Hinge has just released a new study on referral marketing that takes the research on this important topic to the next level. It contains some revelations about how referrals actually work in the real world. Let’s set the scene.
Why This Study? Why Now?
We’re curious—especially when it comes to what matters most to our clients.
Our 2015 Professional Services Marketing Priorities Study found that trying to generate more referrals was the number one planned marketing initiative for 2015. More than half (61.9%) of respondents intended to focus on it. Clearly, referrals matter. So we wanted to understand more about how to generate them.
The Client Referral Catch
The good news is that most clients (around 80%) are happy to refer their current service provider. The bad news, however, is that client referrals are limited by the number of clients you have and whether they know anyone who needs your services.
But there is a way around this limitation.
Our recent study, Referral Marketing for Professional Services Firms, which we conducted with 523 professional services firms, showed 81.5% of firms receive referrals from people they have not worked with in the past. A firm’s visible expertise and general reputation are the basis for most of these non-client referrals.
Referrals Do Not Magically Become Clients
Getting referrals is only part of the battle. The same study showed that more than half (51.9%) of prospects referred to a service provider rule them out before even talking with them.
What Factors Stimulate Referrals?
These findings have significant implications for how to structure a referral marketing strategy. That’s why we wanted to learn more and undertook the current study. We set out to understand:
- Is your reputation more or less important than your relationships?
- How critical is your website?
- What do you need to do to build a successful referral marketing strategy?
How We Conducted the Study
To find the answers to these questions and more, we partnered with two organizations to conduct a comprehensive online survey of professional services referral makers, NACVA (National Association of Certified Valuators and Analysts) and XPX (Exit Planning Exchange). The combined samples provided perspectives from 1,168 study participants.
Four Key Takeaways
Our research uncovered some surprising answers and valuable insights on what promotes referrals:
- Visible Expertise Is the Most Important Factor in Driving Referrals
There is a shift in the way people learn about the firms they refer. More than anything else, visible expertise drives new referrals, accounting for 37.3% of them. People become visible experts by writing and speaking about topics that demonstrate their capabilities and are of interest to their target audience.
Such professionals and the firms they represent receive referrals from people with whom they have not worked. Today, visible expertise is even more important in promoting referrals than client relationships (23.1%).
- Relationships Still Matter
That said, social relationships are still important. They are a referral driver for 17.7% of referral sources.
Social relationships are with friends and people you have met through networking. Not surprisingly, referrals often arise when a social and professional relationship intersect. The research also demonstrated that social relationships in the absence of any direct knowledge of your expertise do little good.
- Reciprocity Works
The advice has been around awhile—givers gain—and the numbers bear it out. The more referrals your firm gives, the more it’s likely to receive in return. When we asked people to tell us how many referrals they had given and received in the last six months, we found some interesting correlations.
On average, people had given an average of 7.2 referrals and received 7.0. The top 20% of referral makers had given an average of 17.9 referrals and received 21.8.
- Forget Some Old Advice
Most of us have heard the guidance. Ask for referrals. Attend or sponsor events to network and increase brand awareness. The data, however, does not show that these are powerful tactics. While such approaches may play a role in opening doors and creating opportunities, they are not among the top referral drivers.
What Are the Components of Visible Expertise?
Given the dominance of visible expertise in increasing referrals, you probably want to know how to become a Visible Expert®.
We have documented the components of visible expertise in previous research with professional services buyers. Activities such as publishing quality, educational content, showcasing client successes, public speaking and creating a high quality website build the perception of expertise.
It’s not enough to be knowledgeable. You must also share that knowledge.
How to Get More Referrals
You can have a smarter referral marketing strategy.
Our research shows that the Internet has changed how people find professional services firms. While relationships are still important, visible expertise is the most powerful referral driver. It is also something you can control.
What do you need to do next? Speak and publish information on subjects that interest your target audience. Demonstrate your expertise. People will start to recognize you and your firm as a Visible Expert® seeking you out when they have a need and referring you to others.
To learn more about this referral study, download the free referral marketing report.
- Get a step-by-step guide to building a powerful referral strategy with our free Rethinking Referral Marketing Guide.
- Our Social Media Guide for Professional Services is designed to give you everything you need to know to build a comprehensive social media strategy for your firm.
How Hinge Can Help
It’s time to rethink your referral marketing strategy. The Visible Firm℠ is the leading marketing program for delivering greater visibility, growth, and profits. This customized program will identify the most practical offline and online marketing tools your firm will need to gain new clients and reach new heights.