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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