Recently there was a case study conducted at the HarvardBusinessSchool with the goal of answering the fundamental question: “How can small business professionals ensure their referral relationships are more reciprocal?” One of our key findings was that by tracking each and every referral you send/receive, your referral relationships will become mutually beneficial; resulting in an increase in business for both parties.
The first and most important reason you should track your referrals also happens to be the most selfless. We've all had professional relationships that either breakdown or become dormant because either one or both parties feel the relationship is imbalanced. Relationship building is all too often approached with a hands-off attitude. This creates ambiguity which is natural in our personal relationships but it can be quite toxic to our professional relationships. If you generate a lot of your business via referrals (most small businesses do) then there is certainly an underlying expectation for reciprocal behavior.
Just as it is important to track your revenue, it is equally important to track and reward the source of that revenue. Simply think about it from your referral partner's perspective. Would you be more comfortable if you knew that all of the business you were sending was being acknowledged and accounted for?
The second reason for tracking referrals relates to your own value and time. For example, you have two accountants you send referrals; Joe and Steve. They both do good work but you're a bit more social with Joe. He's a big talker and a much more visible part your referral network. If you manage your referral relationships, you may be surprised to learn that you've sent Joe ten referrals in the last two months and he's only sent you two referrals; they were unqualified and hardly worth the time that it had taken to follow-up. Conversely, you see that Steve has sent you three referrals, all of which lead to sales and you haven't sent him any. You don't need to cut Joe out but you obviously need to do something.
Through countless interviews and conversations with a wide variety of small business owners, we've discovered that a key difference between professionals who generate a few sales leads here-or-there, and those who've built a successful practice around exchanging referrals, is how actively they manage and track their referral relationships.
Christopher Ott is the blog director at Referral Key; an online business networking utility that helps people manage their trusted referral relationships more effectively to increase sales, expand their professional network and differentiate themselves from their competition. In addition to interviewing industry experts, Christopher dedicates much of his time to helping a wide variety of small businesses develop an effective referral marketing strategy. You can visit Referral Key and try it for free.