When it comes to growing a business, brokers must use everything in their arsenal to promote themselves as sought-after experts and trusted advisors.
While a broker’s reputation is born from the level of service they offer, their business can only grow if this impression is being harnessed as a tool. To do this effectively brokers must establish a strong referral system that gives them reach outside their current client base.
The biggest hurdle for brokers looking to improve their referral systems is the mindset that asking for referrals is an imposition on the client. Many brokers rely on the idea that if they focus their energy on providing quality service, clients will refer naturally. For most, unless specifically asked by a friend or family member, this is not the case.
As a warm lead, referrals are one of the most effective ways to bring in new business.
The Director of referrals website Get Informed Insurance, Kate Fairley, says broker’s clients are the same as any other consumer, with 78% responding more favourably to peer reviews over paid advertisements.
Clients feel more confident when referred by an informed and trusted peer over approaching a broker directly. “By leveraging your existing client base you have a much greater chance of conversion in comparison to things like cold calling, because the transaction is relationship-based from the beginning,” Fairley says.
On top of this, it costs 10 to 15 times more to convert a new lead than it does to build business through an existing client, she says.
A powerful tool
At training and consulting company Boost Your BD, the focus is on bringing better referral marketing practices to the professional services sector.
Director Neil Kafer says their research has found referred prospects are up to 15 times more likely to buy from you, four times more loyal and three times more likely to refer you to others.
Despite the well-known importance of referrals to a broker’s business growth, many still shy away from what they regard as “pushy” and “desperate” behaviour. To overcome this perception, brokers should be aware that what they see as an imposition, most clients do not.
A Boost Your BD survey of 1000 clients of professional services providers found 83% were comfortable providing a referral for their advisor, yet only 29% actually did.
First and foremost, if brokers expect referrers to promote their services, they themselves need to be clear about their value. “If you want referral partners sharing a particular message about you with others, then you should first develop that message and get it very crisp and clear,” Kafer says.
Once a broker has a clear idea of who they are and what sets them apart, they need to look outside their existing client base for contacts. To build a strong network Kafer recommends brokers look to businesses that compliment their own, including “businesses who have benefited from your work, businesses your company has worked with in the past, people you have referred to others, and business referral groups”.
Tricks of the trade
MGA Insurance Brokers General Manager Paul George says when approaching businesses that seem like logical referrers, one is not always assured of success.
“It comes down to relationship and compatibility,” he says. “Our best referrers or spotters are generally the ones that have been there for some years and know us well. If the other party is professional, you have half a chance of success.”
When a relationship has been successfully established with third-party referrers, brokers need to outline who their ideal customer is and the exact details they would like communicated to them.
MGA Director Steven McInerney says brokers need to establish ground rules with their providers and should never make assumptions about what they know. “The biggest mistake brokers can make is that they expect their referral source to know everything a broker does,” McInerney says. “You need to be sure both parties are on the same page and lay it out for them.” This includes providing them with all the necessary information and materials to endorse your service.
One of the most important steps in building a strong referral system, and one that is often overlooked, is measuring the results. Brokers must have structures in place that track every lead, starting from where the referral came from to whether the business was closed.
Without this final step, brokers have no concept of the effectiveness of their plan and financial gain of their efforts.
Many brokers rely on the idea that if they focus their energy on providing quality service, clients will refer naturally.
Case study – Simplex
One of Simplex’s most effective sources, and one that Director Kay Jackson encourages other brokers to sign up to, is a group called Business Network International (BNI).
The local networking group meets once a week for lunch and is made up of 40 members, one from each professional service. The basis of the relationship is that the members build up a rapport and then refer within the group.
Outside of this network Simplex has established a number of strategic alliances. These alliances are built on a spotter’s referral agreement, whereby the referrer provides Simplex with a contact and if they secure the business Simplex pays a spotter’s fee.
This practice of rewarding for referrals is one that is heavily employed by Simplex. Jackson says that by far the best referral process is word of mouth. Simplex rewards every referral with a thank you note and scratchie ticket, and if an individual repeatedly refers they are invited to the Christmas party or a race day. “It’s important to recognise where your business is coming from and thank people for it,” Jackson says. “Recognition of our thanks tends to encourage them to refer again.”
Simplex keeps track of every potential client who calls, noting on an enquiry tracker sheet how they heard about the business. “This way we know which sources are working and which ones aren’t,” Jackson says.
Simplex also has other systems in place to prompt clients to refer, such as a pre-recorded message played on top of their hold music.
Case study – MGA
MGA’s network is made up of a number of third party referrers sourced through authorised representatives. It is a system that has always been in place at the company and one that does not involve approaching clients for referrals.
The third party referrers are generally tied to MGA’s broker portfolio managers and are made up of accountants, property managers, advisory firms and some associations. The authorised representatives will seek out referrers, generally with people who already have a relationship with the company, MGA Director Steven McInerney says.
“Then it’s a matter of sitting down with them and seeing whether they are a good fit,” he says. An important aspect of this is looking at the potential referrer’s client base. “There’s no point in building a relationship with a real estate agent for instance if you don’t deal with house and contents insurance,” McInerney says.
MGA also utilises traditional television, radio and print ads to promote their services, which McInerney says is not a widespread practice in the industry.