The 5 Golden Truths Of Referrals Every Business Owner Should Know

john jantsch book referral engineCheck out the book at Amazon

Editor’s note: The following excerpts are adapted from John Jantsch’s new book, The Referral Engine: Teaching Your Business to Market Itself.There was a time when marketers would simply create a product or brand, broadcast a compelling message, and send the sales folks out to hunt down new business. Over the past few years, in large part due to the explosion of online tools and networks, customers and prospects are now active participants in the creation of products, services, brands, positioning, messages, and subsequent buzz—for good or bad.

You need a strategy that compels customers and partners to voluntarily participate in your marketing, to create positive buzz about your products and services to friends, neighbours, and colleagues. While it may feel a bit odd to suggest that you can actually compel someone to perform a voluntary act, you’ll find that the pull of a fully developed Referral Engine is so strong that your brand supporters will feel as though they have no choice but to sing your praises.

Despite what some might suggest, there are no real secrets in business; only truths you haven’t yet figured out how to apply. You need to move these truths into the realm of execution—the place where innovation and action come together to make growth happen.

But first, a tiny physiology lesson.Want to know why referral generation is one of most effective yet elusive forms of marketing?

There is a tiny part of the brain, the hypothalamus, that—among other things—helps regulate sexual urges, thirst and hunger, maternal behaviour, aggression, pleasure, and, to some degree, your propensity to refer.

The hypothalamus likes validation—it registers pleasure in doing good and being recognised for it, and it’s home to the need to belong to something greater than ourselves. This is the social drive for making referrals.

Human beings are physiologically wired to make referrals. That’s why so many businesses can grow and thrive by tapping this business-building strategy alone.

Click here to see the 5 realities of referrals >
Adapted from The Referral Engine by John Jantsch by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright © 2010 by John Jantsch. 

John Jantsch is a marketing and digital technology coach, and award winning social media publisher. His second book, The Referral Engine: Teaching Your Business to Market Itself, will be available in May 2010. Check out more of Jantsch’s advice at the Duct Tape Marketing blog.

Reality #1: People make referrals because they need to

Reality #2: All business involves risk

Unfortunately, a small but very distinct region of the hypothalamus also monitors, controls, and analyses that powerful emotion known as fear. We constantly balance and measure, often at subconscious levels, pleasure and fear, gain and pain, and every action's likelihood to produce one or the other.
While we are indeed wired to give referrals, they also represent a potential risk. When we make a referral, we are putting the trust we have established with the recipient on loan to the person or company being referred.

Of course, risk varies in degree according to the magnitude of the referred party's need. There is more risk in referring a friend to, for instance, a good accountant, than in referring one to a place for authentic Thai. But as we dive into the strategies and tactics of some real- world referable businesses you'll see that a trust-building approach to marketing reduces fear and risk for a referrer in any scenario.

The surest way to remove risk is to build a business or product that connects with customers on both logical and emotional levels.

Or, as Fred Reichheld, author of The Ultimate Question puts it--head and heart.

People make decisions about the businesses they refer the same way they make decisions about a purchase. We simultaneously weigh whether something is affordable, fits well, or addresses a need-- the head part--and whether we will look good, feel smart, or enjoy ourselves--the heart part. If the emotional pull is very strong, you can rationalize away what may otherwise stand out as a logical shortcoming, like a steep price.

Most businesses focus on the logical elements--price, features and benefits, a desired result--while ignoring the emotional rewards that are essential for the total customer experience.

People don't get emotional and passionate about ordinary products, a satisfactory result, or a fair price. They talk about things that surprise them or make them feel great about themselves--and, in effect, remove the feeling of risk they might have about doing business with that firm.

It's not enough to have a good solution. Buzzed-about businesses have a good solution draped in a total experience that excites, delights, or surprises the customer and motivates them to voluntarily talk about their experience.

Reality #3: Nobody talks about boring businesses

Reality #4: Consistency builds trust

It does very little good to create this week's publicity stunt in an effort to get folks talking for today. Referability is a long-term game; it's not a drive-by event but a well-planned, precisely calculated marathon. Repetition, consistency, and authenticity build trust and are the foundational tools of the referral trade. People can sense when you are attempting to draw attention for attention's sake, or are stepping out of your authentic self so far that it doesn't feel right to you or anyone associated with your business.

Commitment to a remarkable difference demonstrates that yours is not a gimmick.

Reality #5: Marketing is a system

The most tragic referral reality

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