Word of mouth Featured

8:00pm EDT March 26, 2008

Companies big and small spend millions of dollars each year to buy advertising on radio, on television and in print. The rates for a 30- or 60-second spot during the Super Bowl have become legendary.

Yet the most effective and cost-efficient way to advertise is a method for which there is no price tag. A satisfied customer can do more to help a company gain additional customers, while a dissatisfied one can drive away many unseen potential clients.

“If you’re my banker and you’ve taken care of me in the past, I’m going to trust you,” says Dan Summerford, Senior Vice President and Business Banking Manager at Wells Fargo Bank. “If I know someone who is looking for commercial real estate, I will think of my banker and refer the deal to him or her.”

Smart Business talked to Summerford about how important it is for a commercial banker to build strong relationships and how those relationships can help down the road.

Who makes the best referral sources from a relationship banker’s side of the desk?

Lawyers, certified public accountants, insurance agents, and business owners and managers to name a few. Ultimately, a banker should consider his or her existing customers’ portfolio as their No. 1 referral source.

Why are customers such good referrals?

If you’re doing your job as a relationship manager, you’re proving to that customer that you’re there to provide him or her with guidance and that you have the financial knowledge that the customer is looking for. With a lot of customers, you develop a certain friendship, as relationships are very important in the banking industry.

It’s great to work for a company that offers all of the products and services so that as a commercial banker you can take care of the other needs. At the end of the day, the client isn’t concerned about whose name is on the letterhead but whether or not someone has taken care of his or her needs. For example, I’ve been in comparative situations where just the way we have come across on the phone and our knowledge won us that client’s business, even if someone else was offering it at a lower price.

How much business can a good referral secure?

I can only talk from the business banking side, but it can be huge. A potential client is not going to move his or her account from another bank to Wells Fargo based on an initial cold call. It is up to the banker to turn that initial call into a client by building a relationship first. That’s why CPAs are potentially such good referrals. They are already in a position of trust with business owners. So if I already have a strong relationship with the business owner’s CPA and the business needs to finance some sort of project, there’s a good chance the business owner’s CPA will refer his or her business to me.

How does that work?

Say a CPA is referring a deal to me and it’s with one of his current clients. And say that person has been his client for 10 or 20 years. Based on his or her CPA’s relationship with me, that client will now give me a shot to help. However, I have to be mindful of the CPA and his client’s relationship; I can’t just jump in and take over the process. I have to let that client drive the process and treat it almost like a handoff in football. It’s not something as simple as, ‘Here’s the person’s name and phone number, give him a call.’

Say the CPA, the prospect and myself are on the golf course. That prospect is going to see me interact with the CPA that he or she trusts and eventually will make the connection that the CPA trusts me. Ideally, from that situation the prospect trusts the CPA, and we have an immediate link to that resource, which is vital.

How damaging can a negative referral be?

If you’re doing your job as a business banker and you’re being a customer-centric relationship manager and something goes wrong, it can be very damaging when word starts to get around about what happened. It can be damaging to both you personally and your company as a whole.

What’s the best way to build a referral list?

If you’re lucky enough to inherit a portfolio from a previous banker, you already have a client list to work with. However, if you are starting with nothing, spend time at your town’s chamber of commerce and at council meetings. Get out in your neighborhood and meet people. I’ve picked up referrals at neighborhood softball games.

DAN SUMMERFORD is Senior Vice President and Business Banking Manager at Wells Fargo Bank. Reach him at (281) 870-0951 or dan.c.summerford@wellsfargo.com.