How referrals work, and how to get more

Referrals are the centerpiece of most professional services firms’ marketing agendas. Everyone wants more of them. But wanting more referrals is not the same as getting more. How do you go about changing the odds in your favor?

We need to explore an interesting shift in how referrals work — and how to use that knowledge to increase the number of referrals your firm receives.

The old vs. the new

Traditionally, buyers and decision-makers would find out about firms the old-fashioned way: they asked colleagues for contractors they would recommend, based on their experience using them. In fact, over our years of studying the professional services landscape – government services included – our firm has found that simply asking a friend or colleague has remained the #1 method for finding referrals, time and again.

However, that dynamic is rapidly changing. As shown in the first chart, over the past three years alone, the percentage of buyers who rely on networking and advice from friends has declined by 15 percent (from 71 percent to 60 percent). Here’s what’s so striking: during that same timespan, the use of online searches as a primary means of finding referrals has climbed from 10 percent to 18 percent — a relative rise of 80 percent.

There are several drivers of this change. For one, executive decision-makers are busier than ever. Time-strapped buyers have found that using online searches — looking for firms associated with keywords related to the specific area of services they need or solution to a challenge they’re trying to address — is a far more direct and efficient approach for building the proverbial short list.

Another driver is that the very nature of what constitutes a referral has changed. Essentially, there are now two major types of referrals. The traditional kind, which I’ll call experience-based, included only those firms that a person had worked with directly. The second of referral that has emerged as firms have become more proficient in their marketing is reputation-based — and more precisely, the visibility of the firm’s reputation for its expertise.

In other words, the data shows that someone who has never worked with you before is still likely to refer you when you show up to the market with a strong brand, high visibility, and/or reputation for expertise. When people see your firm everywhere, it’s only natural that you will come to mind when they’re asked whom they would recommend for services you provide.

What does this look like from the other side of the table — that is, the firms that are being referred? In a related study, we found that 82 percent of experts have received referrals from someone they’ve never worked with, but who have heard of the firm’s reputation for specialized expertise.

Where do these reputation-based, non-client referrals come from? It turns out that only a small portion are based on the person having actually met you at a networking event, seen you speak at a conference, or had another type of face-to-face encounter. Rather, as shown in the second chart, the vast majority are based on a firm’s expertise, and more specifically, the visibility of its expertise — a quality that is most effectively conveyed online.

It’s worth noting that not every “great” reputation has the same impact on potential buyers. At the most general level, a contractor could have a reputation as being a “great company,” or having “great people.” But a far more impactful type of reputation is one based on specialized expertise. Consider a government buyer searching for a firm to provide disaster recovery services. They’d be interested in a company that had a reputation as being a great company, certainly — but how much more compelling would be a company that has a strong reputation for its expertise in disaster recovery?

In fact, our data reveals that having visibility for a particular area of expertise generates 61% more referrals than a reputation for simply being “a great company.” One implication of this insight is that relying on traditional, experience-based referrals is capping your ability to bring in new business.

The bottom line

Now let’s bring together the observations discussed above for the real point.

Coupled with buyers’ increasing preference for online searches as they build their lists, the changing referral landscape means that prioritizing your digital presence is the most effective way to make your reputation visible. You can do this by highlighting your expertise through writing relevant, keyword-optimized content and distributing it on your website and various social media channels, as well as getting published as a guest writer on other high-visibility, highly authoritative websites.

By making sure potential buyers know about your specialized areas of expertise, you give them a compelling reason to include you on their next RFP.