The 5 Steps to creating a Killer Referral Strategy
What is a Referral Strategy?
A referral strategy is a way of introducing new customers to your business, for a low acquisition cost. Basically it’s a way of getting your existing customers to promote your business for you. A way of getting them to introduce their family, friends and colleagues to your product or service.
What makes a successful referral strategy?
There are a number of elements which combined, go to making up a successful referral strategy. From finding the right type of customer, to the strategy that best suits your type of business. There are 2 things you need to understand above all else ...
Service ... Your service must be extraordinary. Having good or even great service just won’t do. If you want people to refer their friends then make sure your service is first rate.
Your offer ... If you don’t give people a good reason, a ‘What’s in it for me?’, your strategy will fail. Some of the strategies that you’ll discover in the next section will rely on your offer more heavily than others, but regardless of which one you choose always ask yourself - “Would I refer someone for that reason”.
In the following pages you’ll learn how to put a referral strategy into place in your business. Which type suits which business, and the types of customers that you want to refer you, and those you’d rather didn’t.
1. Why (Use a Referral Strategy)?
Before deciding on the type of referral strategy (there are a number to choose from), you need to work out whether this is the right overall strategy for you.
Obviously, you have a suspicion that it is (or you wouldn’t have invested in this package), but you need to compare it’s potential returns against other available ways to market yourself. Whilst a referral strategy has a low hard dollar cost, some can be quite time consuming.
A referral strategy is ideal when you have a higher priced product or service. Whilst almost any type of business can benefit from having a referral strategy (or a number of them for that matter), there are some businesses that it doesn’t suit as well.
For example, a referral strategy is probably inappropriate for a fast food outlet - the average fast food outlet has too many customers at any one time, to go through a script to gain more names for their database. Having said that though, a strategy where your customers could take a card, or flyer and pass it on to their friends, could work quite well. You could also have an offer for groups of 4 or more.
Of course, a referral strategy is an ideal backup for your existing marketing. If you’ve invested money to get a new client to come in, why not get them to bring their friends. It can of course work well as a stand alone strategy.
2. Who (Are Your Target Market)?
Before you even embark on a referral strategy you need to decide the type of customers you want to do business with. The last thing you want is to get referrals that don’t turn into business, that is, referrals that only buy off you once and never do business with you again or even worse, referrals that create more headaches than they do sales, and never give you the business you’re after.u.
So you must decide who your ideal customer is. Some customers are more trouble than they’re worth and will actually cost you money. The 80:20 rule, sometimes called the Pareto Principle, states that 20 % of your business comes from 80% of your customers. The other side of this is that 80% of your headaches will generally come from 20% of your customers.
So, before you try to go and get more new customers, decide on the type of people you want as new customers. You also need to grade your existing customers in one of 4 categories ... either A, B, C or D. An example of an A grade customer would be someone who pays their bills on time, are pleasant to deal with, are happy to pay your marked prices, send their friends to you, and spend a reasonable amount with you each year.
Don’t put up with customers who won’t pay their bills, don’t treat you well and constantly hassle you on price. These customers will generally refer similar types of people, and that’s the last thing you want to happen. To get rid of your D grade customers, (those you don’t want to do business with), simply send them a letter that asks them to deal with someone else. You can’t afford to deal with them any more.
Your C’s will meet just 1 or 2 or your criteria and need to be sent a fairly strong letter that informs them of the new rules of doing business with you. Some will come on board with the new rules, others will want to go somewhere else. Either way, now you’ve moved all of your ‘C’ and ‘D’ customers out ...
Your next step is to train your ‘B’ grade customers how to be in the ‘A’ grade with a simple letter. Every client is now aware of the type of customers you want to deal with ...The most important message you need to get through as you send out these letters is that you’re doing it to be able to provide the best service possible for your target market.
3. What (are you offering)
You need to teach your customers why it’s good for them to give referrals. People will generally only do something for you if you give them a reason to. Your customers want to know why they should do things for you, they want to know how they’ll be affected when they take action and most of all, what will they get in return ...
When you’re being pro-active about getting referrals you need to take all this into account, even if all they get in return is the knowledge that they’ve helped a friend find what they need ...
