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Building Your Internal Circuits: The Five Referral Systems
Chapter 5: Building Your Internal Circles: The Five Referral Systems
The goal is to gather more than 150 people into the internal circles of your database.
1. Educate: Spreading Awareness and Building Credibility
Effective education relies on cognitive psychology, specifically the Information Processing Theory. For education efforts to be effective, information must be clear and concise (avoid complex technical terms, use simple and understandable language), repetitive (repetition enhances memory; repeat your message in different ways), and relevant (link information to the needs and interests of your target audience).
- Application: Start by asking your acquaintances about their work, then explain your work and how you prefer to receive referrals (“What do you do? And what does the ideal client look like for you?”). Create short, simple educational content❓ explaining the advantages of working with you (short articles, videos, or emails). Example: “I help people buy and sell homes. I work primarily by referral, so my goal is to exceed my clients’ expectations. Getting my business through referrals allows me to focus better on my clients’ needs.”
- Formula: Education Effectiveness (E) = Clarity of Message (C) * Repetition of Message (R) * Relevance to Audience (S)
E = C * R * S
2. Ask: Breaking the Barrier of Hesitation and Motivating Action
Effective asking relies on social psychology, specifically Social Influence Theory.
- Application: Use clear and specific phrases. Make it mutual. Use a ready-made scenario: “What do you do? And what does the ideal client look like for you?” “I help people buy and sell homes. I work primarily by referral, so my goal is to exceed my clients’ expectations. Getting my business through referrals allows me to focus better on my clients’ needs. [Name], who do you know looking to buy or sell a property?”. Show your acquaintances that you seek a long-term relationship (“Lifetime Real Estate Agent”).
- Formula: Probability of Getting a Referral (P(R)) = (Strength of the Ask (A) * Strength of the Connection (C)) / Difficulty of Giving a Referral (D)
P(R) = (A * C) / D
3. Reward: Reinforcing desired behavior❓ and Building Loyalty
Effective reward relies on behavioral psychology, specifically Operant Conditioning.
- Application: Treat the referrer better than the referred. Show your appreciation at every stage. Reward the correct behavior. Appreciation is as important as gifts. Reciprocate. Examples of rewards: Gift basket, movie tickets, client appreciation dinner or party, personal gift, one-on-one lunch, free hat or shirt, free massage, book, game night, pedicure/manicure, gift certificate to a home store, gift certificate to a restaurant, gift certificate to their favorite store, sponsoring a sports team for their children.
- Formula: Return on Investment on Rewards (ROI(R)) = (Gains from Referral (G) - Cost of Reward (C)) / Cost of Reward (C)
ROI(R) = (G - C) / C
4. Database: An Essential Information Hub
Effective database construction relies on information management principles, specifically the Information Competency Model.
- Application: Gather detailed information. Record all interactions. Use a Customer Relationship Management (CRM) system.
- Formula: Database Quality (DBQ) = (Relevant Records (R) / Total Number of Records (T)) * 100
DBQ = (R / T) * 100
5. Systematic Personal Contact: Keeping Relationships Alive and Effective
Effective communication relies on interpersonal communication principles, specifically Social Penetration Theory.
- Application: Direct mail and newsletters. Phone calls. Pop-bys. Lunches. Parties.
- Formula: Communication Response Rate (RR) = (Number of Positive Responses (N) / Total Number of Communication Attempts (M)) * 100
RR = (N / M) * 100
Chapter Summary
The chapter aims to provide practical strategies for building a strong referral network by developing “inner circles” of relationships, emphasizing the quality of relationships and their understanding of your work.
Key points:
- Educate: Ensure contacts understand your work, its value, and its differentiation from competitors. The process starts by asking about their work and target clients, then explaining your work, emphasizing reliance on referrals and exceeding client expectations. If contacts can’t explain why to choose you, there’s a flaw in the education process.
- Ask: Directly ask contacts for referrals. Use a specific scenario: inquire about their work, explain yours, and directly ask who they know who might need your services. people❓ often hesitate to provide referrals unless directly asked.
- Reward: Recognize those who provide referrals to ensure continued support. A structured reward system should include: appreciating the referral source more than the potential client, showing appreciation at every stage, rewarding the referral itself, not just a successful deal, combining moral appreciation with material rewards, and initiating referrals for them in return. Rewards reinforce❓ positive behavior and encourage repetition.
- Establish a Database: Maintain an organized database to record information❓❓ about contacts, especially those in inner circles, with detailed information about close network members. The database helps manage relationships effectively and provide personalized service.
- Make Systematic Personal Contact: Maintain regular personal contact with those in inner circles through various methods like direct messages, phone calls, surprise visits, lunch invitations, and parties. Regular contact strengthens relationships and makes contacts more willing to provide referrals.
Conclusions:
Building a successful referral network requires investing in relationships and systematically applying specific strategies. Education, direct requests, rewards, establishing a database, and maintaining regular personal contact are essential for enhancing the effectiveness of inner circles and achieving professional growth.
Implications:
Building a strong referral network requires time, effort, and resources. Referral strategies should be tailored to your work and personality. Continuously measure results and adjust strategies to ensure optimal outcomes. Focus on the quality of relationships, not just quantity.
