Before I jump head on into this topic, I want to be the first to admit that if you search the WWP archive of articles and webcasts you’ll notice a lack of guidance on the topic. Referral programs specifically. You’ll also notice us experimenting with different ideas as we work to prepare a position on this valuable but neglected topic.

Let me highlight what I believe to be true on the journey thus far:

  • Active referral mining is a must and so is rewarding
  • But…rewards should be discretionary as an appropriate thank you and not a revenue source for the referrer
  • Paid referral programs (where you commit to a fee or percentage for referring) are not ideal for any customized services firm
  • Some people find it easy to do, but others…
  • Many feel like ‘sales predators’ when asking
  • Timing is everything
  • Any solution needs to address the above

Referrals are like value pricing – an easy theory that few are able to fully leverage, for largely the same reason: some find the conversation difficult. I’m mining Robert Cialdini’s great work on reciprocity to see if we can parlay it into a discreet, easy to follow referral system that everyone can implement. The test will be whether or not we at WWP use it (One of our values: we do what we say. If we don’t do it, we don’t teach it.)

Ok so for today, let’s take a look at but one slice of the pie, how do you get yourself out of a bad referral from a good client.

Good referrals are like the free pistachios in the bag that have somehow been pried from their shell, leaving you with all the nutty goodness and none of the work.

It takes a lot of work in fact to generate a steady stream of good referrals and it’s no surprise that very few firms ever get to this place where the business is sustained and growing entirely by doing great work for good clients and systematically asking for and following up on referrals. It is however the highest form of “marketing” that we should all aspire to.

Not all referrals are good, however. I routinely see angst created by referrals from poor clients or, more commonly, the situations that arise when a good client makes a bad referral. The common scenario is a good client, who spends lots of money with you, refers you to a friend or relative who has a startup, small business or some other entity that for reasons of affordability or other are not a good fit for you. The mistake is to think that the right thing to do is to take the client on anyway.

So, let’s walk through how you might respond to a bad referral from a good client. Let’s say your gorilla client refers an early-stage (but past start-up) company to you. At first glance you think it’s highly unlikely this referral can meet your minimum level of engagement. What do you do?

First and foremost, understand the dynamics at play. The client is doing you a favour (at least in his mind) but he is also trying to look good to the referree. Your job is to make your client look good. Do not lose sight of this objective, and don’t limit yourself by thinking that the only way you can make your client look good is by taking on a client that’s a bad fit. Nobody wins in that situation. So, how do you proceed? Follow these steps:

1. Thank You

You begin by thanking the client, the referrer. “Thanks for thinking us. We really appreciate referrals and are glad you think highly enough of us to refer us business. Keep it up!”

2. State Any Concern But Reassure The Client

If you have concerns about the fit, state them to the client now and then immediately follow up by assuring the client that you will help his friend get the help they are looking for. In this way you are communicating that you will do your job – make your client look good to the referree. It might sound like, “I’ve looked at their website and they might be a bit small (early-stage, underfunded, tactically-focused or whatever the objection is) but I’m going to follow up and see how I can help.” Now here’s the important part, reassuring the client you will do your job: “”If we’re not the right fit for them, I’ll make sure he gets exactly the help he needs.”

That is your obligation to a good client, it’s not to work for a bad client because it came as a referral from a good one. Whether this initial exchange with your client/referrer is in person, over the phone or via email, it needs to be all positive, even if you’re expressing concerns. It’s most important that the conversation ends on a positive note. “This is your friend, I’m here to help. I’ve got this.”

3. Repeat With The Referree

Now talking with the person to whom you have been referred you do the same thing. Think of the communication as beginning with a positive opening, then moving to your concern while maintaining the positive tone, and infamy, finishing up with an enthusiasm to help.

4. Determine How You Are Going to Help

There are many ways you could help this referree. Let’s list the obvious one. First, you could take them on as a client, if it makes sense to do so on their own merit. Your second choice is to say we’re not the right firm for you, but promise to help refer them. For a good client (referrer) it might make sense to go the extra yard collecting information from the referree and then even sounding out some firms yourself in order to find the perfect fit and live up to your obligation to make your big client look like a star for referring you. It might even make sense to keep checking in with the referree until he or she is happy with the provider with whom he ends up. Another option that you might consider if the referrer is one of your best client and the referree’s needs are very small, is to just help for free.

5. Circle Back With The Client/Referrer

Finally, close the loop by going back to the referrer and let him know exactly how you helped his friend and made him look like a star.

The key to all of this is to remember that when your best clients refer a bad opportunity to you, your obligation is to help your paying client – by making him look good – and not to take on a client that it doesn’t make sense for you to take on. Keep your client in the loop about what you’re doing to help his friend but don’t view a referral as a demand and don’t create any unnecessary stress for yourself or anyone else.

And hey, if you’re so inclined, drop a note and let us know how your referral program is going.