We all know that often, when we’re looking for a particular product or service, we usually don’t have a particular supplier in mind. We may browse the net or the Yellow Pages or maybe even scan the local newspapers, but more often than not, we’ll rely on advice and recommendations from friends or colleagues.
A massive amount of business is generated this way every day.
In fact, when asked, most business owners or managers would say that a great percentage of new leads or new inquiries come from ‘word of mouth’ or ‘referral.’ That is, your happy customers or clients talk about you in a positive way that means they’re literally sending people to your door.
Many business owners would estimate as much as 70% of new sales comes from this source.
And that’s fantastic. Fantastic because it clearly means your customers are happy with your service, the quality of your products or services, the value they receive for money, the way your team deals with them, and so on.
But it’s not so great, too, because any way you look at this, you’re still at the mercy of your customers. That is, it’s totally up to their discretion whether they talk about you. You don’t know who your clients talk to, or when, or even what they say. Worse yet, you don’t have any control over when, or even if, the potential clients contact you.
Those issues mean that you have no control over those referrals. And this could mean that you’re missing a massive marketing opportunity within your business.
if some clients are happily talking about you, that usually means plenty of others would be willing to do the same, with a little encouragement.
Better yet, you’ve probably heard the saying ‘birds of a feather flock together.’ Thinking about your own friends and associates, you’d probably have to agree that’s true.
It’s therefore fair to say that the clients you’re currently dealing with now very probably associate with like-minded people. People who are in a similar income bracket and have similar interests, hobbies, buying habits, ethical and moral beliefs, and often similar personalities.
And…people in decision-making roles who purchase from you tend to know other people within their sphere of influence or industry who are your ideal potential clients.
So then, the active customers you like dealing with, who enjoy working with your business, more than likely know other people like them who could have a truly similar need for your products or services.
And therein lies your ‘sleeping giant.’ A giant you can harness by creating a structured way of ‘capturing’ these referrals from all your customers…a referral system.
A system that means you have a way of asking every customer to refer other customers to you. In this way, referrals no longer come to you by chance or default. Instead, it’s a predictable, ongoing process.
This suggestion often deters people because they don’t want to be seen as too ‘aggressive.’ Do NOT look at this strategy that way. If it’s true that most of your customers are happy with your business and the products and services you sell, then it follows that most would be quite happy to refer you, given an easier opportunity to do so. In fact, a systematised referral system merely provides your business with a way of rewarding people for what they’re currently doing (referring people) and encouraging them to do that more often!
Regardless whether your base of ‘active,’ happy customers numbers 10, 50, 2,000, 5,000, or 15,000, what would happen if you asked every single one of them for a referral to another customer?
Hypothetically, you could literally double your client base, couldn’t you
Consider this…even if only 50% of your customers actually referred people to you and then only 25% of those people actually purchased, you’d still be ahead, wouldn’t you?
In this example, you could have added a quarter more to your client base for very little cost. (Of course, these figures will change, depending on your type of business and the quality of your referral system.)
In fact, the percentage of people referred to you who actually purchase would usually be higher. You see, one of the reasons referral systems work so well is that often, when people are referred to a business, they are no longer ‘shopping around.’
The person who refers them to your business would usually be someone they trust—a friend or colleague whose opinion they value. And because of that trust, many simply won’t feel the need to compare your business with your competitors.
Given that, it no longer becomes a decision of ‘will I buy from this business?’ rather ‘what will I buy from this business?’ Statistics show people who have been referred to you are 4 times more likely to buy from you!
Another important benefit of a referral system is that the quality of your clients can be improved. Because like attracts like, there is absolutely no point asking for referrals from those customers you or your team members DON’T enjoy dealing with or who just aren’t profitable! That will only bring you more people like them.
So the clients you should target to ask for referrals need to be A and B—ideal clients, people who will bring more of your preferred types of clients. These ideal clients are the kinds of people who buy from you regularly, who spend well each time they do, and usually pay on time. They are the type of customer you enjoy dealing with, who appreciate what you do for them.
A referral system means that the cost of acquiring a new client is much lower than normal, especially when you look at how that referral system is structured. Let’s review that area now.
The key to creating a referral system that works is to make sure everybody wins. To do that, sometimes the referrer needs to be rewarded for sending someone to you, and the refer-ee’ (the person who’s been referred to you) must be given some sort of incentive to test your business. Last but not least, obviously, your business must win out of the process, too.
Remember, fundamentally the person who is asked to make the referral will only cooperate if he or she believes that it’s in their best interest to do so.
It can also be a good idea to acknowledge the person who brought the two of you together. It helps to show you’re grateful and looking forward to working with them. AND it is common ground you both have at the early stage of the relationship. Any common ground is good when you’re laying the base of a new business relationship.
Imagine the positive response something like those scripts would have in any business! Good. Very few businesses out there actually welcome new customers. And what a good idea. That person had a choice and chose (thanks to your referral system) to come into your business, so why shouldn’t we thank them for that choice, welcome them into the fold and make sure they understand immediately that your business is different, better, than your competitors?
One final point
It is critical that your referral system match your potential customer types. That is, it must be attractive to the kind of people whom you deal with. They must like the offer, they must find it appealing, and it must match your positioning in the market.
For example, if you sell-high ticket items or if you offer something exclusive, your referral system must match that market and so follow that exclusive feel all the way through. Conversely, if your business is built on a budget image, your referral system needs to match that theme.
No matter which way you do it, the important thing is to do it! Create a system and use it over and over.
And finally, how far you want to take referrals is completely up to you. One successful retailer became so committed to dealing only with customers who were referred that he literally closed his doors. You could visit the store only by referral and on appointment. Another very different dentist generated new A clients ‘by invitation only.’ That is, you could visit him only if you were invited by another client.
So, how central referrals become to your business is something you need to consider. Regardless, it’s important to have a system to help you continually generate referrals. That way, sales will go up and marketing costs will go down!
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We would love the opportunity to help you clear your head on what is the right way for you to accelerate your business…
We highly recommend you watch this step-by-step case study of how we grew Beefy’s Pies into a Famous Aussie Icon from a small stressed out bakery into a family owned chain. Click here to get all the insights into their success…
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P.S. Ask if our Boardroom Program intake is open for enrolments…It works best for business owners who see the benefit of having us on as their ‘external partner’ so that they are not alone in the day to day decisions of their business.