Getting Referrals: The Secret Psychology of Why People Refer

Good morning. Welcome back to the exciting conclusion of Profit Activator Week. Even though 30 years ago in journal number six I wasn't referring to these as the eight profit activators — there was a seven-step process — I'm going to give you the eighth, because for 30 years now I've been working on and developing this, and it makes sense to give you the full picture right now.

The big thing I was including in nurturing lifetime relationships is getting not only repeat business, but doing additional things with people, and most importantly, getting them to refer people. So that's what we're talking about today: there's a secret psychology to why people refer, and in most cases, people get it wrong.

Fundamentally, people come from a position of thinking you have to earn referrals, or that people are doing you a favor by referring. So sometimes that leads people to think maybe we need to compensate people for referrals, incentivize them to refer. But the reality is, as a species, we're already inherently incentivized to add value to the people in our world.

Going all the way back to when we as humans started playing the cooperation game, we realized combined, we could have a better outcome than being rugged individual hunters on our own. The evolution of how we developed as a species involved banding together in tribes of 150 people — this is a known evolutionary psychology thing. Robin Dunbar at Oxford identified what's now called Dunbar's number: we're capable of holding about 150 relationships. Every one of you knows 150 people, and it's happening all the time.

When we were banding together like that, tribes stayed around 150, or split into two tribes beyond that, because you had to know everybody in the tribe — otherwise it was a potential threat. Part of our inherent wiring is to continue adding value to the herd. You had to be a contributor. You see it weaving through all our societal norms now — we want to keep proving our value to the herd, to raise and maintain our status. The worst thing that could happen is to be shunned. So we're constantly looking to contribute, to keep our tribes safe and bring good things to them.

In our modern world — cities — you don't know everybody, but we're all these intermingled tribes of 150 people, playing from the same playbook. That's why reciprocity works the way it does: if I do a favor for you, you owe me a favor, and we want to keep those things balanced.

Imagine we're out on the savannah, hunting and gathering, and I find a big patch of blueberries. I gather some up, run into Josh on the way back to camp, and tell him, "hey, there's a big blueberry patch over those hills — go get some, maybe Nancy will make her muffins tonight." In that moment I'm higher status than Josh, because he's riding on my coattails. So he immediately feels the need to tell me, "oh, watch out behind those rocks, I saw a lion on my way over here." Now we're both better off.

That dynamic plays out in modern society every day. We want to contribute information, share good news, be helpful. So instead of framing referrals as something you earn, or a favor someone's doing for you — tap into the idea that people want to maintain and improve their status in the herd. How can you make them look like a hero, earn status points within their herd? That's a completely different game than trying to incentivize people.

I've mentioned Robert Cialdini's book on influence, and there's another one on social psychology — "Predictably Irrational" by Dan Ariely. Ariely introduces the idea that bringing an economic exchange into something removes the inherent power of the social contract. For instance, if I need to move a piano and call Josh saying, "can you come help, I'll give you 20 bucks" — now I've put an economic value on it, and Josh can evaluate: "not worth it for $20." But because we have a relationship, if I just ask him to help move the piano, he feels socially drawn to do it, because we're friends and I need help.

Underneath it all, I believe every piano moved by a friend is only moved because they know that along with the piano move comes a "certificate" for a reciprocal piano move in the future. Maybe two years from now Josh needs to move a piano, and he knows he can call me, because I owe him one. This psychology, once you understand it, is fascinating — it's like getting in the jet stream of things that are already happening. We're a sharing species — constantly telling people about movies, Netflix shows, books, restaurants, vacations. And how we do that is in conversation. That's the important part.

Once you understand the psychology of why people refer, you can get into the mechanics of how referrals actually happen, and insert a way of tapping into that. All referrals happen as a result of conversation. In those conversations, three things have to take place: first, they have to notice the conversation is about whatever it is you do, or something that could turn into a referral for you. They have to think of you. And they have to introduce you to the person they've had that conversation with.

When we did the big real estate seminars, for the last three years, I'd have 10 people stand up and tell me the story of their last referral. 80% of the time, it was somebody calling them up saying, "I got a call from Nancy, who's a friend of Bob, and Bob told her I could help sell her house." The other 20% was the client calling: "hey, I was talking to my friend Nancy, she's going to sell her house, you should call her." Those are two types: passive referrals — they just call, it's already done — and reactive referrals — you react to somebody telling you their friend needs help.

