Referrals are the lifeblood of many of the MSPs I meet.
For some, it's pretty much the only way they get new business.
Referrals are amazing (if hard to ramp up) when you need new clients.
In fact, the majority of referrals should lead to a client, so long as the prospect's expectations are set correctly (if the referrer is telling them, "You should use my IT guy, he's amazing, and you can ring him on his mobile at 11pm on a Sunday night", that's never going to be a happy client).
And when it comes to relying on referrals as a primary marketing method, it's not just MSPs.
You only have to look as far as the end of your nose to find businesses using referrals to thrive (and survive).
If you refer a friend to Dropbox, you can get up to 1GB free storage every time you do it (capped at 32 friends. Incase you have that many.)
Or how about HelloFresh? As well as using celebrity influencers, they rely on you telling your family and friends how life-changing having dinner delivered to your door in a box is. In return, they offer free boxes, account credit and other discounts to sweeten the deal.
So, we know referrals work for the most part.
But the question I get asked most about this quite traditional form of marketing is, 'Should I pay for referrals?'
Well, for me, the answer is generally - no, you shouldn't (more on that 'generally' part later).
For someone to be referred to you, there is a huge amount of social risk for the client that's referring them.
What's social risk? It's the risk that they send someone to you, and actually, it turns out not to be a great experience.
No one's going to take that risk just to make a bit of money or get an extra month free.
The best book I've ever read on referrals is Unstoppable Referrals by Steve Gordon, which explains more about social risk and how to overcome that as a barrier to getting more.
But just because I don't think you should pay for referrals, that doesn't mean I think a client taking the time to tell someone about you should go unrewarded.
I think your existing clients will respond much better to a heartfelt, genuine show of gratitude from you than cold, hard cash (as much as we all love cash, it is cold. And hard, apparently.).
How about you turn up at their premises, hand them a bottle of champagne, shake their hand and say, 'Thank you so much for telling so and so about us. We really appreciate you pushing our business.'?
Sending a bottle in the post with a nice note will equally do the job. This could be a job you give to your Virtual Assistant.
Rewarding the behaviour of a client telling someone about you is almost more important than the referral itself. Because, just because one referral doesn't work out, doesn't mean the next one they send you won't.
Now, I did say that for me, the answer to the question should I pay for referrals is generally no.
That's because, just because an expert tells you you should or shouldn't do something, if you've already figured out a way that works for you it doesn't really matter what they say.