Double Referrals for Consistent Profits and Build a Perpetual Profits Machine

One of the fastest ways to double your revenues is to tap into your existing network of clients. Your clients can be your best source of new business if you know how to approach the strategy of referral marketing.

First you've got be sure that your current policies work to build good relationships with your existing clients. Here are some key questions to ask yourself about your current clients:

What's the Lifetime Value of a client for your business?

What's your initial income from an average client?

What's the client repurchase rate?

What's your average repurchase income?

How long is your average client's lifespan?

Let's calculate an average Lifetime Value Example.

This is from our chiropractor's worksheet Example:

Initial fee = $75.00 + ($33.5 revisit fees 8 times a year x 4 years (lifespan) =$1072.00 (Lifetime Value)

Our chiropractor has been in business for 10 years.

Average patient valued at $269.00 a year.

Patient LTV at $1072.00 each.

(Average patient = 4 years.)

Now that we know the average value of a client, we need to take a look at a system to cultivate more of them.

That means developing a referral system

1. Develop a policy - How will you handle referrals?

2. Create a letter or postcard and email template that will go to your associates, family and friends.

3. Incorporate your V.I.P. List and begin to organize a referral network. These people on your list should be the ones that give you butterflies in your stomach when you think of asking them for favors. They are the people you know who are at the top of the food chain. They are above you in the social pecking order.

4. Build a Referral Partnership Network. These folks are the ones you hang out with at the local Chamber of Commerce events. They are your peers.

5. Your current client list - implement your referral program within your follow up. Go back as far as you can and even contact the ones you think can't stand you. They might have short memories. Give them a chance to say no.

6. Employee Referral Program. Your employees have a circle of influence that can if properly tended to , bring in a large amount of business. This of course depends on how many employees you have and what kind of incentive you arrange for their benefit.

When you develop your policy, be sure to maintain consistency in practice. If you decide to send out a "thank you" card to any client who successfully refers a new one, do it EVERY TIME. If you generate referrals by inviting clients and their guests to an event, thank them when they bring a guest.

Take ONE idea and implement it. Test it and be consistent for at least 3 months. Tweak it if there is even a minimal positive result. Success comes from consistent positive action on your ideas.

How can you develop a perpetual referral machine?

I've spoken with many small business owners over the years and they all want the same thing. They want unlimited referral business without taking the enormous amount of time needed for developing the referral base.

There is not one small business owner who would not love to get 100% of the referrals their clients hand out. The problem is very few businesses actually know how many times their clients have referred a friend or family to their company.

The referral strategies used by small business are inconsistent and usually impossible to track properly.

I'm going to give you three strategies to consider for your business marketing. These will allow you to develop a record of your efforts and allow you to adjust to your unique circumstances.

1. It all starts with consistent customer service. There should be a massive effort to develop a step-by-step program of above average service. Once you've created that program, offer it to every client, big or small. Use customer service surveys to uncover the needs of your market.

Before you contact past clients for the purpose of getting referrals, establish a warm up period. If you've been in touch with them regularly, there should be no problem making the pitch. Create a series of offers in the form of letters or emails. Create several letters. You'll want to create an awareness in your clients that you do most of your business by referrals. Take them through your process and give them the tools to offer referrals to their friends and family.

A series of articles that point out the problems potential clients might have and how your type of service solves them can be mailed out or emailed to your existing clients as a way to spread the word. You can instruct your clients on the proper time and ways to distribute your information.

Your articles can be timely such as "10 ways to overcome .... or "How to recognize the symptoms of...". These types of articles allow your clients to pass them on to their friends and family without pressure.

A series of these helpful articles will also work well in the local papers and on the Internet. You can include an offer or point the reader to more information on your website.

You can generate referral business by offering a free seminar or tutorial along with an incentive for guests of your existing clients. The offer can be time sensitive in order to generate greater interest. (See our tools section for sample referral letters.)

2. Create a network of partners who share referrals. Several business owners can work together to create a referral network of noncompeting partners. The group can share referrals on a regular basis.

