Don't you love it when the phone rings and someone says, “My friend Alice told me all about your widget flatteners and I really need some. I'd like to order a couple dozen".
Of course you love it. You're gratified that you have a loyal customer who is so happy she recommended you to her associate. You feel the excitement of knowing you've got an easy, lie down sale. You're thrilled, because you instinctively know this new customer isn't going to cost you a dime in marketing investment. No ad to create, no media to place, no letter to write, no phone to dial or person paid to dial it. Isn't that the beauty of referrals?
So, why do so few people ever ask for referrals?
For some reason our warped thought processes make us think something like. . . “Duh. . . I just got these fine folks to give me a bunch of their money. The last thing they want is to be bothered by me asking them to send me to their friends so I can get some of their money too. "
People don't see you as having just taken their money. They look at you as having just solved a problem for them they needed to be solved. At the point of sale, more than at any other time, they feel a sense of obligation to you. It's the time they're most predisposed to enthusiastically give you the referrals you're looking for. But like everything else, there's a right way and wrong way to ask for referrals. Do it this way. . .
Review the specific benefits your customer derived from your product or service. If you have helped your customer receive protection or avoid loss or trouble or the persistence of a nagging problem, make sure you articulate these benefits.
Get the customer to acknowledge the value you have provided.
Remind your customer that he or she has friends, relatives, and associates who may have some of the same needs, problems and desires.
Now here's the clincher. . .
Remind them that if they appreciate the relationships they have with these other people who share the same needs, and who stand to lose or gain in the same way your customer did, then it seems the neighborly, loving, moral thing to do, to at least put these people in touch with you, so they can decide for themselves if what you have is right for them.
Can you see the beauty of this? Now they're not focusing on your request or helping you out. Now you've got them thinking of helping their friends.
There are two kinds of referral systems. . . passive and pro-active.
Passive Referral Systems
In passive referral systems you're two steps removed from the prospect. Basically, you have to provide such a quality product or service that your customer voluntarily tells his associates about it, and tells them so compellingly that the person told voluntarily “looks you up" and functionally says, “Can I do business with you?"
By adding incentives into the mix, you can increase the chances of that happening.
You can give your customers gift certificates that they can distribute to their friends. Their friends then come in and do business with you and you issue a reward certificate to the referring customer.
Tim Branscomb of Sierra West Jewelry, offers a merchandise credit of $50 to $250 toward in-store purchases, depending on the size of the sale that results from the referred customer.
Dentist Dave Miller sends his referring patients to dinner for two and a movie, every time one of their referrals joins his practice.
Of course, the best, most motivated referrals come from passive systems. But there is one drawback. . .
Because you're two steps removed, you're never in a position to assertively market to these referrals. You're still at the mercy of your customer to do your marketing work for you, and do it so well that it results in a new buyer.
Therefore, you should also install pro-active referral systems in your business. In Pro-active referral systems you get your customers to tell you who to talk to. And you then take responsibility for making sure those people do get talked to.
Pro-Active Referral Systems
The dynamics of pro-active referral systems are a little different from passive systems. You should reward your client just for giving you the names, even if none of his or her referrals ever convert - something meaningful enough to be attractive to the customer, but not so valuable that you get hordes of unqualified referrals who you can never convert.
For example, I give customers back issues of my newsletter, complete with audio recordings, just for the names. The cost to me is next to nothing, but the value to our referring customer may be thousands of dollars as they apply the principles, strategies or tactics described in the newsletter.
There are other good, inexpensive incentives. You can use movie rentals, desserts at nearby restaurants, buy one, get one certificates or whatever else you can think of for incentives to secure the names of a customer's referrals.
Now let's talk about the Cadillac of referral systems. The “Graduated Incentive" referral system.
Graduated Incentive Referral Systems
The idea is to reward referring customers more handsomely for each successive referral they send to you.
Here's an example:
For the first time someone refers a friend they receive a $25 gift certificate. The second time they refer you send them a $75 gift package to a local restaurant. The third time you may give them a full day package at a local spa. You may have a tiered system where they can work their way up to receive a FREE, week-long trip to Hawaii.
I've known Realtors, Chiropractors, carpet cleaners, heating contractors and virtually every other kind of business to have successfully used this strategy.
One final note on pro-active systems of any kind.
If you're going to ask your customers to give you the names of their friends and relatives, you'll want to put their minds at ease by making a couple of promises to them. . .
First, promise you will contact their referral, and by all means, follow through.
Second, promise that you will make their referral an excellent offer. . .better than the offers you typically make to strangers off the street.
And finally, promise that you'll never embarrass your customer in any way by applying high pressure tactics to their referral. Make the commitment to contact them and make your offer, but also that you won't be pushy.
The more referral systems you have in your business, the more referral business you'll do, and that can only improve your revenues and profits.
Derek Viveiros is a Certified Marketing Coach who teaches the principles of marketing to small-medium sized business owners. He has helped business owners dramatically increase revenues with his unique one-on-one coaching style. Keep your mind on marketing your business everyday with the Daily 30 Second marketing tip. Click here for your free registration.
Jim Ackerman is President of Ascend Marketing, Inc. of Salt Lake City. He is a member of the National Speakers Association and developer of the Principle-Centered Marketing CoachingTM Program. 2006, Jim Ackerman. All rights reserved