When done correctly, referral marketing brings in more qualified clients at a better ROI than almost any other marketing campaign.

Yet many companies either ignore referral marketing as a means of attracting new business, or say, "I tried it but it didn't work."

"A lot of people fail because they say, 'Do you know people who need what I do?' without communicating what would make a good lead," says John Jantsch, who writes the Duct Tape Marketing Blog recently voted as Best Blog on Small Business Marketing by MarketingSherpa's readers. Jantsch recommends creating an actual system for garnering referrals. Here's how:

Step 1. Identify who would be your best referrer

Targeting people or businesses that might be willing to refer you to others is different than targeting the market to which you actually sell. While satisfied clients often make good references, they're not always the best place to start.

"In most cases, there is somebody else who is not a client and will never be a client who can be more motivated to refer people to you," Jantsch says.

For example, if you're a financial planner and you want to show people how to make the most of their retirement funds, you might focus on estate attorneys as sources of referrals.

Three tips:

a. "What's in it for me?"

Whether you're approaching these people with a letter, on the phone, or in person, hook them with how helping you will help them.

"Rather than saying, 'Gosh, I want to talk to you about 401Ks,'" says Jantsch, "say, 'I want to show you how to become famous,' or 'how to make your clients fall in love with you.'"

The benefit to them may be more straightforward -- maybe you'll be offering a referral fee -- but for the most part, professionals understand that they have more value to their own clients when they have a wide network of professionals to whom they can refer clients.

b. Host a workshop

Call the HR department of a company that you are targeting for leads and suggest a no-cost seminar.

Again, if you're a financial planner, you might approach a law firm and offer to talk to the lawyers about retirement planning. "It's an opportunity to get in front of attorneys who all might have 30 or 40 clients of their own," Jantsch says.

c. Involve existing clients

"In any aspect of marketing, some of your greatest ideas come from existing clients," he says. "Clients can tell the value you bring a lot better than you can. Bring in four or five clients to help you design your system."

Step 2. Formal training for potential referrers

When a business or individual has agreed to refer people to you, have a meeting to train them. This training should include:

a. Who makes a good lead You don't want to be referred to anyone and everyone. Be specific. You might say, "Do you know any divorcees with a net worth of $500,000?"

b. Your core message You want them to be able to communicate what it is that you do. Give them the tools they need to effectively get your message across to the people they're referring: handouts about your company, Power Point presentations, etc.

c. What you'll do with the lead Some people don't like referring because they hear back from their clients who have said, "Why did you tell so-and-so to call me? They won't leave me alone."

"Telling them what actions you're going to take with a referral relieves a lot of the fear of bad experiences," Jantsch says. "If you do it right, it shows how professional you are, that you actually have a process for following up with leads."

Step #3. Set up a formal process to handle resulting leads

You already know this, but it bears repeating: have a plan on how to turn a lead into a customer.

Say you have a lunch planned with a referral. Your strategy might look like this:

--At lunch, you want to share three specific pieces of information and invite the lead to a workshop.

--At the workshop, you want to educate them on ten points relative to passive investing, and offer them a free portfolio analysis of their portfolio.

--At the portfolio analysis, you want to give a full report on investments, offer suggestions, and introduce them to your fee structure.

"I hesitate to act like this is anything ingenious," says Jantsch. "It's just another type of lead that hopefully is more qualified."

Step #4. Keep the people referring you up-to-date

The best way of losing a referral person is to not let them know what's going on.

Keep them informed. You might say, "Here are the five people you sent me last week. These two weren't really the right types, these two are thinking about it, this one became a great client, thanks so much and here's a pair of movie tickets," explains Jantsch.

Results: a real-life referral success story

Cornerstone CPA Group in Overland Park, Kansas, started a creative referral system a little over a year ago. Every client who uses their services for a standard tax return has the opportunity to earn back a full refund by referring clients.

Here's how it works:

--Clients Bill and Betty Smith are given some of Cornerstone's business cards, with their own names on them.

--When Bill and Betty refer someone who becomes a customer, the new customer shows the business card with Bill and Betty's name. The new customer gets a free coffee mug.

--A check goes in the mail to Bill and Betty for one-fifth the amount of their original tax return.

--For each new referral that Bill and Betty give, they get another check for one-fifth the amount of their original return, up to five (or 100%).

--Clients who refer five people and get the full 100% back get their pictures on the 100% wall.

"So it's not just a referral system, it's become their marketing message," says Jantsch. "People say, 'Oh, you're the 100% referral people.'"

The company has gotten more than 100 new clients since they began their referral system.

Useful links related to this article:

Duct Tape Marketing Blog http://www.DuctTapeMarketing.com/weblog.php

Referral Flood - a book by John Jantsch (note: MarketingSherpa is not a business partner of this site, and does not receive anything for referrals. We just thought you'd like to know about it.) http://www.referralflood.com

Cornerstone CPA http://www.cornerstonecpas.com