We all know that a recommendation from a third party is much more effective at generating business than any advertising. So, what are you doing to get those recommendations and referrals and turn them into new customers?

Super-marketer Dan Kennedy has coined a simple mnemonic device called the “EAR formula.”

EAR stands for Earn, Ask, and Reward.

Before you can ask for a referral, you need to earn the right to do so. You earn that right by delivering superior value and quality to your customers.

Believe it or not, too many businesses don’t ask for referrals. Common sense tells us that the best way to get more referrals is to ask for more referrals, so you need to make it a practice starting now.

The final part of the formula is to reward your customers for helping you build your business. The most common reward is some sort of discount on a future purchase or gift in exchange for the referral. But, I would encourage you to be a little more creative in your approach. The reward really can be anything that has value to the customer.

One problem with many referral programs I see is that they make the exchange very explicit upfront – “get your friends to buy and you’ll get something.” This approach can create the perception that you’re buying your customer’s address book like it was any other list. This is especially true if you aren’t doing a great job at earning the right to ask for a referral in the first place.

If you want to provide discounts or gifts in exchange for referrals, then consider “surprising” your customer with an unexpected gift or discount after they’ve made a referral. You could also host periodic “customer appreciation” events. Ideally, these events would be related in some way to your business but should never be overtly commercial.

A referral program works best when you are asking all of your customers for referrals, not relying on a small handful of your “best” customers to do all the referring. If all of your referrals are coming from a very small number of people…

What happens if something goes wrong with that customer?

What happens if that customer moves away or changes jobs?

Certainly, you won’t get referrals from all of your customers no matter how much you deserve them, ask for them, or reward people for making them. But, the more customers you actively solicit for those referrals, the more you will get, and the less impact the loss of any one customer and their referrals will have on your business.

If you don’t have a referral program, sit down now and create one. This doesn’t have to be complicated. Start by simply making it a point to ask every customer (assuming you’ve earned it) if they could refer someone to you. It could be as simple as saying something like:

“I’m glad to see you’re happy with our service. May I ask you to tell at least one of your friends about us?”

Since I like to practice what I preach…

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To your success,