New Research Points the Way to More Referrals
Grow and Retain Your Referral Base
Todayâ€™s valuation firms rely heavily on referrals to produce new leads and revenues. According to a new study by NACVA and Hinge Marketing, most firms could be getting far more referrals if they made a few changes to their marketing. This article shares the findings.
Todayâ€™s valuation firms rely heavily on referrals to produce new leads and revenues. Â According to a new study by NACVA and Hinge Marketing, most firms could be getting far more referrals if they made a few changes to their marketing.
In our study of 354 NACVA members, prospective members, and other individuals associated with the industry, we wanted to discover which marketing strategies and tactics are the biggest drivers of referrals.
Previous research has shown referrals come in two basic flavors:
- Experience-based Referralsâ€”These come from people who have hired the service firm in the past or worked together on a project.
- Reputation-based Referralsâ€”These referrals come from people who have encountered the firm in the marketplace but have not worked with them directly. There are two types of reputation-based referrals:
- Generalâ€”the firm has a reputation for doing good work, being easy to work with, and so on.
- Specializedâ€”the firm has specialized expertise or works in a narrow niche (usually a specific industry or service area).
But we wanted to understand what forces were promoting and hindering referrals in the valuation industry.
Eight Key Factors
Our new research uncovered eight key factors that influence referrals:
- Visible Expertiseâ€”This is the intersection of reputation and visibility. The more a firm writes and speaks on topics of interest to its target audience, the more the firmâ€™s stock rises in the eyes of the marketplace.
- Professional Relationshipsâ€”People who have worked with a firm as a client or worked on a project together.
- Social Relationshipsâ€”These tend to fall into two categories: 1) personal friends, and 2) professionals you meet at a networking event and develop a relationship.
- Reciprocityâ€”When an individual or company makes a referral, they may be rewarded with one or more referrals in return.
- Asking for Referralsâ€”The process of directly asking clients or influencers to make referrals.
- Attending Networking Eventsâ€”Making connections in person, often at events designed to facilitate this process.
- Social Responsibilityâ€”Generating visibility and good will by donating time and/or money to charitable causes.
- Sponsorshipsâ€”Paying to sponsor events in return for public recognition.
When we compared these factors, we found that Visible Expertise was the clear winner:
Visible Expertise Matters
This finding suggests that reputation-based referralsâ€”generated through Visible Expertiseâ€”are the single most important factor determining how many referrals a firm receives. Â Most firms, then, would benefit from activities that promote thought leadership.
The Value of Making Relationships
The next two items, professional and social relationship, together add up to a larger share of the total, but they are very different from each other. Â Professional relationships are founded on direct experience with the firm, while social relationships are influenced more by reputation, personality, and loyalty.
Quid Pro Quo
Next comes reciprocity. Â Here we dug a little deeper and made an interesting discovery: firms that make more referrals tend to receive more referrals. Â Most likely, this is because a firm that benefits from a referral feels the need to repay the favor. Â According to the data, making referrals generates a positive return on investment. Â In fact, the firms that made the most referrals received an additional 18 percent referrals in return.
The last four itemsâ€”networking, asking for referrals, social responsibility, and sponsorshipâ€”add up to only nine percent of the total. Â Many firms still rely on these techniques alone to deliver awareness and stimulate referrals. Â But clearly these four factors are not the only major drivers of new business.
What Kills Referrals?
We also asked participants to identify factors that worked against referrals. Â Overall, their responses support the findings we discuss at the beginning of this articleâ€”but they emphasize the importance of Visible Expertise even more. Â More than half of participants said that a lack of thought leadership and other activities that promote a firmâ€™s visibility would hobble a firmâ€™s ability to generate referrals.
So how do you use these findings to get more referrals for your business? Â While the data does not answer all of our questions, we believe that new market dynamics, powered in large part by the Internet, are changing the way people and companies find valuation firms. Â While relationshipsâ€”both professional and socialâ€”remain powerful forces in generating referrals, a firmâ€™s Visible Expertise is the most important single factor.
The good news is, Visible Expertise is completely within every firmâ€™s control. Â By speaking and writing frequently on topics of interest to your target audience, you can raise your industry profile and extend your reach into new markets. Â As more people recognize and trust your expertise, the more referrals you will receive.
To learn more about these insights, as well as many others, download the free report today.
Lee W. Frederiksen, Ph.D., is Managing Partner at Hinge, the leading branding and marketing firm for the professional services. Hinge conducts groundbreaking research into high growth firms and offers a complete suite of services for firms that want to become more visible and grow. Lee can be reached at: (703) 391-8870 or e-mail to: LFrederiksen@hingemarketing.com.