you dont have a systematic referral program you are missing out on one of the simplest, lowest cost ways to generate your highest quality customers. Referrals are the lifeblood of small business - if you havent yet institutionalized a referral program, youre making a huge mistake.   Why Are Referrals So Powerful?   The reason referrals are so powerful is because they come from a credible third-party that has experienced first hand the benefits of doing business with you.   They are even more powerful when they come from a friend, because you know that a friend has no ulterior motive but to do whats in your best interest. You can believe what you friend is saying (versus hearing a commercial from a salesperson whose sole purpose is to make money from you).   Referrals are also valuable because most of the time they are completely free. How would you like to receive the benefits of the most compelling sales advertisement on earth for absolutely nothing? You can through referrals.   Research shows the importance of referrals. According to Paul and Sarah Edwards (authors of Getting Business to Come to You), up to 45% of most service businesses are chosen by customers based on the recommendations of others.   A recent Dun and Bradstreet survey found referrals to be one of the two most popular small-business marketing methods. (The other one is advertising.)   Lastly, and I think this is the most powerful reason of all, customers that give referrals become more loyal to you and your business. Once someone stands up and makes a public statement about you, psychologically they will become more loyal to you and your business.   Customer Service Doesnt Always Equate to Lots of Referrals   Customer service is critical to the success of your referral program. It is the foundation of the referral process. But just because you give good customer service, it doesnt mean that you will get a lot of referrals. Receiving referrals on an ongoing basis is as much a function of deliberate planning as it is of great customer service. Many small business owners assume that referrals will happen by themselves if you give good customer service. This isnt true. If you are not deliberate and proactive in creating referrals, the chances of you receiving as many referrals as you want are slim.   And your best customers are ready and willing to give you referrals as was shown in the statistics above. You just need to show them how.