You’ll have to educate them about how referring people to you can, and will help them. We’ll get into the rewards you can give later but for now, just tell them the simple logic I’ve used so many times for success before.
Your customers will benefit in several ways by referring people to you. Let me list them for you ...
1. By referring you new clients they’re helping you save marketing dollars and that allows you to pass on greater savings to them, greater rewards, or better service ...
2. They’re making sure you have a strong and healthy business, so you’re around in the future when they might need you again
...
3. They’re helping you work with only the best level of clients so you can always come up with new ways of serving them better ... and so on ...
Every time you educate one customer about referring new people to you, you’ve got an advocate for life ... with one condition. That you always give them the level of service you’ve promised, it doesn’t have to be 5 star, just what you’ve promised.
Another quick tip about educating people how to refer, be sure to let them know that you’re after quality people, just like them. You’ll give them a compliment and set a standard for who they refer to you straight away ...
4. How (Are You Going To Encourage Referrals)?
Once you know who you want to deal with, and what you’re prepared to offer to get them in the door, the next step is working out your strategy.
Referral strategies can be the trickiest of them all - you are asking people to risk something that is dearly important to them ... the respect of their friends.
That may sound a little over the top, but consider this example - let’s say you convince a friend to buy a car that turns out to be a dud. How is that friend going to feel about you? Or what if your friends’ appearance was completely destroyed by a hairdresser you recommended.
The negative effects can vary in intensity, but there is always a risk. If you tell someone to do something and it turns into a nightmare, you can expect some of the fallout.
Of course, the reverse is true. If you introduce a friend to a business that solves a problem for them, or gives them exactly the service they’ve been looking for, it can reflect on you very positively.
People tend to highly value what other people think of them. That means, they won’t refer someone to you unless they’re absolutely sure they won’t be embarrassed, or be blamed for anything going wrong.
The upshot of this: if your service or products aren’t up to scratch, you can forget about referrals. Get that part right, and you’ll get more referrals than ever.
Once you feel comfortable that people are happy with your service and products, you can start work on some specific referral-generating strategies.
What is a Referral Strategy?
A referral strategy is a way of introducing new customers to your business, for a low acquisition cost. Basically it’s a way of getting your existing customers to promote your business for you. A way of getting them to introduce their family, friends and colleagues to your product or service.
What makes a successful referral strategy?
There are a number of elements which combined, go to making up a successful referral strategy. From finding the right type of customer, to the strategy that best suits your type of business. There are 2 things you need to understand above all else ...
Service ... Your service must be extraordinary. Having good or even great service just won’t do. If you want people to refer their friends then make sure your service is first rate.
Your offer ... If you don’t give people a good reason, a ‘What’s in it for me?’, your strategy will fail. Some of the strategies that you’ll discover in the next section will rely on your offer more heavily than others, but regardless of which one you choose always ask yourself - “Would I refer someone for that reason”.
In the following pages you’ll learn how to put a referral strategy into place in your business. Which type suits which business, and the types of customers that you want to refer you, and those you’d rather didn’t.
1. Why (Use a Referral Strategy)?
Before deciding on the type of referral strategy (there are a number to choose from), you need to work out whether this is the right overall strategy for you.
Obviously, you have a suspicion that it is (or you wouldn’t have invested in this package), but you need to compare it’s potential returns against other available ways to market yourself. Whilst a referral strategy has a low hard dollar cost, some can be quite time consuming.
A referral strategy is ideal when you have a higher priced product or service. Whilst almost any type of business can benefit from having a referral strategy (or a number of them for that matter), there are some businesses that it doesn’t suit as well.
For example, a referral strategy is probably inappropriate for a fast food outlet - the average fast food outlet has too many customers at any one time, to go through a script to gain more names for their database. Having said that though, a strategy where your customers could take a card, or flyer and pass it on to their friends, could work quite well. You could also have an offer for groups of 4 or more.
Of course, a referral strategy is an ideal backup for your existing marketing. If you’ve invested money to get a new client to come in, why not get them to bring their friends. It can of course work well as a stand alone strategy.