The third type, which I never heard anybody talk about, is an orchestrated referral. This is where mastering the psychology of referrals really helps. If we know everyone's having conversations all day — I'm here at Honeycomb, and every one of these people behind me is having conversations. Say we have 10 meaningful conversations a day — it's way more, but let's say 10. Take your 150 people: that's 1,500 conversations a day happening, almost 50,000 a month. Your big opportunity is to program your clients so that when they hear the right conversation, they know what to do.

An example that made this crystal clear: we have a real estate group, and in the forum somebody posted, "does anybody know where I can get carpets replaced today? We have a closing tomorrow and the painters spilled paint all over the carpet, it's ruined." When I read that, my brain immediately started singing a well-known carpet company's toll-free number jingle. I knew that had been planted in my brain years earlier, without my permission, waiting to be triggered by "same day carpet." Immediate flip of the switch.

That's how you can tap into what's going on with your top 150 — the people who know you. So I ask people: what would it be like if you could plant a chip in the ears of all your potential referral partners — everyone who knows, likes, and trusts you — and listen in on all their conversations? What would you program the chip to listen for? What are the trigger words? If a trigger word happened and you got an alert — "referral conversation in sector 9" — what would you do?

Start thinking about what comes up in conversations: "Bob got a job transfer, we're moving to Poughkeepsie." "We're thinking about moving to the country." "The kids are graduating, we're going to downsize." "We're having another baby, need a bigger place." "We're looking for an investment property, thinking of doing a flip." All real conversations happening. If you can skillfully plant an opportunity for them to be a hero in that situation, that's amazing.

Say someone mentions selling their house, and you have a book called "How to Sell Your House for Top Dollar Fast," and one of your clients is a friend of that person. Imagine saying to your clients: "just a quick note — in case you hear someone talking about selling their house this fall (right after Labor Day is when people list, hoping to sell before year end) — if you hear that, give me a call or text me, and I'll get you a copy of our book to give to them."

Now it's so much easier for your client, who already knows, likes, and trusts you, to call you — and you're offering something valuable, a book, for them to give to their friend, to be a thoughtful contributor to their own tribe. It's much more likely for them to call you than to tell their friend to call you, because all three things still have to happen: notice the conversation, think of you, and introduce you.

Sometimes clients tell people about you — "you should call Josh, he's great, he helped us sell our house" — thinking they're doing the right thing, because you've told them "don't keep us a secret, tell your friends about us." They're doing what they think you'd love. But instead of saying "tell people about me," you want them to tell you about people. You want them listening for and recognizing conversations of people who are about to do something, and you offering them an opportunity — like a list of the 10 best flip opportunities in Winter Haven, or the 10 best horse farms, whatever applies.

Programming it like that is super valuable. Even offering something you could give them — a gift card, a free mosquito treatment — even better, because you're empowering people to fully introduce you to the people they're having these conversations with. Do that right, and you'll watch your referrals take off. Don't sleep on the referral opportunity.

I got a funny email the other day from Rick. It says, "Dean, question. Are you saying you can teach me to make fat stacks by hanging out at a pub drinking coffee like you?" And I laughed to myself, because I was thinking — you know, yes, I can do that. That's what I do. The funny thing I really realized is that every idea I've had, every dollar I've made over the last 30 years, has gone through my brain, through my pen, onto a piece of paper in my journal before it went out into the real world.

And if I can turn people on to that activity as a driver for what to do, what to think about, what to ask yourself to draw out what the next most valuable action is for you, and how to find the most profitable things you can install in your business — I'm all for it. So this Friday at 1 p.m., I'm going to do, for the first time, a 50 Minute Profit Finder workshop. And you're going to join me live on Zoom. We're going to go through a 50-minute exercise. Bring your pen, bring a notebook or piece of paper, and I'm going to guide you through a thinking process that will help you identify where the lowest-hanging fruit is in your business — and maybe some fruit you didn't even know was there, but I'm going to show you where to look for it. So it's free. It's for you. It's Friday at 1 p.m. This Friday. Just go to 50minuteprofitfinder.com and I'll get you all the details. And hopefully you can join us then, Friday at 1 p.m.