When speaking with small business owners about internet marketing, one of my standard questions is " How do you generate new business now? ".

Most small businesses generate most of their new business as a result of referrals from happy clients. If the business owner (or their sales people) are good at networking, they also get referrals from their network of contacts who know and trust them to do a good job.

I usually ask them if they're able to predict and control the amount of new business they get from referrals. Some people can honestly answer "yes". They are the rare people who have an excellent reputation, as well as excellent sales skills. Most businesses are unable to control the pace at which they generate referrals. As a result, they can't rely on referrals to reliably grow their business. 

This is usually why we're talking. They want to know whether internet marketing can help them. 

What most small business owners don't realize, though, is that generating leads online and generating referral business are tightly connected. It's hard to do one without the other. Most savvy business owners will intuitively understand this, once explained. However, they don't usually understand exactly how it'll happen. 

So, I thought it'd be beneficial to lay out what I've observed are the most important ingredients to leveraging the web to generate more referrals from clients.

Great Product and Service! 

There's really no shortcut to generating leads online if you don't have an awesome product and if you don't provide amazing service. Word spreads fast online. You can't fool people. It doesn't take many blog posts from unhappy customers to destroy your online reputation. From the other angle, if your clients don't think you're the best, they're not going to subscribe to your blog, they're not going to connect with you on LinkedIn, etc. 

A Commitment to Client Success!

Clients don't refer more business to you unless they know that their contacts are going to be taken care of. If your client doesn't believe that you put their success first, why would they think that you'd make their contact's success a priority? Like any referral, online or off, your clients have to be willing to refer you. The best way to make them absolutely confident in doing this, is to make sure they understand you care about their success. 

Achieving this level of trust with your clients is another issue. Your client's success starts in the sales process. You must know what will make your client successful, in their own words. If you don't know how your customer is measuring their own success, you can't measure it. You then must agree how you're going to measure this success. You then must measure it and report it. And from time to time, you must review it with them to make sure everything is meeting or exceeding their expectations. 

Give Them Something Worth Sharing!

Here's the secret to leveraging the web to generate more referral business. You must do Inbound Marketing ! If you read this blog regularly, you probably knew I was going to say that. But, if you're new here, you should simply understand that it's imperative to publish great educational content on your website (eg. blog posts, how to articles, white papers, webinars, ebooks, etc).Then, you should spend time connecting with your clients on social networking sites (eg Twitter, Facebook, LinkedIn, Digg, StumbleUpon, Delicious, YouTube, etc). Once you connect with them, you should interact with them via these sites. Don't forget to share your content on these sites, of course.

If you want to generate referrals from your clients, you have to give them a reason to tell their contacts about you and you have to make it easy for them to do so.

By putting content online, it makes it real easy for your clients to share stuff about you with people who may need your product or services. Ideally, your clients would introduce you directly to people that need your service so you can call the referral. But, the next best thing is to have your client share an authoritative blog post you've written with a contact of theirs who will get value out of it. As long as you're following best practices for lead capture , they'll be highly likely to convert into a lead for you. Like any referral, they'll trust you automatically because of the relationship they have with your client. Your blog post will reinforce that you understand their needs. And once they contact you, you'll be well on your way to converting them into a client!

Just don't forget the basics! Define their success and provide a great product and great service that will help them achieve it. 

( Illustration by lumaxart .)

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Originally published Jan 5, 2009 8:26:00 AM, updated March 21 2013