According to networking strategist Andy Lopata, customers who come through referral spend more with a business and produce higher margins than those recruited through any other means. Mark Lee explores his ideas further.
Andy Lopata's views in his book, 'Recommended: How to sell through networking and referrals' reflect my own experience over the years. Clients tend to refer people just like them and who tend therefore to be less fee resistant than complete strangers.
The best sales strategies focus on opening the door before closing the sale. Referrals are one of the oldest forms of marketing and we all know that a recommendation from a friend or trusted contact is worth far more than what we hear from an advert or a salesperson.
For accountants, word of mouth marketing is vital. I don’t know of an accountant who doesn’t claim to get the vast majority of their business through recommendation and referral. Yet it’s also clear that few accountants have no strategy to generate such referrals. Most rely on happy clients to recommend them, but that simply doesn’t happen as often as they’d like.
Many of us though tend to think of referrals as covering tips, leads and recommendations. However a referral is quite different to each of these.
- Tip: This is simply a piece of information. It may not even include contact information. When someone tells you that they’ve heard that the local estate agent is trying to build relationships with accountants, it’s a tip. And you have to do all the work to generate some value from the tip.
- Lead: With a lead you have more information – a name and phone number perhaps. If the referrer, giving you the lead, says that you can use their name when you pursue the lead, it’s simply a warm lead. If the referrer hasn’t told the prospect about you then you’ll be making a cold call when you follow the lead.
- Recommendation: Most commonly mistaken for a referral, a recommendation involves someone telling your prospect that they should consider using your services. We generally only hear about the recommendations that are made when the prospect gets in touch. Indeed such recommendations are only of immediate value IF the prospect follows through and gets in touch.
In his book, Lopata suggests that referrals are distinct from and far more valuable than tips, leads and recommendations. And that real referrals are the best form of business information you can receive. There are three elements to real referrals:
- The person referring you identifies someone who has a problem you may be able to solve
- They talk to the prospect and establish that they are interested in speaking with you
- They provide you with the key contact details such that the prospect is expecting your call
Of course, many accountants are happy being on the passive end of recommendations rather than referrals that need to be pursued. So be it. Each to their own.
Lopata suggests that it can be a mistake to blindly accept random tips, leads and recommendations without thinking about how to improve the quality of these. This should mean more focused, relevant and valuable referrals. For example, ask for the contact details and ask the referrer if they could introduce you. I suspect that the reason this is rare when accountants receive recommendations, leads and tips is because they know how few of these will convert into valuable fee paying clients. This is often a function of the accountant’s inability to distinguish themselves from all other local accountants. When you’re a commodity you are replaceable and unmemorable. Even warm leads may choose someone else who stands out and distinguishes themselves, their service and approach from the other options.
The desire for increased referrals is a perennial topic on the Any Answers section of AccountingWEB.co.uk – most recently in the thread: Do you ask for referrals? On it Phil Hendy suggested that “referrals will happen naturally if you do a good job”. That may be true to a degree but it’s not very strategic.
Forgive me but I think my reply is worth repeating here: “It's a nice thought and if you don't need a steady stream of new clients you may get enough through this hope/dream. You may get lucky. You may not. You will most likely only get referrals to new clients just like the ones you have. That may be fine. But what if you may want to focus on more profitable work or to promote a wider range of your services.
Simply hoping clients will refer you to friends etc or even asking them for referrals won't project your wider skills. Do all of your clients know about all of your skills, all of your sector expertise, all of your service offerings? Don't expect them to do so. They don't know and they wouldn't remember if you told them.
They'll just think of you as an accountant unless you have ONE area of expertise, niche sector or other specialist area of knowledge/focus. And if you do, you'll get more referrals as everyone who knows about your niche will think of you whenever they encounter that niche etc. And they won't be thinking about any other accountants. And you'll stand out as compared with any other referrals that the prospect receives.”
Lopata’s latest book contains loads of simple and easy ideas that accountants can use to maximise the prospect of securing valuable referrals. He also relates this topic to the activity that seems to polarise accountants: Networking. And here Lopata is adamant: “Networking groups do not produce referrals.”
Lopata’s point is that that many people miss the fact that “networking groups are merely the starting point; most of the business is done and most of the relationships built are based on the understanding developed OUTSIDE the formal meetings”. The real power comes from people who know you and trust you. As Lopata points out and as my own experience confirms, referrals come not from networking groups but from your network – the wide circle of people with whom you have relationships – whether these are personal, social or business related. In this context I would reference a couple of other articles on AccountingWEB.co.uk: Get more from your networking and Which breakfast networking group?
Returning to the book it is a real goldmine of tips, advice and recommendations (!) that all accountants can use to get more clients of the type that they want. It can help you move from being ‘referral-aware’ to having a workable referrals strategy. This includes the need to understand and to be able to articulate your ideal referral. Lopata also addresses the perils of mass marketing and highlights the role of trust in a referrals strategy.
The book is written in a very engaging, down-to-earth style, which makes it a pleasure to read; while offering practical, takeaway information which can be implemented easily. Insightful, resourceful and presented in an easy to digest, takeaway format, 'Recommended' is the must-read book for any accountants who wants to capitalise on the most valuable of assets; their own networks.
Recommended (published by Pearson Prentice Hall) is available now, priced £14.99 from www.recommendedthebook.com and all good bookshops.