I heard a fascinating story recently at a dinner party that perfectly illustrates why.
I met a friend of a friend who runs a decorating business, and his frustration was obvious as he was enduring a slow start to the year – the phone had just stopped ringing.
I asked him what he was doing to promote his business. He’d printed several thousand leaflets and dropped them through letterboxes all around his local area. I asked him how many calls he’d received. From all that effort, he’d received just one call to quote! However, as it happened, that one call had been for what would be a very good job: repainting an entire five-bedroom house.
As you can imagine, he was desperate to get the work. When the client called back to discuss his quote, they told him that they’d ruled out four other companies, and he was on a shortlist of two. They told him they would think about it over the weekend, and call back on Monday.
He told me he spent a nerve-wracking weekend waiting, but was very confident about winning the pitch. He’d been super-professional, arrived early, provided guarantees about the quality of his work, was available to start immediately, and the clincher in his mind: he personally was an expert in painting ornamental fireplaces (of which there were two in the house).
I have to say I very much identified with the decorator: we’ve all been in situations like this. Maybe we’re perhaps pitching for work, perhaps going for a job, but we know that we’re the right person. We just KNOW it.
Monday morning came, and the client phoned. They’d decided to choose the other company! The decorator, despite being absolutely gutted, did what every good businessman should do in this situation, and asked for feedback from the (non-) client.
“Was I professional – do you think I could have done the job?” “Absolutely,” came the reply.
“Was I competitive on price?” “Definitely.” In fact, his quote had been cheaper than the other company’s.
“Well then, why didn’t I get the job?”
“Because the other company came from a referral.”
Referral Business is Better
From all points of view, referral business is better than that gained through other means:
- For the business supplier, referrals tend to be easier to close, and have fewer objections. Referrals often bring customers with a stronger sense of loyalty that remain clients longer.
- For the referrer, they increase their credibility with both the end user and the business.
- For the end user, the trust element is crucial. Why take a risk with someone from an online search?