Referrals can be the lifeblood of just about many professional services firms. They are cost effective, and are typically warmer than other leads that come in through your pipeline.
The status quo may be giving you an adequate stream of referrals, but how do you know if you are optimizing your referral potential? The answer lies in the behavior of your clients.
Before you can assess your referral optimization, you must answer one key question:
What is the ratio of promoters to detractors among your client base?
In other words, how will your clients speak about your firm? If this ratio favors more detractors than promoters, it can have a significant impact on your firm’s reputation in the marketplace, the ability to attract referral opportunities, repeat business, and even your bottom-line through the time and money spent remedying unsatisfactory service.
Boil this question down to the behavioral tendencies that buyers of professional services show, and you’ll see that the likelihood that someone will recommend your business to a friend or colleague is a good barometer of your brand’s health.
Asking your clients to rate the likeliness they will recommend your firm to friends or colleagues on a 0-10 scale will allow you to segment your clients into three behavioral categories:
- Promoters (9 or 10)
- Persuadables (7 or 8)
- Detractors (6 or Less)
Think of this segmentation similar to an academic scale: 90-100 is above average, 70 – 80 is average, and scores below 60 are unsatisfactory. Is your firm’s report card in good standing?
Below are descriptions of each segment:
Promoter: By giving a rating of 9 or 10, promoters are highly likely to recommend your business to a friend or colleague. When someone asks them for a referral, your firm is top of mind. This group is also the most likely to recommend your firm without being asked.
Persuadables: When assessing the likeliness they will recommend your firm, clients who give a rating of a 7 or 8 are categorized as persuadable. These clients are passive in that they aren’t likely to recommend your firm, but they aren’t likely to speak poorly of your firm either. They are neutral in this sense. At Hinge, we recognize this group as being an opportunity for improvement.
Detractor: Detractors are clients who give a rating of 6 or less. Reasoning behind these ratings typically reflects a poor experience that client had with a professional service provider. When someone asks this group for a referral, they are the most likely to dissuade and detract others from working with your firm.
How it applies to your firm
In 2003, Fred Reichheld of Bain & Company introduced the concept of a Net Promoter Score in a Harvard Business Review article titled, “One Number You Need to Grow.” He explained that aggregate client loyalty could be measured by taking the difference between the ratio of promoters and detractors within a company’s client base (Net Promoter Score = %Promoters – %Detractors).
Once you’ve interviewed your clients and categorized them into these three segments, the next step is to calculate your Net Promoter Score. It can range anywhere from -100% (all of your clients are detractors) to +100% (all of your clients are promoters).
I know what you’re thinking to yourself right now, “What is a good Net Promoter Score to shoot for?” There’s no need to worry. Here at The Hinge Research Institute, we’ve established a Net Promoter Score benchmark for professional services firms.
We’ve compiled data on over 5000 buyers and sellers of professional services in the accounting and finance, legal, management consulting, marketing, technology, architecture, engineering, and construction firms. What we found was that professional services firms on average have a net promoter score of +54%.
So what does that mean?
Compared to other benchmarks of broader B2B companies and even B2C companies, our benchmark suggests that there is more opportunity for referrals from clients of professional services firms than their B2B cousins.
Where does your firm stack up? Using a Net Promoter Score is one indicator of the health of your brand. It’s also the first step in retaining the Promoters, convincing the Persuadables, and limiting the Detractors in order to generate more referrals.
If you want to learn more about optimizing your referral marketing strategy, make sure to check out our Rethinking Referral Marketing Guide.