provide names and contact information for their associates and receive a token reward, just for giving you the names. When those prospects become customers, the referring customer receives a greater reward.
REFERRAL CASE IN POINT Chad Fos of Southern Tint & Audio outside of New Orleans is installing a referral system where the referral gets a $50 credit to use in store and the referring client gets the same. Fos even allows the referring client to “save up” referral rewards, and use them all at once, just like cash, up to $500. There is no expiration date on the certificates or the rewards, and there is no minimum purchase required. But wait! That’s taking $100 out of your pocket just to get a
new customer! No, it’s taking roughly $50 out of your pocket. If you analyze your Cost of Acquisition of a customer through traditional means like advertising,
I’ll bet you’ll find you’re
paying up to four times that to get a first-time purchase from your average client. And in the referral system, you only shell out the money, if and when it works, unlike the “crap shoot” that often is media advertising. Still, it is $50, so it’s a good idea to have up-selling and add-on selling systems in place to increase your return on that initial investment, don’t you think? And it’s even smarter to have relationship building systems in place and ways to ask your new customers to come back again, so you can turn them
ESTABLISHING GOOD REFERRAL SYSTEMS Here are the pieces of the puzzle for establishing good
referral systems: 1) Incentives for your customer to refer. In pro-active systems
you’ll need a token incentive, simply as a reward for giving you names. This can be a $5 or $10 voucher for use in your store, but a better one might be something they can use immediately, like a dessert coupon at a local restaurant, or a free movie rental. The $50 same as cash voucher Chad uses in his program is a fine incentive for referrals who become customers, whether through the passive or pro-active system. 2) Incentives for the referred prospect to become a customer.
Again, Chad’s model is a good one, although you might want to sweeten the pot for pro-active referrals. Perhaps a free jewelry cleaning kit or gift of similar value to encourage more rapid action on the part of the referred customer. Yes, you will give away something without getting an immediate sale, but if you establish and cultivate that relationship, it will turn into revenue soon enough. 3) Incentives for your staff to encourage them to introduce the program to your customers. These can be anything from candy bars to free lunches, to time off with pay. Use your imagination. 4) Materials. Certificates, letters introducing the program
to your customers, letters to prospects and reward letters to referring customers that also provide them with more certificates to pass out. These are the tools of the systems.
Even though merchandise credits are a good incentive for the referring client, you might experiment with other, instant-gratification rewards. Dinner and a movie comes to mind. So does cash.
into a regular income stream.
Even though merchandise credits are a good incentive for the referring client, you might experiment with other, instant- gratification rewards. Dinner and a movie comes to mind. So does cash.
There are advantages to each type of system. Passive
referrals come to you absolutely ready to buy. They have a need or they wouldn’t show up in your store. They bring all of the advantages of referral selling we talked about as we opened this column and at the highest level. But you have to wait for them to come to you. Pro-active referrals also bring all the advantages we suggested at the beginning, but they are less intense. When you pro-actively solicit people who are referred, but who have not come to you on their own, the timing may not be right. They may take some additional cultivation. This is not a bad thing, and it can be done far more economically than mass solicitations through the media or mail. The primary advantage is in permission to establish a relationship. If you are diligent in following through with that relationship, it will almost certainly turn it to revenue.
5) Scripts for you and your staff to use in talking about your
new referral rewards programs. You will be far more effective if you and your staff know what to say in persuading your customers to refer. 6) Training for your staff is also essential, if you expect them to implement the program. Sometimes employees resist being asked to do new things. It’s outside of their routine. In most cases the resistance comes from a lack of confidence in themselves. Training can help overcome that problem. 7) A tracking system is the last piece in the puzzle. You must accurately track referrals so you can appropriately reward clients whose referrals become customers, and so you know what revenues you are gaining from your referral programs. If you’re like most good mobile electronics retailers, you already get a substantial number of referrals. By installing the systems described here, you can significantly increase the percentage of your business that comes from referrals. Remember, you pay little or nothing for referral customers until after they are acquired. If you cast your referral nets wisely, you may find you need little more than good referral systems to build a thriving enterprise. ■
www.me-mag.com 57
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