The Holy Grail Of Marketing – The Referral

What is the one thing that most business owners say is their best source of new business? It is word of mouth referrals! But are you leveraging this for your business and do you know how to make it really work it’s butt off for you? It is easier than you think to master the art of referrals (even if you are super shy or not comfortable asking for them).

In today’s episode, I talk to David Smerdon from Referral Formula who is going to share the secrets to this amazingly powerful free marketing tactic.

Word-of-mouth marketing is right up there. Word-of-mouth influences as much as 90% of purchases, it’s 10x more effective than traditional advertising, yet fewer than 1% of businesses have a defined plan for it.

So, we know word-of-mouth works, but most businesses don’t actively plan for it. Why is that? I think in part because we see word-of-mouth as organic – for example, two people talking about your business at a coffee shop. It’s happening outside of your business (so some think it’s outside of our control) and it can be tricky to plan for and predict.

BUT I wanted to go deeper into an area that is more tangible and measurable, so I focused my attention on the pinnacle of word-of-mouth marketing…REFERRALS. Where your business has solved a problem for an existing client, and they had such a great experience they spot a similar problem to be solved for a friend or family member and directly introduce them to your business.

Why are referrals so powerful?

  • The power of the referral is the trust relationship between your client and their friend or family member. A referral is a direct, personal endorsement of your business.
  • The cost to acquire a new client is often less via direct referrals than traditional paid lead generation.
  • You can target clients that have shared values to your business (their friends and family will often be likeminded). I want more clients like I already have.
  • Referred prospects convert quickly, and a study from Extole suggested they generate 16% more profits.
  • Referred customers can also be more loyal and Referrals are easily tracked.

The biggest referral advantage is you as a business owner are focusing on delighting your existing clients (so they become referrers or super referrers)

7-Step Formula

Step 1. Asking (or not)
How you can let people know that you’re open to receiving referrals. I have two approaches and which one you choose depends on your personality, the personality of your client and where your relationship is at. So, the first approach is ‘Asking’ –….  you have a very clear understanding of the dynamic you have with your client, and casually asking for a referral won’t put pressure on your relationship or offend them. The language here is key, and I provide scripts to my clients to help get this right. You don’t want to put your client under undo pressure or make them feel trapped to offer up a referral.

The second approach is no asking (asking for referrals might be something you deem not appropriate based on your personality and that or your client, or the timing might now be right). Instead, I would propose using what I call ‘Subtle Referral Cues’ or SRCs. An example could be publicly thanking clients who have sent you a referral. In this instance, you are not directly asking your clients for a referral, but over time they understand you value referrals.

Step 2. Of the 7A’s is Advocates
I share a processes with my clients on how best to uncover those who are most likely to refer

Step 3. Actions
A list of tactics that can be used to earn more referrals. This is an extensive list and you can cherry-pick what will work for your business

Step 4. Accelerator
How your business can become more referrable (shareworthy) to fast track your growth. The stronger your businesses is the more referrals you’ll receive. A great quote from the word of mouth expert Jay Baer “Competency doesn’t create conversations”…. You have to be better than average for people to talk positively about your business.

Step 5. Articulation
A short statement to outline your referral philosophy. This is used for all your referral messaging. It’s a great way to anchor your approach to referrals.

Step 6. Activity Plans
Your actions (or tactics) mapped into your calendar (so they actually happen). Plans are vital. 83% of customers say they want to give a referral but only 29% do (referral Rock)

Step 7. Analysis
How to measure and track your referral program.
– Referral program ROI: Referral revenue generated divided by referral costs
– Referral tracking spreadsheet: name of client, name of their friend or family member
– Identifying ‘super referrers’

NOTE: David’s ReferralFormula process has been tweaked slightly since we recorded this episode, as can be the case in the dynamic world of startups 🙂 but all content is still 100% relevant to grow your business with referrals. Learn more at


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Thank you for being awesome. Tanya

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