Cloning Customers with Customers – Part 2

By Jim Ackerman, President of Ascend Marketing – In our last column we suggested that the hit-and-miss approach to referral generation is costing you money and we gave you the reasons why referral selling is so wonderful, along with recommendations for how you can execute a more systematic approach to referral generation.

In this column, we’re going to reveal and 8-step system that, even when executed poorly, will increase the number of referrals you can count on each month, and the number of sales you’ll make from having all those additional referrals coming your way.

But first, a quick review of why referral selling is so important and so good…

1.            When a referral walks in, you know you’ve got a lie-down sale.
2.            You will have paid little or nothing to acquire this new client up-front.
3.            Referrals tend to offer fewer objections prior to buying.
4.            Referrals tend to spend more than the average transaction in their category.
5.            Referrals may be more likely to say yes to your up-selling and add-on selling efforts.
6.            Since referrals are faster, easier closes, your sales staff is more efficient, raising your profit margins.
7.            Referrals tend to become loyal, long-time clients.
8.            Referrals tend to refer others like themselves.

With all these benefits of referral selling, who on earth wouldn’t want a system in place designed to generate a steady stream of referral customers?

There are eight pieces of the puzzle to a neatly fitting, efficiently operating referral system, either of the passive (where you wait for the referral to come in) or the pro-active (where you actively market to referred people) varieties.

First, you’ll need a compelling incentive for your existing clients, encouraging them to refer their friends to you. As we discussed last time, your incentive needs to be fun and immediate. Tune-ups and discounts on your products aren’t fun and may not be immediate. Free merchandise and entertainment (dinner for two and a movie) are both.

Next, you’ll need a compelling offer to get the referred prospect to come in. This can be a discount, but it had better be a meaningful one. A hundred bucks off a $5,000 new boat won’t cut it.

Of course, it doesn’t need to be a discount at all. Again, entertainment can be quite compelling. Free trial might be very powerful. Let them take a demo for the afternoon, if you’re located right.

Dealers might be tempted to offer a very generous accessory package with purchase, and that can be motivating.

But be careful. It will only be motivating to the most serious prospects who know they want to buy, right now. It won’t move the likely bigger hordes who are “thinking about it” but who may think they’re months or years away.

Often the big trick is to get them in. If you can do that, you may be able to close them immediately with good salesmanship, or substantially shorten their buy cycle. Either way, getting to them first can effectively pre-empt the competition, especially if you’ve provide a powerful incentive.

Third… scripts. If your people are to be involved in executing your new referral system, they need to know how to do it. Your scripts will tell them what to say and when, to maximize their chances of success.

NOTE: They’ll give you resistance on this. Tough. Prepare the scripts and have them use them, until the whole process is second nature to them.

Fourth is material support. You may need signage, letters, certificates, a brochure. Any materials that will help your staff implement and you to execute on a mass-customer level will need to be generated.

Next you’ll need a training program. Remember, you’re trying to implement a system here. That will require something of a change in routine and habits from your team members. It won’t happen unless you consistently train them for a fairly extensive period of time.

If you have weekly training meetings (and you should) train weekly for at least 90 days. That doesn’t mean the referral program must be the sole focus of those meetings, but it must be included. Your team must realize this is important to you. Consistent effort will deliver that message. Be sure to include role playing, practice with scripts, etc.

The sixth piece is rewards and consequences. Again, these are to help establish new habits in your people. Reward them when they execute the system. It can be simple things like candy bars, free lunches, time off with pay. It can be cash.

But there must be consequences if they don’t execute the system. Less favorable shifts, mandatory extra training, notations in their employee record, loss of raise opportunities, and eventually perhaps, dismissal. Again, your team needs to know you’re serious.

There needs to be two tracking elements (7 & 8 ) to make your referral system run at peak efficiency. You’ll need to track the activity and effectiveness of your team members.

Are they explaining your Referral Rewards Program to clients and asking for those referrals? Are they getting them?

Are referral sales going up as a percentage of all sales?

And of course, you also need to track when referrals come in and buy, because that will trigger your rewards to your referring clients. The timely sending of rewards is the key to keeping your loyal clients sending more referrals time and time again.

One final note: If you are offering a pro-active referral system, you’ll need a token reward to give clients who give you the names of their friends and relatives, and permission to contact them. Again, these are simple, little rewards that should cost you very little. A FREE dessert at a local restaurant, for example, or a FREE movie rental with each name. That kind of thing.

Is it worth it to go through all this trouble to put this reliable marketing system in place? Well, consider the alternative: ever increasing prices for traditional advertising that is ever less effective.

Establishing, testing and refining a system like this will take time and effort, no doubt about it. But it’s largely a one-time investment that can pay big dividends for decades. And when the economic seas are rough, a reliable referral system can keep things smooth sailing when your competitors are being dashed on the treacherous shoals of recession… or worse.

EDITOR’S NOTE: For a FREE 8-page report on referral programs, send an e-mail request to mail@ascendmarketing.com. Jim Ackerman is President of Ascend Marketing, Inc. of Salt Lake City. He is a nationally renowned marketing speaker and can be found at www.marketingspeakerjimackerman.com. He is also the author of How To Market Your Crap When the Economy Is In the Toilet… 12 Vital Strategies for Unclogging the American Economy, One Business at a Time, found at www.marketyourcrap.com or www.amazon.com.