Independent insurance agencies achieve long-term success when they combine high account retention with sustainable organic growth. Achieving organic growth requires a consistent pipeline of new prospects who will become new customers.

To populate that pipeline, you must generate referrals. In fact, referrals are foundational to your agency's customer acquisition strategy. 

Here are five questions to help you generate referrals for your agency: 

1) Who's Your Target Market?

In crafting your agency's marketing messaging, don't get caught in the trap of competing on price and the “15-minute mentality." Define your target demographic and their cohort's characteristics to drive your client service philosophy. Investing time to learn about their needs reduces the possibility that they will shop around. Getting to know your customers will result in them generating quality referrals for your agency.

Accurately defining your target market will set the course for your agency to build a network pipeline. Try to mirror the composition of the agency's book of business: personal and commercial insurance, including industry niches, such as employee benefits, and life and health insurance. 

In developing personal lines referrals, remember that your homeowners or personal auto customers may not associate your agency with life and disability insurance. Not only does that negate the potential synergy of cross-selling other insurance products, but it can also result in lost referrals to competitors that do a better job of promoting those product lines. 

If your agency's focus is on commercial insurance, develop relationships with professionals in the industries you target. Position yourself as a subject matter expert on business insurance. Being viewed as an expert on architects & engineers professional liability insurance, for example, can facilitate referrals from architecture and engineering firms to their attorneys. 

2) Do You Use Leads, Referrals and Testimonials Effectively? 

Your agency should be using all three avenues—leads, referrals and testimonials—to build your customer pipeline. Determine which mix of the three is most effective for your agency, and periodically experiment with the mix to keep it fresh and effective.

A lead is someone who may not know about your agency but has shown an interest in your services. A referral is someone who knows you or your agency and provides an introduction to a lead. A testimonial typically involves a recommendation from a customer who may name a specific staff person or the agency in general. While referrals and testimonials are exclusive in nature, leads typically are not. 

Segmenting the results from each approach will help you assess their effectiveness in generating organic business. 

3) Who Will Build Your Pipeline?

Your independent agency has three primary sources of referrals: people who you and your staff know, agency customers, and centers of influence. Here's a breakdown of each category of referrals:

• People who you and your staff know. Have you ever considered how many people each person on your staff knows? Their potential reach can be exponential. People you know can become online ambassadors, providing personal product testimonials by sharing their opinions and information. 

• Agency customers. Customers who truly value their relationship with your agency can be fertile ground for referrals and testimonials. An invaluable tool to gauge the customers' view of the agency is a net promoter score (NPS), which captures how likely a customer is to recommend your product or service on a scale of 0-10. This customer experience metric should also be shared with agency staff to serve as a client service motivator.
   
• Centers of influence. They may or may not be a customer but still recommend the agency. While brand ambassadors and influencers can be included in this category, the focus is on business advisors as well as civil, athletic, hobby and other groups that can connect you to your target customers. For example, for personal insurance customers, realtors can be a referral source of new homebuyers.

4) Should Your Referral Program Be Formalized?

Most agencies mine for referrals in some manner, but often haphazardly. A formal referral program will help you imbue a culture of relationship-building at your agency.

To make the most of this opportunity, here are a few ways to get started: 

Program guidelines. Before you decide on a program or incentives, refer to your state insurance department's rules, which may affect your choices. For example, most states permit an exception to the rebate rules for referrals if the gift's value is less than the statutory amount and it does not discount or affect a client's policy. 

Regardless of your state's rules, these are general guidelines for a referral program: 

• The person making the referral should not discuss the specific terms and conditions of the policy. 
• The reward you provide must not be dependent upon whether the referral results in the sale of insurance.
• Referrals should not be a one-way street. Reciprocate. 
• Always ask for referrals. 

Incentives. You'll want incentives for employees, customers, centers of influence and for all of their acquaintances who provide referrals. A variety of incentives work for a formal referral program. Common examples include gift cards, cash, entry into contests and event tickets. 

Scope. Begin with a budget. Next, determine the number of incentives or rewards—within state rules— the length of the referral campaign and measurement of both referrals gained and for conversions. Not all sales will be immediate, so referral tracking should take that into account. 

If your budget allows, referral program vendors can offer platforms that facilitate campaigns, incentive management, data integration and personalization. 

The whole team participates, and results are rewarded. It is critical to create a culture of referral building across the agency. Forget the notion that producers sell and customer service representatives (CSRs) service. Every employee should be engaged in marketing your agency to drive referrals. 

When an employee forms a relationship that leads to new business, provide firm-wide recognition and a commensurate reward to that person. 

5) Who Can You Tap?

Getting in front of people, in person or online, is the best way to generate awareness about what you provide. A prospect may not have an immediate need, but they may remember that one of their 150 or more acquaintances have that very problem and refer you to them as their problem-solver.

Align your target demographic audience with the civic groups, sports teams and hobby clubs that fit their criteria. Local business groups like chambers of commerce are logical choices, but they also can include more than their fair share of insurance agents. 

Look to other less obvious opportunities to impart your knowledge. Some examples of groups to approach to speak or provide content include: 

Cycling and running clubs. Offer to speak about how uninsured/underinsured motorist coverage can protect them if they are hit on their bike or while running and the driver is uninsured or has low insurance limits.

Youth sports leagues. Discuss the insurance perspective of transporting players to games and how a personal umbrella policy provides higher insurance limits in the event they have an accident and are found at fault or passengers sustaining significant injuries. 

Community group volunteer board. Discuss their risk exposure for being sued. Discuss the role that directors & officers insurance plays. Some national charities no longer cover their local chapters for liability insurance due to the cost, which has become a major issue for attracting volunteer board members. 

Building a strong pipeline of referrals starts with exploring your book of business, prospecting and community involvement. Get everyone in the agency on board with the effort. Formalize the plan and talk about it regularly. Don't leave it to chance. 

Peter van Aartrijk is principal at insurance branding firm Aartrijk. This article was originally published on the Trusted Choice® blog.