Referral marketing is a quick, cost effective way to bring new customers into the business with very little risk.
If your business has a reputation for high quality customer service, then it's likely that you are already enjoying a number of referrals from happy clients in the form of word of mouth recommendations.
But while this is a good thing as it proves that your business is actually worth referring, it is still a hit and miss method. Just because you have great service doesn't guarantee that you will get a referral. So you need to put systems in place that remove that element of chance.
In order for you to create a referral system that benefits you, your referrers and the people they refer, you need to understand and appreciate a few concepts:
The Lifetime Value Of A Customer
When you truly grasp the average lifetime value of a customer to your business, then you can begin to engineer massive growth within your business.
The best way to explain this is with a quick example. Imagine for a moment that you run a restaurant. For each customer, the average cost of raw materials is $10. However, the profit per meal is $25. Your average customer visits your restaurant once every 2 months and you keep them for an average of 5 years. So your lifetime customer value is $25 profit multiplied by 6 times a year multiplied by 5 years which is $750.
Each new customer is worth $750 to you over the course of your relationship with them. Now lets take the concept a stage further.
The Lifetime Referral Value Of A Customer
People are creatures of habit. We all tend to hang around with people who broadly share our views, our income bracket and our tastes. So in essence, the friends of our existing clients would be our ideal target market! All we need to do is come up with ways to encourage our clients to bring their friends to us.
Now that you appreciate just how much a new customer is worth to your business, would you agree that enticing them to try your restaurant with the offer of a free meal is worth the expense? After all, if you WOW them enough to turn them into regular clients, you have effectively invested $10 to get a $750 return.
Of course, chances are that you do not run a restaurant. So you will need to substitute your business model and data into the mix to give you a lifetime value that you can work with.
But whatever industry you operate in, the core principles are the same. So in order to tap into the wealth of referrals hidden away in your existing clients mental database, you need to give them an overwhelmingly compelling reason for them to recommend a friend.
In our restaurant example, we could give two free meal vouchers as a birthday gift. Nobody likes to dine alone and they are sure to bring other friends to make a party of it!
For most other businesses, we need to find a limitless supply of something that has a high perceived value but very low cost to us that we can entice our clients with. May I suggest that you give away information?
From CD-ROMs to reports and white papers, information is cheap to produce and helps to position you as the obvious expert. So for a cheap, effective way to put yourself in front of your prospects, give them the information they need in order to choose you!
To see how you can put your referral marketing on autopilot, download a copy of my free report, Referrals - Unleash A Never Ending Flood Of New Customers.