Referrals work. Word of mouth advertising is still the most powerful form of advertising available, and it’s getting ever MORE powerful in 2004. The largest companies in this country have cut their advertising budgets over the last 10 years and directed that money towards generating positive PR and good word of mouth (a.k.a. “buzz”) for their products. (Most marketing people who are paid to buy and sell advertising would rather you didn’t know that, but it’s a verifiable fact).
So how do you build a successful word of mouth program for your business?
Offer your customers a discount on their next purchase if they refer a new customer to you. A lot of companies do this already, but amazingly, not many of them publicize it. If they remember, they mention it to you on your way out the door. Well I say you make damn sure your customer knows before they leave your store or your website that you want their business, and you want them to talk about your product or service to their friends as well.
Think of your local mechanic. They might have mentioned to you at some point that if you refer a friend, they’ll give a small discount next time around. But they could do much better than that, couldn’t they?
If I owned a garage (and believe me I never will because I can barely hold a wrench let alone use one), I’d make sure that after every transaction I told my customers that if they refer a client to me, and that client brings their car in for any kind of repair at all, I’d give them a free lube oil and filter on their next visit. That’s a retail value of about $20. It would cost me about $10. If you were in the auto repair business, wouldn’t you buy a new customer for $10!?! The same logic applies to online sales or any other retail model you can think of.
Just give your customer a reason to make the referral. Deliver good service, charge a fair price, and make it worth their while to send a friend your way. (By the way, the referral program also helps to bring the original customer back in to get their free oil change, so it’s really like getting 2 follow up visits from just one referral.)
What about the plumbing business? Here’s a quiz for you. Name 2 plumbers in your area.
Couldn’t do it, could you? Most plumbers are independent businessmen and women. They don’t have big advertising budgets, and they only service a local area. So you can imagine that a plumber, who sees 4 or 5 or maybe 6 clients a day would be well served by offering a referral program. Turn those 6 clients into 12 by having them each refer a friend who has a plumbing problem.
Now you’re saying that this is not possible. You only call a plumber when you need one, so what good is a 10% discount off your next plumbing job? It’s not like the mechanic who does regular maintenance on your car. You might use a plumber once, and then never again. How would a plumber come up with a referral program?
I’m no plumber, but here’s my idea. You refer any client to me who has a job of $100 or more, and I’ll install a brand new kitchen faucet for you at no charge. The faucet won’t cost a plumber much, because he’s got the inside track on deals in the industry. So a nice $80 faucet at the store probably costs him $40. And he can put it in about 15 minutes or less. Now who wouldn’t want a nice new kitchen faucet, installed free! All they have to do is mention you to their friends. If one of them calls, you make $100 less $40 for the faucet, and gain another client for the future. Do that for a few years and watch your business grow exponentially.