E-Class #32: How to Generate Leads Through Referrals

Checkpoint:

• You have identified all the areas in your business where you use telemarketing, and where you need to implement a tele-marketing strategy or process.
• You have created scripts for your telemarketing needs, including both incoming and outgoing calls.
• You have incorporated your telemarketing process into you staff training and development program.

A comprehensive referral strategy will act as a passive, low-cost lead generation tool for your business.

If you’re not working to get more customers from your existing customers, you’re missing out on a huge pool of revenue that could have a significant impact on your bottom line.

Referral customers are any prospect that comes to your business because of an existing customer. It’s the result of word-of-mouth marketing, or word-of-mouth testimonials. A happy customer has encouraged their friend, family member or colleague to try your product or use your services.

The beauty of referral business is that referral customers cost less to acquire. Compared to the leads you generate from advertising, direct mail campaigns, and other marketing initiatives, referral customers come to you already qualified and already trusting in the quality of your offering and the respectability of your staff.

With a little effort, and the creation of a formalized system – or strategy – you can not only continue to enjoy referral business, but easily double the number of referral customers that walk through your door. All for a minimal investment of time and resources.

In this E-Class we will cover:

• Why referrals are a low cost lead generation strategy
• Why referred customers are ideal customers
• How to create a referral strategy in your business
• Referral sources
• Active and passive referral strategies

Most businesses can benefit from a referral strategy – and so can yours.

If you have a referral-based business, you can potentially create a stream of qualified customers who arrive at their doorstep ready to spend. You’ll be able to put less focus on advertising, and more focus on serving and communicating with your existing customers.

Generally speaking, a referral program can generate outstanding results for nearly any business. Since most referrals do not require any effort, the addition of a strategy and a program will often double or triple the number of qualified referrals that come through a business door.

There are, however, a few types of businesses that will not benefit from a formalized referral strategy. These are businesses with low price points – like fast food restaurants and drugstores. Their customer base is already large, and I would say that their efforts would be best spent on increasing their average dollar sale.

A referral program can:

• Save you time on marketing. Referral strategies – once established – don’t require much management or time investment.
• Improve your credibility. Your customer’s networks likely overlap, and create potential for a single customer to be referred by two people. This encourages the perception that your business is “the place to go.”
• Increase your qualified leads. Your customer arrives with an assumption of trust, and willing to purchase.
• Boost your profit. You will spend less time and money generating leads, and more time serving customers who have their wallets open.
• Speed the sales process. You will have existing common ground and a reputation with the referred customer.

Referral strategies will earn you customers who cost less and spend more.

As we discussed in earlier E-Classes, you don’t just “get” customers you buy them. The money you spend on advertising, direct mail, and other promotions ideally results in potential customers walking through your doors.

For example, if you placed an ad for $200, and 20 people make a purchase in response to that ad, you would have paid $10 for each customer.

Referral customers cost you next to nothing. Your existing customer does the work of selling your business to their friend or associate, and you benefit from the sale. Aside from the cost of any referral incentives or coupon production, there is no cost involved at all.

Referral customers cost less and require less time investment than any other customer. That means you can spend that time making them a loyal customer, or a devoted fan.

Ready to go after your untapped referral business? Here’s how you do it.

A referral strategy is any system you can put in place to generate new leads through existing customers. The ideal way to do this is to create a system that runs itself! Here’s an easy way to make your business a referral business:

1. Create a list of all the people and businesses you may be able to use as referral sources.

Take some time to brainstorm all the people who could potentially refer business to you. Think beyond your business, to your extracurricular activities and personal life. There are endless sources of people who are ready and willing to send potential customers your way.

Customers

Customers are an obvious source of referrals because they are the people who are dealing with you directly on a regular basis. Often, all you have to do is ask and they will happily provide you with contact information of other interested buyers, or contact those buyers themselves.

Your customers also have a high level of product knowledge when it comes to your business, and are in a great position to really sell the strength of your company. Remember from the Testimonials section, the words of your customers are at least 10 times more powerful than any clever headline or marketing piece you could create.

Past Relationships

This includes anyone you have previously had a relationship with, but for one reason or another have fallen out of touch. This includes former colleagues, associates, customers and friends.

Including them in your referral strategy can be as simple as reaching out through the phone or email, and updating them on your latest business initiative or career move. Gently ask at the end of the correspondence to refer anyone who may need your product or service. They will appreciate that you have attempted to re-establish the relationship.

Suppliers and Vendors

Your suppliers and vendors can be a great source for referrals, because they presumably deal daily with businesses that are complementary to your own. The opportunities to connect two of their customers in a mutually beneficial relationship are endless. These businesses should be happy to help out – especially if you have been a regular and loyal customer.

