Referrals rank among the most uncomfortable necessities of the business world. Regard­less of the extent of one’s people skills, the feeling is usually one of discomfort when broach­ing the subject with a valued custo­mer who may feel imposed upon. Why? Because referrals too often focus on “getting” not “giving.” When this happens, it’s likely to leave the object of the referral request feeling somewhat manipulated – an emotion that does not bode well for future customer relations. So here is a suggestion to help eli­m­­inate the discomfort: consider focusing on a strategy based on giving referrals; getting them is likely to follow.

Referrals have long been recognized as “especially invaluable because they can be a passive, indirect and inexpensive way to pro­mote your business,” writes Alyssa Greg­ory, business blogger for Sitepoint.com, adding that “word of mouth is pretty powerful.” Gregory re­p­orts that a 2007 study conducted by a ma­jor research firm found that 78 per­cent of respondents “trust recommendations from existing users of products and services more than any other form of advertising.”

The study corroborates the long-held view that referrals are one of the least expensive yet most powerful weapons in a company’s promo­tional arsenal. What bet­ter way to reach a target audience and/or market without busting a budget? No one would think twice about offering a referral on behalf of a valued customer or client without being asked, but an apprehensive feeling seems to manifest itself when it’s time to request one. You don’t have to be a psychologist to understand why.

That Unsettling Feeling
David Frey, president of Marketing Best Practices Inc., says the weak spot in the re­ferral process is easily exp­l­a­ined. “People hate to ask for referrals,” he writes on BusinessKnowHow.com, a small business Web site. “People won’t do what they hate to do.”

One reason may be that the referral request is often one-sided; there is no giving along with getting. Nowhere in the req­u­est is anything said that might offer val­ue to the customer – and the individual asking for the referral knows it. No one would think of prefacing a referral by saying, “I want something from you and I’m not offering anything in return,” yet the customer or client undoubtedly sen­ses this attitude based upon the way the request has been presented. Is there any wonder why both sides are resentful over referrals in this type of environment?

The initial hesitancy and reluctance on both sides can be overcome easily if the person initiating the request for the referral takes the time to do some homework about the customer’s situation, including answering these vital questions:

• Has our performance always met the customer’s expectations?
• If not, how can we make things right?
• Do we know if the customer’s current business situation is positive or negative?
• If there were referrals previously, did we follow-up to see how those wor­ked out?
  

Without such preparatory groundwork, a referral request becomes releg­ated to the level of a sales cold call, something that is certain to be obvious on the other side of the phone line. It deserves more respect than that, which brings us to another issue.

Referrals and Business Ethics
At first, it might seem like the referral issue is irrelevant to any discussion of bus­iness ethics, but quite the contrary is true. The ethical environment can only be present when there is a mutual bus­iness proposition that offers value for both sides. If the request for a referral doesn’t include or acknowledge a two-way street, customers are likely to feel hesitant.

Further, when the referral becomes a fishing expedition, e.g. “can you give us the names of three companies we can contact,” the customer has just been sent an unintended message that is neither effective nor ethical. That approach doesn’t foster trust or respect, two necessary ingredients of ethical conduct. In addition, referral requests handled in this manner lack fairness because no thought has been given to the customer’s success. Instead, it’s all about how one company can use another’s name.

Relationship skills here become especially vital. In an interview in Manage­ment Consulting News, David Maister, author of several books on building professional service practices, observed that “people who are interested in others and are skilled at building business relationship get more business … get more referrals.” Maister told the interviewer that the process should begin with having the right motives, which are clearly absent from a referral fishing expedition.

Beyond the approach, there’s also the question of giving or getting commissions or other “gifts” in exchange for getting new business as a result of referrals. To avoid misunderstandings or the appearance of any kind of impropriety, this issue should be addressed in a formal corporate referral policy.

Take Rigney Graphics, for example. This Southern California provider of graphic design and marketing materials has a policy that takes commissions and other important considerations into account well in advance. Executive Dir­ec­tor Bruce Rigney says individuals who provide referrals to his company earn commissions under defined circumstances. First, the person generating the re­ferral is required to know about Rig­ney Grap­hics’ capabilities, its customers and can “talk about a personal positive experience with the company.” He also req­ui­res a Web site address so his company can check out the firm that will be told about the referral. In addition, Rigney requires that the referrer “e-mails or calls us to let us know about the potential contact.” A commission is pay­able if all those conditions are met. Not all companies offer referral fees, but for the ones that do, a defined policy is just part of ethical conduct.

Giving and Getting Go Together
What makes giving referrals equally imp­o­rtant to getting them? For starters, it pre­sents the image of a company that is equally interested in a partner or client business, as well as its own. When establishing a policy of referral giving, it’s important to include these considerations:

• Express the importance of referrals in maintaining positioning and customer relations.
• Insist upon standards for those asking for the referrals. 
• Require understanding of each party’s business and environment on both sides.
• Follow-up on all referral outcomes.
  

What it should not contain is a referral requirement from the other party in return. That makes it much easier for the other company to return the favor without feeling obligated to do so.
To be even more effective, referral pol­icies, especially those that emphasize giving, need to focus on the value of extensive networking. Don’t overlook such mod­ern technology networks as LinkedIn and Twitter – gradually gaining a following for business purposes – and the tried and true method of businesses.

Giving referrals can only have value if the giver continues to perform at or above expectations and emphasizes a concern for customer/client welfare that goes beyond payments received for services rendered. Imagine how much easier it is to eventually request a referral from a business that is already sold on your performance and your corporate ethics.

Remember, a clearly executed policy of giving referrals can help open other doors. When such a guideline is in place and well understood by those in the referral front lines, there is less likely to be either apprehension on one end of the call or resistance on the other. That is why a practiced effort in giving referrals is likely to have the desired effect of getting more of them.