One of the reasons advisors struggle with developing a profitable referral program is that they do not stick with one consistent strategy in their marketing, says John Prendergast, CEO of Blueleaf, a firm in Cambridge, Mass. that develops software and applications for advisors.

“Advisors want referrals – they are invaluable and they want more,” says Prendergast. “However, not all referrals are created equal.”

In order to help you build a more efficient and structured referral program that pays off, Prendergast reviews three different marketing strategies:

1. The limits of word of mouth
This is the most traditional way to boost your referrals. But while creating a good impression on your clients and having them spread the word about your services is simply good business practice, it’s generally viewed as less effective at generating referrals than it has been in the past.

Certainly, having people talk about your value at a cocktail party will help you get started on building a reputable brand. Word of mouth still has its uses. But to “close the loop” more often and create a direct introduction to new clients, Prendergast says you should be adding updated strategies.

2. Referral marketing
A newer way to seek out referrals is by meeting with friends, colleagues or relatives of your current — and happiest — clients.

This meeting might not happen in a formal session set up for the purpose. Rather, it could take place at a client appreciation event that you are hosting or at a charitable function you are helping to sponsor.

This strategy is more likely to lead to a referral than simple word of mouth because it not only leverages your established client relationship but also leads you to a direct interaction with the prospect.

“Referrals work best when they [originate] in the need of a prospective client,” says Prendergast.

In this respect, it always pays to be prepared and on your game. You want to frame the conversation around the prospective client’s individual needs and how you can help them meet those needs.

3. Centre of influence (COI) marketing
This strategy is about leveraging the professional network of others to help you generate new business.

For example, you might choose to partner up with an accountant or lawyer, who will refer their clients to you for financial planning services. In turn, you will refer them for services such as wills or estate plans.

This strategy is likely to be the most profitable for your practice, says Prendergast. In essence, it creates joint value between you and your COI partner by offering the client more comprehensive access to wealth planning.

“[COI marketing says] ‘look you have the opportunity to share your value proposition within the network of another trusted professional,'” says Prendergast. “There is an implicit referral potential there.”

Another thing to consider is that a COI-based strategy is cost effective and can be replicated many times over.

“As an advisor you want to be able to control and execute your marketing so that it translates into new clients,” says Prendergast. “This kind of approach meets that test.”

This is the first installment in a two-part series on marketing and referrals. Tomorrow: “turbocharging” your referrals.