Referrals That Don’t Understand Why Your Services Aren’t Cheaper


HubSpot released a report I was happy to be a part of (Marketing Agency Growth Report 2018), and while I provided a few thoughts in a previous post on the report, one topic I thought was handled deftly was referrals.

We’ve spoken to the topic on a few occasions previously, but Jason Swenk brought up a point we hadn’t touched on, and one that an agency brought up in her experience recently.

When HubSpot asked agencies the question “What are your main source of leads”, a whopping 57% said referrals and/or their personal network.

Jason points out the inherently troubling nature of that stat:

Don’t get me wrong. I love referrals, and referrals mean that you did a good job so someone is endorsing your services. Here’s the problem with referrals: Usually, referrals are the same type of lead, with the same budget you are working with now or smaller. Which means you are going to have to keep your pricing the same, even as your experience and expertise improves.

An important point, and Jason finishes with this:

You get better and more efficient yet the smarter you get, the more profit you lose. You’re stuck charging the same prices because you’re working with the same types of clients who are a network of referrals.

Jim Darcangelo’s section followed Jason’s and he carried the thought further. Essentially, with that 57% of leads coming from referrals and networking, Jim points out an agency could probably expect these opportunities to be reasonably strong.

We saw how that often isn’t the case, per Jason’s quote, and as I mentioned earlier, I had an agency principal call me specifically because, while she was awash with referrals, they weren’t the right clients, and typically didn’t understand why this agency wasn’t cheaper. Ugh.

Jim brings up another good point as well, those same agencies,

. . .noted that only 52% felt that they could attract the types of clients they wanted. And 60% stated that getting new clients was their biggest pain point. In other words, they are not sure they can attract the right prospects. . . To make matters worse, when asked what was preventing their agencies from growing as quickly as they would like, agency leaders noted that they believed they needed more sales and marketing. More sales and marketing to fuel wobbly new client value and return?

Referrals should always be a part of your new business program, but because they can be unreliable, and even more importantly, because they can sometimes be detrimental to your bottom line, they should only be one part of your new business strategy.

Author: Lee McKnight Jr

I’m the VP of Sales at RSW/US. We specialize in working with services firms to help drive and close new business-if you need help with that, email me at lee@rswus.com. What I actually do: drive sales efforts to bring ad agencies and services firms on board with RSW, create content around successful new business tactics and help drive RSW/US marketing objectives, including social media channels, blog content, webinars, video and speaking engagements. Dig it.