Another networking concept along the same lines is to prepare a professional referral form for your clients to fill out that lists the names of services they currently refer to others. Call their list of services and find out more about them. Let them know that you routinely refer your clients to trusted service providers and you want to know if they do the same. Depending on your client list, you can quickly develop a network of several hundred people.

3. Remember, your testimonial collection is a goldmine. Build a testimonial letter collection. Better yet, get your best clients on audio and video. This is a powerful endorsement to new clients and works well in connection with the above concepts.

You can build your business to the point where the majority of your business is powered by consistent, reliable referral marketing; it takes time, practical systems, constant care and attention.

The Referral Marketing Revolution

It wasn't long ago when camera giant Nikon announced it would stop making film cameras and focus only on digital-another example of a new technology shoveling dirt on the grave of an old one. Today paradigm shifts like that are happening with increasing frequency. Take referral marketing, for instance. 

You may be familiar with referral marketing's rather ho-hum history. How you were supposed to ask your customers to "tell their friends"...how they pretty much yawned when they heard your referral reward...how you waited around for something to happen...how nothing usually did. 

Fortunately this kind of mediocre marketing is going the way of film cameras. By not building on any of the old foundations, the new Web-based trend in referral marketing is helping fulfill the promise of what should have been, by now, an indispensable way of doing business. 

Here are seven key principles of the new referral marketing. 

That Incentive Thing-"What's In It for Me?" 

The real challenge in referral marketing, of course, has to do with the motivation issue: "Why should I go to all the trouble of telling my friends about your business?" This understandable reluctance is now being addressed in two ways: 

1/ First, when people make recommendations to friends and family, the trend is to instantly and automatically reward them with meaningful points, discounts or other incentives. Today's referral plans are operating much like frequent flyer programs-when enough points are accumulated, members qualify for interesting rewards. That motivates them to be more persistent in making their referrals. 

2/ Second, successful referral marketing plans take advantage of a powerful human motivation: 

Recognition. In the workplace, for example, people often list "recognition" higher than "better pay" in what they want most out of a job. Accordingly, thank-you notes are now immediately and automatically sent to members of these plans who make a referral (that's in addition to notes for other meaningful "recognition moments"), It simply pays to say "thank-you." 

Tools That Magnify Word-of-Mouth Marketing. 

Okay, one of the bigger problems in the past was that customers only had their "word-of-mouth" to make referrals. While that's certainly nothing to sniff at-it remains one of the most powerful forces in all of marketing-it is pretty limited. Most of us only talk to a handful of people each day. That's where other online and offline referral marketing tools come in handy. Zero-cost tools-like e-post cards, online referral forms and "click-to-Website" emails-go far beyond the limitations of word-of-mouth and make it fun, fast and easy for people to make loads of effective referrals. 

The Referral Email Secret. 

One of today's greatest referral tools-emails-can be uncommonly effective, and it's not hard to understand why. Do you open lots of email from unknown sources? Few do. That's why referral email messages sent directly from a person to their friends or family (with the sender's name showing in the "from" part of the email) can make a gigantic difference. Statistic say that the emails from people we know get opened nearly ten to one over those from strangers. This is a big part of the referral marketing revolution. 

Privacy is Never to be Compromised. 

Face it, no one wants to risk putting their friend's personal information in the wrong hands. For that reason, today's referral programs go the extra mile to ensure online privacy. People need all the confidence they can get before sending offers to the people they care most about. 

The Web Revolutionizes Referral Management. 

In the old days, referral programs were, to say the least, hard to manage and update. Everything was done manually on index cards or, years later, on poorly maintained databases. Neither method kept up to speed and often referral-makers slipped through the cracks and went unrewarded. With the Web, all that's changed. The capability now exists to automatically track and record every referral, every point earned and every reward redeemed in real time. This kind of technology has never been available before to referral marketers. Along with this breakthrough... 

People Can Now Control Their Referral-Making in Real Time. 

