If you’re in the professional services industry, you know that your ability to generate referrals can make or break your business. Now, your intuition might tell you that most referrals come from past and current clients—but is that the whole story? My colleagues and I weren’t quite so sure, so we set out to uncover what really generates referrals.
The Hinge Research Institute partnered with the National Association of Certified Valuators (NACVA) and the Exit Planning Exchange (XPX) to conduct an exhaustive online survey of almost 1,200 professional services referral makers.
Good news and bad news
Let’s start with the good news. In an earlier study, we learned that approximately 80 percent of current professional services firm clients are happy to refer their service provider. This suggests that most clients are quite content with their service providers—enough that they would be willing to recommend them to friends and colleagues.
So what’s the bad news? First, of that 80 percent, only a portion will actually make a referral. The rest will simply never find the opportunity. Second, client referrals are limited by the number of clients you have, as well as how many people they know who might need your services. Your client list is finite, and so are the number of referrals it can yield.
The secret to attracting more referrals
Fortunately, there is a way around this limitation. In a separate study of over 500 professional services firms, we found that over 80 percent of them received referrals from people with whom they had never worked. The secret to their success at attracting referrals from people they didn’t even know was their firm’s visibility in the marketplace—and the impact of this visibility on their reputation.
We also discovered that having a specialized area of expertise is more beneficial for receiving referrals than having a good general reputation. This finding was no surprise. Specialists, after all, are usually considered better trained and more experienced in solving problems within their narrow field. As a result, referrers probably see them as a surer bet.
Our research revealed four additional insights that affect referrals:
1. Visible expertise is the top referral generator
By far the most significant lead generator (cited by over 37 percent of respondents), a firm’s visible expertise makes it easier for someone to refer them even when they’ve had no direct experience with the firm. More on this in a moment.
2. Social relationships are still effective
Social relationships contributed to more referrals, 17.7 percent of respondents said. Social relationships are connections you’ve made with friends and people you’ve met through social and professional networking. The best relationships are those that combine both social and professional interactions. However—and it’s a big one—social relationships had little effect if there was no associated direct knowledge of expertise. In other words, if your contacts don’t know what you do, they aren’t going to refer you.
3. Reciprocity pays
That old advice still holds true—givers gain. Our studies showed that the more firms referred others, the more referrals they received. The top referring firms in our study made 18 referrals each year on average, and they received about 22 referrals. By contrast, firms that made a typical number of referrals (seven) received only seven themselves, on average.
4. Events don’t generate meaningful referrals
A common traditional sales and marketing strategy is to sponsor or attend as many events as possible to increase networking opportunities and actively ask for referrals. Guess what? We found that approach doesn’t work. Less than 4.5 percent of respondents said that either of those tactics increased the probability of referrals.
What does work for gaining referrals? Visible expertise
According to the research, the internet has changed how people find and vet professional services firms. And visible expertise is the most powerful referral driver of all, creating online buzz, powering search engine results, and building trust over time. It’s also something you can control.
How? You or someone else in your firm can become a Visible Expert®. It’s easier than you think, but it will require work and a fair amount of time. Start by speaking or publishing information on subjects that interest your target audience. Use these opportunities to demonstrate your expertise. As people start to recognize you as a Visible Expert® they’ll think of you and your firm when they have a need or are asked for a referral.
As you and your firm gain visibility, you can take additional steps to create a more effective referral marketing strategy:
- Showcase successful, high-profile projects
- Develop in-house experts who speak at conferences and trade shows
- Create a high-quality, professional looking website
- Position your firm at the forefront of industry trends
- Create and distribute quality, educational content
Today’s Internet-fueled marketplace has changed marketing forever. And that includes the way people discover firms, learn to trust them—and refer them to others. Knowledge is power, and understanding the engine that drives referrals will give you greater leverage as you compete for the minds and attention of your prospects.
Lee W. Frederiksen, Ph.D., is Managing Partner at Hinge, the leading branding and marketing firm for the professional services. Hinge conducts groundbreaking research into high-growth firms and offers a complete suite of services for firms that want to become more visible and grow.