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How much does your business rely on referrals?

If you are in a services business, the likely answer is "very." If you run a small to medium-sized business, the likely answer is also "very." If you run a small to medium-sized services business, you probably work seven days a week and the volume on "very" was just turned up two notches.

We all know individuals and firms that seem to drown in a sea of referrals. How do they do it?

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The business owners I know who are very good at drawing new business have two things in common:

1. They ask their current customers for referrals. Actively, not passively.

2. They have a top-notch (conscious or unconscious) referral strategy in place.

A great referral strategy is much more about fundamentals than incentives or aggressive sales techniques sometimes masquerading as a basis for referrals.

We need a framework for this discussion. How about: if your end goal is to ask a current customer to refer you to a prospective customer ("Hey Barb, could you call Jean-Francois and get the door open for me over there?"), then all the elements of the strategy should build toward being able to make The Ask. There are five elements to a solid referral networking strategy. Let's work backward.

Element five: Fantastic customer experience

Think about it. What is the one piece of the puzzle you need to solve before you call Barb to make The Ask? It's great customer experience, no? If Barb had a poor or even average experience with you, are you going to make the call? No. Barb had to have had a really positive customer experience. What goes into engineering a great experience for customers? Depends on the industry or the product or service, but some basics usually include:

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• Relationship building.

• Customer service.

• A memorable differentiator. Don't underestimate how important it is to be memorably different.

The bottom line is that if you don't have confidence in the customer experience you are providing, this is the first thing to fix in your referral strategy.

Element four: Product/service quality

You need to create an environment for fantastic customer experiences before you can make the referral ask. What comes before customer experience? What needs to be in place before even the opportunity to provide a great experience can manifest? It likely has something to do with your product or service and its related quality. It is difficult to imagine a scenario where your product or service is sub-par, or is even average, yet customers come away willing to say very positive things about you.

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This is one of those zero-sum games – product or service quality is expected. If you deliver, then customers will focus on the intangibles, such as great customer experience, but if you don't, then the recommendation will always be made with an asterisk. There are so many factors that affect quality – we can't explore them all here. But we also need to think about perception of quality. Some factors that matter in terms of perception of quality:

• Pricing, which ultimately leads to a judgment about value.

• Purchase environment, whether a store, an office or a website – the details matter here.

• Guarantees and after-sales support.

You have to get the check-mark here.

Element three: Experience and credibility

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Customers can't give you the thumbs up on quality in order to move on to raving about customer experience and agree to make a referral for you if they don't have an opportunity to experience your product or service in the first place. And the purchase criterion or step in the purchase process that normally comes right before actually pulling the trigger is a check by the customer on your experience and credibility.

"Have you catered an event this large before?"

"Have you done any work in telecom before?"

You can't cheat here. But you can put yourself in a better light when it comes to experience and credibility. Some of the most effective methods of communicating know-how are:

• Awards plus client lists and testimonials.

• Partnerships with known or branded entities.

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• Original thought-pieces, blog posts on specific expertise areas or published articles.

If you have weapons, pull them out and put them to work.

Element two: Awareness and relevance

One step removed from experience and credibility is awareness and relevance. In other words, if experience is judged just before purchase, this means the customer is already engaged in a decision process about you and must therefore be aware not only of who you are but also what you do, and must think you are relevant to current need. So how do you create awareness of your product or service and communicate relevance? We're almost back to the basics of marketing now:

• A well-constructed website that clearly articulates the value proposition and covers the basics.

• Effective marketing collateral, designed around your different customer segments.

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• Normally most important for small and medium-sized businesses with lower brand equity – legitimate PR.

It's more important to be accurately known to your target segments than widely known to all.

Element one: Brand/value proposition

Before you can be known for what you're all about, and get the chance to prove your product or service is relevant, you have to be known, period, to your prospective customers. Getting known for a specific value proposition involves building a brand – a differentiated and clear brand. These days, building a great brand involves, among other things:

• A thorough understanding of customer behaviours/needs/wants.

• Sharp internal understanding of the brand promise: everyone must sing from the same sheet.

• Crystal clear and consistent messaging and manifestations of the brand promise.

It doesn't have to be whiz-bangy, it has to be real and it has to be reiterated a lot.

Imagine a solid referral strategy as a pyramid. At the very top is brand – getting known; which leads to awareness and relevance – building an understanding of what you are good at and matching it to the customer need; which then drills down into experience and credibility – proving you are worthy of the purchase; which in turn leads to product or service quality – a necessary check-point on the road to a great experience; and ends at fantastic customer experience – the most important and last element in the chain that leads to a referral.

Fundamentals. If you have done a good job at each stage, you are in great shape to ask your customers for referrals.

Special to The Globe and Mail

Mark Healy, P.Eng, MBA, is a partner at Satov Consultants – a management consultancy with practice areas in corporate strategy, customer strategy and operations strategy. Mark's focus areas inside the Customer Strategy practice include consumer insights, customer experience, innovation and go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to strategy, in telecom, retail and other sectors. Mark is known as much for his penchant for loud socks and a healthy NFL football obsession as he is for his commitment to Ivey and recent Ivey grads. He currently serves as chair of the Ivey Alumni Association board of directors. Mark lives with his wife Charlotte and their bulldog McDuff in Toronto.

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