The problem with asking for referrals

Referrals provided in response to your request for them will not generally give you the best ones.
By Guest |  24-01-17 | 
 
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Asking for referrals is about the worst way to try getting them. Too frequently, it sets up a scenario that actually compromises the client relationship. What's worse, unlike cold calling, which may be the crudest and least imaginative way to try to get new clients, it doesn't work. At least cold calling, done consistently and frequently enough, will bring in clients, and sometimes good ones. Referrals provided in response to your request for them will not generally give you the best ones.

In her studies the Economics Of Loyalty and Anatomy Of A Referral, Julie Littlechild demonstrates that which clients refer has little statistical relationship to how or how often they are asked. There is simply no clear straight-line between asking clients for referrals the way we have been traditionally trained to do it and the best referrals you actually receive.

Here are some of the problems created by constantly asking your clients for referrals:

  • It places demands on clients. Your relationships with clients are not like your relationships with friends. In a friendship, you do each other favors because you like each other and are important to each other. While most advisors count friends among their clients, the fundamental relationship is for you to provide service to clients and for them to compensate you for it. (We will get to the whole compensation thing in just a minute.) Asking your clients to serve you gets the relationship backwards.
  • It violates client expectations. When a client retains an advisor, they are looking to receive services, and in return they are willing to pay. Everyone understands that relationship. When you begin asking for more than simply pay, you run a significant risk of surprising your client with an expectation from the relationship they had not counted on. Surprises like that are generally not positive experiences for the client.
  • It converts referrals into transactions. Many training programs recommend framing the referral request as an exchange. "If we do this, we would like you to do that." That establishes a weak basis for a referral. Ideally, clients refer to us because they are thrilled with the experience and want to share that with people they care about. Reducing it to an economic transaction cheapens it. Giving us a referral can be a very positive experience for our clients. But, like any other activity we enjoy doing, doing it as a business transaction takes most of the fun out of it.
  • It distorts the message you want to communicate. Many programs recommend introducing the idea of referrals with phrases like "it is part of how I get paid" or "if you help me find new clients, I can spend less time marketing and more time providing service to you." Most of these approaches can confuse the client. I'm not paying you enough? So you're spending all your time marketing and not taking care of me? There is tremendous opportunity to confuse the client about how you run your business.
  • The biggest problem of all – it puts the focus on you. In your relationship, the focus should be on the client. In a well-designed referral system, the focus remains on the client. The client provides referrals because they derive benefits from introducing their friends and acquaintances, not because it is an obligation. Once the activity changes to providing you benefits, you have just short-circuited much of the motivation for providing them to you.

Too many of the ways we have been taught to attract referrals send the wrong messages. Too many create stress for the client. Too many create the scenario that makes the client uncomfortable with referring people to us.

Am I actually advocating never asking for referrals? Not really, although many businesses get consistent referrals without directly asking. If you ask, do it the right way. Dan Richards and John Jantsch have both written about creating referral systems focused on the asking for referrals in a way that benefits the clients. The right way means starting by asking the clients for their opinions instead of referrals. Ask how you can get better. Ask what they want most from you and your interactions with them, and update your processes to consistently deliver it. Ask what your clients believe is your greatest value to them, and what particular skills or value they recognize you for.

Put the spotlight on the clients, get them involved in improving your practice. Only then can you credibly ask if they know other people who need what you provide. And at that point, your clients will refer their friends and acquaintances because it is a benefit to them, not a service to you.

 This post was written by Stephen Wershing, President at The Client Dirven Practice, where it initially appeared. Wershing coaches financial advisers.  

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