Sunday, May 15, 2011

Build Your Referral Base


Every business needs an effective referral strategy.  In fact, referrals are usually the most effective and least costly way to acquire new customers.    Here's a step-by-step outline to help you put together an effective referral program that will make a significant impact on your business.

Get ready.  Do all of 6 of these steps before implementing any of the suggested referral strategies.
  • Define your ideal customer: who you want referred to your business (the 20% who generate 80% of your business)
  • Go through your current customer list grading them A, B, C, D (awesome, basic, can't deal with, dead)
    • Get rid of, fire your D customers
    • Inform your C customers about your new rules of business: here's how your redoing you business to provide what your most valued customers want, here's what you are no  longer going to provide
    • Train your B customers how to become A's
    • Let your A customers know you can now devote far more time to taking care of their needs
    • Calculate what it costs you to "buy" a new customer.  Include:
      • All marketing and promotion costs
      • All fixed costs (this way, any sales to existing customers are pure profit)
      • Decide how much you are willing to spend to "buy" a new customer
        • Work out how long an average customer stays with you
        • Multiply by the number of times your average customer buys from you each year to get the total number of lifetime transactions
        • Multiply that by the average dollar sale and the gross margin to determine the lifetime value of your average customer
        • Compare that to what it costs you to "buy" a new customer
        • Decide what you are willing to spend to "buy" a customer going forward
        • Implement a plan to keep in touch with your customers at least every three months
          • It's more expensive to acquire a new customer than to keep old ones coming back
          • Include special offers for existing customers in any communication
          • Consider newsletters, birthday, Thanksgiving cards
          • If using e-mails, ask permission before adding to list; let them know that by doing so they'll be the first to learn about any deals you are offering A grade customers
          • Teach your customers why it's good for them to give you referrals
            • It helps you continue to give them great service
            • Think of additional WIIFMs ("What's In It For Me?") to include when you are teaching your customers why they should refer you
            Referral Strategies
            • Develop an "awesome service" strategy
              • Brainstorm what you can do to get your customers to "rave" about you.  Think about situations where you've received truly outstanding service.
              • It doesn't have to be expensive
                • A simple smile, warm personal greeting, friendly good-bye
                • A short letter, small give, quick phone call
                • Consider CNE's ("Absolutely Critical Non-Essentials" by Paddy Lund) to dramatically improve your customers' perception of quality
                • Goal is to create a lifelong relationship with your customers: look beyond a single sale
                • Make sure you thank your customers and ask them to tell their friends about you
                  • Send thank you notes
                  • Or a small gift, something complementary to your service
                  • Be daring: ask for referrals when people buy from you (or even if they don't!)
                    • Ask why they bought from you, then ask if they have friends who would buy for the same reason.
                    • Be sure to give them at least 2 valid reasons why you are asking for referrals
                      • "I'm building my practice and I need your help."
                      • "Would you like the regular price or the discounted referral price?"
                      • Be willing to spend as much on a referral as you would to "buy" a customer on your own.
                      • Offer a gift, gift check or free service for each referral, including a gift provided by a related business to you
                      • Let your customers give their family, friends or associates a gift provide by you.
                      • Be willing to give gifts to both the referrer and the referral.
                    • Let your customers know that you'll be asking for referrals later on.
                      • Ask you customers permission to describe how you will work with them.
                      • As part of this, let them know you are building your business and will ask for referrals
                      • Make giving you a few referrals a condition of doing business with you.
                        • Prepare a Commitment Statement that describes how you will deal with your customer, and vice versa
                        • Include a section about being willing to refer
                        • Consider letting your customers know that you only deal with people who have been referred to you, creating a sense of exclusivity
                        • Reward customers with a special price if they give you a certain number of "qualified" referrals. "Would you like the regular price of the discounted referral price?"
                        • Offer a gift for each referral
                        • Give your customers the opportunity to give their family, friends or associates a gift from you.
                        • Give gifts to both the referrer and the referral, possibly doubling the effectiveness of your referral program.
                        • Send out a referral card with every order, every invoice, drop one in the shopping bag or give to each customer as they leave.
                        • Put a sign or sticker on each of your products, or customer awards or tchotchkes and include an offer
                        • Present a seminar or information night for your existing customers and have them bring their friends along.
                          • Go for quality
                          • Invite 5-10 times the number you want to attend.
                          • Make sure you fill the room
                          • Give everyone name tags (one color for existing customers, one for prospects)
                          • Capture contact info
                          • 80% info, 20% selling
                          • Make an offer available only to attendees
                          • Follow up immediately
                          • Encourage customers to buy gift vouchers to give to their friends
                          • Have a 'bring-a-friend' sale
                            • Exciting invitation letter
                            • Include an offer
                            • Make it a social occasion
                            • Make bringing a friend the price of admission, or the price of access to the special offer
                            • Throw a party to celebrate your customers' purchases and invite their friends along.

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