The old axiom “It’s all about who you know” has some truth to it. But when it comes to generating referrals, there’s more to the matter than personal connections. Referrals are a powerful way to generate leads — and leads are the lifeblood of every technology firm — but personal connections alone aren’t sufficient to grow a referral base that in turn, brings in more business.Prioritizing Referrals
In a recent study of over 500 firms, more than 72 percent of respondents report that “Attracting and Developing New Business” is their greatest challenge. How do they plan on attracting that business?
Figure 1. Professional Services’ Planned Marketing Initiatives in 2015
That generating more referrals came out as the highest priority marketing initiative isn’t surprising – referrals are a time-honored strategy in the professional services marketplace. But it’s the way firms seek referrals that’s important, and it won’t surprise many in the technology industry to learn that, like the rest of the marketplace, referrals are evolving.
Where are referrals coming from today, and are firms taking full advantage of the opportunities available to them? The Hinge Research Institute conducted another study to find out, questioning 530 professional services firms about how they seek referrals. The results show that firms may have been relying on the wrong type of referral to bring in new business.
Different Types of Referrals
Traditionally, many firms have thought of referrals as coming from firms they have worked with directly, or from personal contacts. This is true, but it’s not the whole story. In fact, over 80 percent of respondents receive referrals from firms they’ve never worked with at all.
Figure 2. Prevalence of Non-Experience Based Referral Types
When it comes to generating business, there are three other types of referrals that, in some cases, perform better than the traditional experience-based referral:
- Reputation-based referrals
- Expertise-based referrals
- Referrals based on preexisting relationships
How exactly are these referrals generated? Referrals based purely on a personal relationship are self-explanatory – and as you can see above, that type of referral alone doesn’t necessarily lead to new business. But the other two types are missed opportunities in the technology services landscape, and require some unpacking.
To find solutions to particularly complex challenges, most buyers consider candidates outside of their previous experience. Having a highly specialized skill-set or a unique area of expertise sets you apart from the competition — regardless of existing relationships.
Better yet, specialization differentiates you from your competitors, giving you an identity to build your brand around. Today, you have to be more than an IT firm – you have to be an IT firm that specializes in biomedical data management and security, or whatever other area your expertise might lie in. This goes a long way in generating leads and securing buyers’ confidence. In fact, when individuals and organizations feel that they have a strong grasp of your expertise, they will refer you to others without having a direct client/provider relationship.
But how are people in your marketplace learning about your expertise?
Figure 3. Sources of Expertise-Based Referrals
The short answer is: from you. By speaking about your expertise, by presenting your research, accomplishments, and ideas, you can make a huge impact on your audience.
But apart from speaking engagements, online sources are responsible for more than half of all expertise-based referrals. A well-executed online marketing campaign – including blogs, social media, downloadable whitepapers and guides, and a lead-generating website—gets you and your expertise on prospective clients’ radar.
These are similar to expertise-based referrals, but are tied more to the positive impression of your abilities and the customer satisfaction you produce, rather than a specific knowledge-base or set of skills. There are two types of reputation-based referrals:
Figure 4. Sources of Reputation-Based Referrals
55 percent of these referrals come from your prospects’ colleagues and friends. None have worked directly with you before, but your marketing efforts are working. They’ve heard of you through online and offline networks alike. When your industry comes up in conversation, people think of you.
The remainder of reputation-based referrals doesn’t come from a specific contact. You’re simply known and well-regarded. Your content marketing efforts have spread across the Web and made an impression on your audiences. They’ve read your blog, and they may have found your website while researching your industry and the various services you offer. Because your content was helpful, educational, and relevant to their needs, they’ve developed a favorable impression of you.
The takeaway here is that referrals are a complex matrix of who you know, what you can do, and how well you’re regarded. Past experience only matters if you have the expertise to handle the current challenge — and expertise only matters if you’ve got great customer service and organizational skills that you can bring to bear on the project at hand.
And it’s important that you communicate all of this before your prospects even reach out to you. Why? Because over half of them will never reach out to you.
Figure 5. Why Buyers Rule Out Referrals
Poor content quality, a flimsy reputation, a substandard website—all of these things can rule you out before a would-be referral contacts you. Your marketing efforts must be impressive, convey your expertise, build your reputation, and regardless of who else is talking about you, be part of an impressive story of who you are and how you can solve customer problems.
If you’re interested in exploring Hinge’s full study on referral marketing today, download the research report. By taking a more expansive approach to referrals and strengthening their educational marketing efforts, technology firms can avoid being ruled out and take full advantage of referral opportunities among their audience. In today’s hyper-competitive industry, those opportunities matter more than ever.
- Elizabeth Harr is a partner at Hinge, a marketing and branding firm for professional services. Elizabeth is an accomplished entrepreneur and experienced executive with a background in strategic planning, brand building, and communications. She is the coauthor of The Visible ExpertSM, Inside the Buyer’s Brain, How Buyers Buy: Technology Services Edition and Online Marketing for Professional Services: Technology Services Edition.