The Engaged Client is very satisfied (ranks the primary advisor 8 out of 10 on a scale of satisfaction) and is extremely loyal. However, those characteristics do not automatically translate into referrals. Doing a better job does not guarantee more referrals.
“Despite the fact that 91 percent of clients say they are somewhat, or very comfortable, providing a referral, only 29 percent actually provided a referral. We describe this challenge as a ‘referral gap.’ Despite the fact that 58% of engaged clients say they are fundamentally motivated to refer in order to say ‘thank you’ to their advisor, few take action unless there is a clearly stated need on the part of a friend or family member. We call this a ‘motivation gap’.”
It is these gaps that have prompted countless generations of sales managers to conclude, “All we have to do is ask for referrals.”
But it does not work that way.
“Advisors are often taught to ask for referrals, and ask often. The data suggest that a better approach is to help clients to spot a good referral opportunity so that they recognize the opportunity to share your name. That opportunity is not likely to be as obvious as a client being asked for the name of a good financial advisor. Rather, the opportunity might involve a client speaking with a friend who has lost a spouse, a colleague who is selling a business, or a family member who is hoping for early retirement. The need triggers the opportunity for a referral; your clients need to recognize that need.” Emphasis added.
How do you do this? For years, I’ve called it “Promote Referrals.” I have defined this as “the art of gently and persistently reminding your clients you value and accept referrals.” Consistently reminding clients you value and accept their referrals, does in fact increase referral business. Based on Ms. Littlechild’s research, I’m now abandoning the term, “Promote Referral” and incorporating it into a new term: “Induce Referrals.”
The new sales commandment is: Continually educate clients to recognize referral opportunities and gently and persistently remind them their referrals are valued and accepted.
This actually lies on top of my “Client Relationship Retention Formula” which, interestingly, incorporates many of Ms. Littlechild’s service dimensions. I guess good service really is common sense, and any two or three people who define great service will come up with similar or identical dimensions.
The word “induce” is a near perfect word to describe this process. Per the American Heritage online dictionary, “To induce is to lead, as to a course of action, by means of influence or persuasion.”