualified referrals?
Enhance Relationships with Other Businesses
Referrals among businesses are the best source of opportunities to sell more goods and services. By making referrals you demonstrate that you understand their importance. This positions you as someone to whom referrals can be made. When you receive referrals, you are the “other business” and, as such, receive the benefits outlined above. In business and in life, you get back what you give out. If you want referrals, you must make referrals.
In some industries it is customary to pay referral fees to other businesses that make referrals to them. These fees, either a percentage of the value of the referral or a set fee, are rewards or commissions for making the referral.
The same rationale might apply to your industry. The businesses to which you make referrals might be prepared to pay referral fees. After all, they didn’t have to pay a sales representative to generate the new work.
If you can arrange to get paid for making referrals, congratulations. If you cannot make these arrangements, don’t worry. There are many other benefits from making referrals.
Entrepreneur Beware
Not all businesses are receptive to the idea of referral fees. Some, mainly professions such as law, accounting, and medicine, have strict rules against what they call fee-splitting. If someone is ethically or morally opposed to referral fees, under whatever name, they will be offended if you even suggest such an arrangement.
When Not to Make Referrals
When you do not have both a qualified customer and a qualified business, it is better to not make the referral. Explain your inability to make a qualified referral and suggest that your customer speak to his or her network contacts and ask for their help in locating a business that can help. Offer to help qualify any business that your customer might identify.
If you do make a referral in which you have not qualified either the customer or the other business, you risk annoying and possibly alienating your customer and the other business. In either case, you jeopardize your relationship with these people. It’s better to make no referral than to make one that could cause you difficulties.
If you can, develop the capability of profitably delivering what your customer requires. But your customer’s request might be an isolated or one-time occurrence; if so, by all means make the referral. If, however, your customer might need the same thing again or other customers might also need it, consider developing or acquiring the ability to deliver what your customer requires. Maybe you could buy it and resell it (subcontracting is discussed in the next chapter), or perhaps involve someone else in helping you serve your customer (for joint ventures, see Chapter 23). You might even consider hiring someone to look after requests of this nature (see Chapter 22 for information on hiring employees).
Do not automatically think of making a referral when facing a request you don’t think you can meet. Who knows, maybe you can turn the request into an opportunity to expand your business.
The Least You Need to Know
Sometimes the best way to help your customer is to make a referral.
When making a referral, make sure that you qualify both the other business and your customer.
Everybody wins when referrals are properly qualified.
There are times when it is not appropriate to refer a customer.
