We all know the most effective form of promotion is Word of Mouth. It’s effective because when someone we know and trust tells us about a product or service they use, and recommends it, if we have that need we will more than likely buy it.
The weakness of WoM is that it is spontaneous, unplanned and not in our control. But it can be.
You can take WoM to another level, and systematise it, through …….. referrals.
One of the most overlooked areas of growth comes from your current clients. But you shouldn’t leave it to chance. The key is to develop a system which is repeatable. I’ll get to that in a minute.
Referral marketing is a method of promoting products or services to new customers through referrals, usually word of mouth. Such referrals often happen spontaneously but businesses can influence this through appropriate strategies.
Referral marketing is a process to encourage and significantly increase referrals from word of mouth, perhaps the oldest and most trusted marketing strategy. This can be accomplished by encouraging and rewarding customers, and a wide variety of other contacts, to recommend products and services from consumer and B2B brands, both online and offline. (Wikipedia)
Do you have a “referral system" in place for your existing clients? You should. Let’s look at “why”.
Referred customers are just better customers: They have 20% higher Average Order Values (AOV), 25% higher Lifetime Values (LTV), and are overall 25% more profitable than customers from any other channel. An article in eMarketer notes: "If you're not running a referral program, you're falling behind your competition."
Referrals are the lowest hanging fruit for business sales, but odds are that your company is one of the 80% of small businesses that don’t have a referral program in place.
Existing customers are far more profitable than new customers; there is no acquisition cost, they buy more often, and because they like and trust you and what you offer, they don’t see buying larger a risk. But just as importantly, they are likely to be “raving fans”, happy to refer you to others. The key is not to leave that to chance.
Tom Hopkins, author of “Sales Prospecting for Dummies,” says that no other lead source converts to sales at a higher rate than referrals, which close at 60 percent!
They Create Better Customers – referred customers have been proven to yield higher profits. Plus they are more likely to remain a customer or be a repeat buyer. A study conducted by Goethe University Frankfurt and the University of Pennsylvania found that referred customers provided a 25% higher profit margin, and were 18% less likely to leave.
Here are 7 reasons why referrals make sense:
• It’s a manageable process. Because of your relationship with the referrer, you can influence the prospect
• The process can be automated or semi-automated, freeing you up
• Referrals complain less, and are more enjoyable to work with. They come with a degree of “know, like and trust” because of the referrer.
• They are mostly not price shoppers, so there is a bigger opportunity to charge premium prices
• They have a longer client life cycle, in that they are more likely to stay with you.
• Like existing customers, they make more frequent purchases
• Their acquisition cost is low
Identification - Go through your client/customer list and identify the 80/20 customers, that 20 % of customers who provide 80% of your sales, and profits. And identify those who have been with you for some time. They are the most likely to give you referrals.
Of course, the best time to approach a client for a referral is when you have just completed a significant service for them. This will of course depend on the nature of the business you are in.
Because they are repeat customers, that 20% are loyal and likely to give you a referral, or more likely, a number of referrals.
But you have to ask for the referral, otherwise you are relying on traditional, haphazard WoM.
The approach – there are two principal ways you can approach your client; a phone call, or an email. Which you use will depend on how well you know the client, and how recent the transaction has been. The closer, in both senses, then use a phone call. Otherwise use an email.
Remind them of the transaction, (see Follow Up below) and their reaction at the time.
Essentially you are asking for other businesses they know of who might be able to benefit from your services. Obviously, you would want to exclude their competition.
Again there are two different approaches you can follow:
Develop a template you can use over and over again.
You should have a second template for a follow-up reminder to encourage the client to take action. They may have been well-meaning and intended to provide you with some names, but chaos can always intervene.
Offer a Reward – people are busy, and you like to say thank you for their willingness to assist. It doesn’t have to have a great monetary value, but it should be useful or have some gift value. They receive the gift when they have given them the referrals.
You should let them know their contact will also receive a similar gift if they take up your services. This will help relieve any feeling of awkwardness your client may feel in providing their details. It’s also a way of reinforcing the behaviour so you receive more referrals down the line from the same person.
Remember to say thank you again – when the referrals come in. Give them a quick call, a personal touch. It’s another chance to reconnect.
Keep records - as part of your “Referral System”; who you have contacted, when, follow up, when, results.
There are some other things you can do that will encourage referrals, such as:
Be Memorable: Go above and beyond. Blow customers away with a simple gesture. A harbour cruise company I knew in Darwin would give ladies stepping ashore after a cruise a single stem orchid or rose. You can bet they would remember that, and the cruise. And you can also bet they would mention it to their friends.
Follow Up – An opportunity that should never be missed. We’re all guilty of this. Make a phone call or send a card to customers a week or two after you have delivered your service. Thank them for their business, and let them know you hope they’re finding things now. The simple effort of reaching out will earn you big points and help gather valuable information. This is when you could also ask for some referrals.
This approach is also useful in asking for a testimonial, but let’s not confuse the issue at this stage; one step at a time.
Several things can kill your Referral Program;
• Not earning the right to ask for them – bad service kills off referrals. The only referral you are likely to get is “Don’t go near them!” Bad news travels fast.
• Not asking for them – not having a program.
• Relying on Word of Mouth – not systematizing your program.
• Not tracking and measuring the number of referrals
• Not thanking people for their referrals, and again when they are successful
• Assuming all you get, is all you can get. Do this well, and well and you’ll get more referrals down the line from the same client
• Believing that all you need is a good product or service – it won’t happen unless you make it happen.
• Relying on only one main source of leads for your business. “One” is the most dangerous word in business.
And receive my reward, “The Profit Leak Detector – Tell Tale Signs to put Cash Back in Your Business”, contact me here and give me the business name, contact, their email and phone number, and I’ll immediately forward this valuable booklet.
© Copyright 2017 Adam Gordon, The Profits Leak Detective
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