These days, no small business owner needs proof of the power of word-of-mouth to impact business. Just look at how quickly social networking tools like Facebook and Twitter have taken off as ways to grow your business.

But there’s another word-of-mouth tool that’s sometimes overlooked in the media hype about social media today. I’m talking about referrals.

Referral marketing means getting new leads based on referrals from your current customers. It’s long been a way for service businesses to grow, but referral marketing can work equally well for a product-based business. While referral marketing is a tried-and-true method for growing your business, far too many entrepreneurs don’t use it effectively in any systematic fashion.

Here’s a quick rundown of how to make referrals work for you.

1. Just ask. All too often, we feel shy about asking for referrals or worry that we’ll come off as overly aggressive if we ask for them. That’s a big mistake. The key is knowing when to ask. A good time to broach the subject is when you’re following up with your customer after the sale. If they’re happy with the service or product, they’ll be in the mood to refer a friend or colleague your way. (If they’re not, correct the issue immediately.)

2. Make it simple. Clients may have every intention of giving you a referral, but then get too busy to do so. Streamline the process by creating forms—either online, by email or on paper—that you can use to capture referrals quickly. For instance, a restaurant could include a paper referral form with the check, a home remodeler could include it with the invoice or a retailer could have forms available at the point-of-purchase.

3. Act quickly. If you wait too long to follow up on a referral, the person may no longer have need of what you sell. Create a follow-up system within your business, or use contact management software to remind you to follow up within a reasonable period of time, such as two weeks.  

4. Pay it back. Offer customers some type of incentive for every referral that brings in new business.

For instance, a hair salon could offer 20 percent off services for the next visit after a customer refers a friend who gets a service. By waiting until the referral actually buys something, you ensure you’re only paying for valid referrals—not for useless email addresses or phone numbers of people who really don’t want to hear from you. For more information check out the marketing book The Referral Engine by John Jantsch.

Need more marketing ideas to help your business grow? The experts at SCORE can help. Visit the SCORE website to get connected with a Mentor online or in-person for one-on-one counseling and support.

About the Author(s)

Rieva Lesonsky

Rieva is CEO of GrowBiz Media, a content and consulting company specializing in covering small businesses and entrepreneurship and

CEO, GrowBiz Media