2. Who (Are Your Target Market)?
Before you even embark on a referral strategy you need to decide the type of customers you want to do business with. The last thing you want is to get referrals that don’t turn into business, that is, referrals that only buy off you once and never do business with you again or even worse, referrals that create more headaches than they do sales, and never give you the business you’re after.u.
So you must decide who your ideal customer is. Some customers are more trouble than they’re worth and will actually cost you money. The 80:20 rule, sometimes called the Pareto Principle, states that 20 % of your business comes from 80% of your customers. The other side of this is that 80% of your headaches will generally come from 20% of your customers.
So, before you try to go and get more new customers, decide on the type of people you want as new customers. You also need to grade your existing customers in one of 4 categories ... either A, B, C or D. An example of an A grade customer would be someone who pays their bills on time, are pleasant to deal with, are happy to pay your marked prices, send their friends to you, and spend a reasonable amount with you each year.
Don’t put up with customers who won’t pay their bills, don’t treat you well and constantly hassle you on price. These customers will generally refer similar types of people, and that’s the last thing you want to happen. To get rid of your D grade customers, (those you don’t want to do business with), simply send them a letter that asks them to deal with someone else. You can’t afford to deal with them any more.
Your C’s will meet just 1 or 2 or your criteria and need to be sent a fairly strong letter that informs them of the new rules of doing business with you. Some will come on board with the new rules, others will want to go somewhere else. Either way, now you’ve moved all of your ‘C’ and ‘D’ customers out ...
Your next step is to train your ‘B’ grade customers how to be in the ‘A’ grade with a simple letter. Every client is now aware of the type of customers you want to deal with ...The most important message you need to get through as you send out these letters is that you’re doing it to be able to provide the best service possible for your target market.
3. What (are you offering)
You need to teach your customers why it’s good for them to give referrals. People will generally only do something for you if you give them a reason to. Your customers want to know why they should do things for you, they want to know how they’ll be affected when they take action and most of all, what will they get in return ...
When you’re being pro-active about getting referrals you need to take all this into account, even if all they get in return is the knowledge that they’ve helped a friend find what they need ...
You’ll have to educate them about how referring people to you can, and will help them. We’ll get into the rewards you can give later but for now, just tell them the simple logic I’ve used so many times for success before.
Your customers will benefit in several ways by referring people to you. Let me list them for you ...
1. By referring you new clients they’re helping you save marketing dollars and that allows you to pass on greater savings to them, greater rewards, or better service ...
2. They’re making sure you have a strong and healthy business, so you’re around in the future when they might need you again
...
3. They’re helping you work with only the best level of clients so you can always come up with new ways of serving them better ... and so on ...
Every time you educate one customer about referring new people to you, you’ve got an advocate for life ... with one condition. That you always give them the level of service you’ve promised, it doesn’t have to be 5 star, just what you’ve promised.
Another quick tip about educating people how to refer, be sure to let them know that you’re after quality people, just like them. You’ll give them a compliment and set a standard for who they refer to you straight away ...
4. How (Are You Going To Encourage Referrals)?
Once you know who you want to deal with, and what you’re prepared to offer to get them in the door, the next step is working out your strategy.
Referral strategies can be the trickiest of them all - you are asking people to risk something that is dearly important to them ... the respect of their friends.
That may sound a little over the top, but consider this example - let’s say you convince a friend to buy a car that turns out to be a dud. How is that friend going to feel about you? Or what if your friends’ appearance was completely destroyed by a hairdresser you recommended.
The negative effects can vary in intensity, but there is always a risk. If you tell someone to do something and it turns into a nightmare, you can expect some of the fallout.
Of course, the reverse is true. If you introduce a friend to a business that solves a problem for them, or gives them exactly the service they’ve been looking for, it can reflect on you very positively.
People tend to highly value what other people think of them. That means, they won’t refer someone to you unless they’re absolutely sure they won’t be embarrassed, or be blamed for anything going wrong.
The upshot of this: if your service or products aren’t up to scratch, you can forget about referrals. Get that part right, and you’ll get more referrals than ever.
Once you feel comfortable that people are happy with your service and products, you can start work on some specific referral-generating strategies.
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