Avoid the 5 Flaws of Networking and Referral Marketing

Referrals can make the difference between a great year and an outstanding year. Avoid these 5 flaws and generate massive referrals.

By Dan Stewart
2-time Inc. 500|5000 Honoree and President of Happy Grasshopper

In my career I’ve had the good fortune to fail. I’ve also enjoyed a bit of success, but failure is a better teacher. One of the things I used to really struggle with was networking. I knew it worked for other people but I wasn't getting results, so I decided to figure out why.

This lead to a multi-year study of sales psychology and a deep look into the real reasons people make referrals. I started by joining a group. Before each meeting, I’d stuff my pockets with business cards, practice my elevator pitch and check my breath about a hundred times.

Without fail, I would find (and repeat) the same patterns of behavior, over and over again. Go to any networking event, anywhere in the world, and you’ll see people doing the same thing. I’ve come to think of these behaviors as the five flaws of networking and referral marketing:

1) We “clump” into groups that already know each other. It’s human nature - we’re just magnetized to people we know. That’s part of the fun at these events, but it can keep us from getting a good return on our networking efforts. So be brave and go say hello to stranger.

2) We talk when we should listen. I’m guilty of this. It’s very easy (and rude) to tune out what a person is saying, especially while busy thinking about the next brilliant thing you want to say. The other guy is doing exactly the same thing, so neither of you learn very much. Listen, then think, then talk.

3) We exchange business cards and never do anything with them. This is the primary reason Happy Grasshopper exists. We all meet people who could make a major difference in our sales, but often don’t know what to do. Send a handwritten card? Put them on your mailing list? Subscribe them to your newsletter? You need a strategy that will turn acquaintances into on-going referral sources. Happy Grasshopper does this for you, automatically.

4) We sell too early. No one likes to admit it, but if you sell things for a living you know what it’s like to really need a sale. Too often, we meet people in this situation who are just moving way too fast. For long term success, you need a long term strategy. Otherwise, you’ll always be riding a boom-bust sales cycle. It doesn’t have to be that way. Widen your sales funnel by adopting a communications strategy that works for everyone you meet.

5) We give up. After a short while, we decide that networking just isn’t for us. What was I thinking?, you say to yourself, why did I think this would work? It can work for you though. You just need to a better way to benefit from the broad range of people who attend networking events. Because you never know where your next referral is coming from, the best practice is to keep in touch with everyone.

These five flaws provided the spark that became Happy Grasshopper. We built it because we needed a better way to generate referrals for our parent company. In October 2010, Happy Grasshopper was an idea. In November, we had our first hundred users and today - just 5 months later - we have customers in all 50 states, Canada, Australia and the United Kingdom. Not surprisingly, we’re building our business on referrals.

From your own experience, you know that it's much easier it is to do business with someone who was referred to you. They've already made a decision to buy, which is why they were talking about it with friends.

Now imagine you're that friend. When asked to give a referral, what goes through your mind? If you're like most people, you immediately recognize that there is some friendship capital at risk. So you run through a quick mental checklist - first, do I know anyone? and second, will they do a good job? To make a referral, you must be able to answer yes to both these questions.

When you get a referral, it's for these four reasons: they know you, they like you, they believe you'll do a good job, and they want to help you. The first two are mandatory. The last two are discretionary, so the real question is, how do you get more people to know and like you?

Well, assuming there are some people who already do, consider how that happened. Do you work together? Go to the same church? Live in the same neighborhood? Or, if you're a parent like me, are your kids best friends with their kids?

This is your home base. These people know and like you because of who you are, but the way they got to know and like you was through regular communication, over time. It was small talk at first, which allowed you to discover common interests, which then lead to deeper conversations and ultimately friendship.

But feeding friends into your sales funnel isn't going to help. In fact, it will alienate them. To create a large and consistent pipeline of opportunity you need to become known and liked by a much, much larger audience than you already know.

The way to do this is by adding the people you meet - everyone - to a database and regularly sending them short, engaging, conversation starting messages. It is not difficult, and will make an enormous difference in your results as long as you're careful about what you send.

Happy Grasshopper automates this function, but you can do it yourself. Just be sure to stay away from anything remotely sales related. Do not send industry info, do not send your newsletter and do not send information about yourself. Keep the messages very short and use your email signature to inform them about you. Follow these tips and watch your referrals soar.