Let’s start with some empirical evidence – then we’ll get to the “how to.” I’ve seen two studies that indicate rewarding clients for giving referrals stimulates more referrals. The first study was a life-insurance based study that showed that using small gifts to thank clients for referrals increased referrals by 40%. A general industry study- conducted by Baylor University demonstrated that the use of small gifts to thank client for referrals resulted in 22% increase in referrals. While the percentages varied, the results are clear. Thanking clients for referrals increases referrals.
Are you using small gifts to say “thank you” for referrals (compliance friendly, of course)?
In the financial services world, making the gift contingent upon referrals is usually against regulations. Besides, it can cheapen the referral process. And you don’t want to wait for the prospect to become a client. You just want to reward the giving of referrals.
There are two things that will give your little gift (I’m talking $25 or less) maximum impact:
- Speedy Response – The faster you get the gift to the client (meaning the closer to their action of giving – the more that act will be rewarded. Have a simple system in place to act quickly. For instance, you can have an inventory of Starbucks gift cards or movie theater coupons in your drawer. These things are flat and easy to mail.
- Tailored Response – Anytime a gift is tailored to the client, it has more impact. This doesn’t necessarily mean you have to spend more money. In fact, a tailored gift brings you more bang for your buck. If your client likes the movies, then make the gift theater coupons. If your client has a special pet, get something for the pet. If your client has children, perhaps coupons for ice cream cones.
I just delivered one of my full-day referral boot camp for a client in Connecticut. It was a great day with about 150 financial professionals in the room. As my client was driving me to the train station, I learned that he had two dogs. He also started telling me about the introductions he was going to make for me. I immediately knew the thank you gift I would get. Once on the train, I went online and ordered the book Wolf in the Parlor. It’s a fun and interesting look at how dogs evolved from wolfs and eventually became the most domesticated animal on the planet.
Gifts vs. Promotion
My general rule of thumb is, “If it has your logo on it, it’s not a gift. It’s promotion.” With that said, when it comes to saying thank you for referrals with a small gift that has your logo is not so bad – as long as the gift is very utilitarian – say good quality golf balls for the golfer or a mug for a coffee drinker. (No stress balls, other useless items!)
Get the New Client Involved
Here’s a best practice I picked up from a Canadian company I worked with recently. They were encouraging their reps to get the new client involved in delivering the gift to the old client (logistics permitting). I think this is brilliant. First, you end up with a gift tailored to the referral source. Second, the new client sees how you say thank you for referrals, so it plants the seed for them to give you referrals in the near future.
Personally, I think this client-assisted gift should actually be the second gift the referral source receives. First, they get a little something from you for the giving of the referral. Then they get something else when the prospect becomes a client.
One of the best gifts in this situation is the advisor and the new client taking the old client out for lunch (or similar social setting). While at lunch, the new and old clients are singing your praises (validating their decision to work with you) as well as coming up with other people who should know you. This is a very effective strategy.
Remember – Reward the giving! Then get your new client to thank the referral source.