Employees and Associates

Give your employees and associates a reason to have their friends and families shop at your business with a simple incentive program. These people have the most product knowledge, and are in the best position to sell you to a potential customer.

This is also a way to tap into an endless network of people. Who do your employees and associates know? Who do their friends and friends of friends know? A referral chain that connects to your employees can be a highly powerful one.

Competitors

This doesn’t seem so obvious, but it can work. Your direct competitors are clearly not the ideal source for referrals. However, indirect competitors can refer their clients or potential clients to you if they cannot meet those clients’ needs themselves.

For example, if you sell high end lighting fixtures, the low-budget lighting store down the street may be able to refer clients to you, and vice versa. You may wish to offer a finder’s fee or incentive to establish this arrangement.

Your Network

Don’t be shy about asking your friends and family members for referrals. Too many people do not provide enough information to their inner circle about what they do or what their business does. This doesn’t make sense, since these are the people who should be the most interested!

Take time to explain clearly what your business is all about, and what your point of difference is. Then just ask them if they know anyone who may benefit from what you are offering. You could even provide your friends and family with an incentive – a gift, a meal, or a portion of the sale.

Associations + Special Interest Groups

This is another place you likely have a network of people who have limited knowledge about what you do or what your business does. The advantage here is that you have a group of people with similar belief s and values in the same room. Use it!

The Media

Unless a member of the media is a regular customer of yours, or you are in business to serve the media, this may not seem like an obvious choice either.

The opportunity here is to establish a relationship with an editor or journalist, and position yourself as an expert in your field or industry. Then, next time they are writing a related story, they can ask to quote you and your opinion. When their audience reads the story, they will perceive your business as the industry leader.

2. Now, take your list and start asking! (This is your active referral strategy).

This may seem simple and obvious, but it’s true. Be open with your customers and associates, and simply ask them if they can refer any of their friends or associates to you. Make it part of doing business with you, and your customers will grow to expect the question. Or, let them know in advance that you’ll be asking at a later date.

Remember that this can include potential customers – even if they don’t buy from you. The reason they chose not to purchase may have nothing to do with your business; any person who has begun to or actually done business with you can refer to you another person.

3. Offer an incentive to your referral sources and all your customers.

When you speak to your customers, when you ask them for something, you typically try to answer the question “what’s in it for me?” before they ask it.

The same is true when you ask your customers for a referral. Incentive-based referral strategies work wonders, and can easily be implemented as part of a customer loyalty program, or as part of your existing customer relations systems.

Consider offering customers who successfully refer clients to you discounts on products, free products or services, or gifts. Offer incentives relative to the number of referrals, or the success rate of each referral.

This can have a spin off effect, as your referral customers may become motivated to continue the referral chain. They too will be interested in the incentives you have provided, and tell their friends about your business.

3. Be diligent and stay proactive until your referral system is up and running.

The only way your referral program will work is if you put some effort into it, and maintain some level of ongoing effort. Once the system is in place, it will run itself with some minor involvement from you and your staff.

Here are some ideas for ongoing referral strategies that incorporate incentives and require minimal maintenance:

• Put a referral card or coupon in every shopping bag that leaves your store
• Promote gift certificates during peak seasons
• Offer free information seminars to existing customers, and ask them to bring a friend
• Host a closed-door sale for your top 20 customers and their friends

4. Remember to make sure your passive referral strategies are in place too!

Provide Great Customer Service

An easy way to encourage referral business is to treat every potential customer with exemplary customer service. Since the art of customer service is lost is many communities, people are often impressed by simple added touches and conveniences. That alone will encourage them to refer your business to their network.

Stay in Touch

Make sure you are staying in touch with all of your potential and converted customers. Through newsletters, direct mail, or the Internet, keep your business name at the top of the minds, ahead of the competition.

Even if they have already purchased from you, and may not need to purchase for some time, a newsletter or email can be a simple reminder that your business is out there. If someone in their network is looking for the product or service, it will be more likely that your customer will refer your business over the competition. I’ll walk you through how to create strong newsletters in an upcoming E-Class.

Harness the power of your referral network and you’ll find a host of hidden prospects that you’ll easily convert to customers.

I find that once you start thinking about referral business, you’ll see new opportunities within your existing network on a regular basis. Often, it’s just a matter of getting in the habit of asking for it!

Of course, an incentive-based system for your customers is also a really effective way to go after a big slice of referrals, but remember to make sure that the incentive you promise costs less than it would to acquire these new customers through your existing marketing strategy.

Next week I want to show you some fun and easy promotion ideas for your business. Promotion is all about getting your name out there, and you can get really creative with it.

Looking forward!