Not only has the Web revolutionized referral management, it can also effectively sit the referral maker right down in his or her own personal referral "headquarters." Today when you make a referral, the technology exists to let you track your referrals to friends and family and, where applicable, to stay current with the points and rewards you've earned (remember that frequent flyer analogy?). This level of enjoyable, up-to-the-moment control wasn't even on the radar screen in the past. 

Web Technology Has Cut the Cost of Referral Marketing. 

There is at least one "next generation" referral marketing plan that does all of the above yet doesn't see the need to charge an arm and a leg. When referral plans like this cost well under $75 a month, it doesn't take too many "referral-to-customer-conversions" to pay for a year of service (in some cases, even one referral can do that). Credit Web technology for making this kind of sophistication so affordable. 

We've come a long way since the days of index cards. Today's referral marketing is shoveling dirt on the grave of old referral marketing methods and is now poised to become the essential cog in every business that visionaries thought it would be by now. 

Nicole Wicks

Create Referral Systems That Really Work

I think it's the dream of every professional to have their business grow by referral only. Imagine not having to cold call or advertise! What a way to grow a business. 

Can it really be accomplished? Yes it can. In fact, I know a handful of professionals that not only grow their business by referrals, but have SO many potential clients, they need to turn some away! 

So the question is: If it really DOES work, why haven't most of us created a business which is filled by referrals? The answer lies in understanding several important issues. Generally, people don't know how to properly ask for referrals and don't put in enough effort to create a steady stream of them. 

Learning How to Ask for Referrals 

How do most people ask for referrals? Most of the folks I know ask a variation of the question, "Who do you know...?" Here's how it comes out: 

- Who do you know who could use my services? 

- Who do you know who'd like to lower their premiums? 

- Who do you know I could call on? 

A variation of this is the "Thank You" letter that reads: "Thank you for your business... I've enclosed a couple of my business cards. Please pass them along to anyone who could use..." You get the idea. 

Or sometimes people will ask a client to take out their Rolodex/Contact List/Address Book and go through it with them, trolling for possible referrals. 

My sense is that most everyone's experience with theses approaches is about the same. Not only do they not work very well, but they make us uncomfortable even asking for referrals. The result is that we stop asking. If we could come up with an effective, professional way to get referrals, we'd never stop asking for them. 

Let me talk about why the typical methods don't work and then discuss a few methods that do work. Generally, the typical methods of asking for referrals don't work for one or more of six reasons. First of all, if you ask someone to think of a list of names, they can't. Basically, you're asking them to recollect names plucked out of the universe. The pool of names is so great that they aren't able to focus on any particular ones. Secondly, most people don't think about their insurance very often and almost never DISCUSS it with others. When you ask a client, "Who do you know...", you're either asking them to name someone who recently mentioned insurance to them or you're asking them to make a judgment about whether someone they know has a need. The likelihood of someone mentioning insurance in a conversation is pretty slim. Also, I don't know about you, but I wouldn't want someone else making a judgment call as to whether a prospect needs my services or not. 

A third reason that people generally won't offer up names is that they may not be sure of what you'll do with them or say to them. Most people have a certain level of caution when it comes to sharing the names of acquaintances. A fourth reason is that people are living in their own world. That's not to say that they're selfish, but rather that when they go about their day, they're generally thinking about their own tasks, needs and issues - not yours. Asking someone to pass out your cards is unrealistic. It happens, but not too often. The fifth reason that asking for referrals usually doesn't produce results is that most people don't really know who your best client would be. Inotherwords, even if they're inclined to send prospects your way, they won't if they can't identify someone as an "ideal" candidate for you. The final reason that typical methods are ineffective is that most people don't really understand what you do and how you're different. Ever had a client say, "I didn't know you do that!"? That's a sure indication that you aren't effectively educating your clients and/or your network. 

All this is well and good, but what will work? Actually there are a number of referrals approaches that overcome the shortcomings of the typical referrals methods. Effective referral generation methods must 1) not rely on the person to recall names, 2) educate the person as to who you are and what you do, and/or 3) build confidence and credibility. 

Briefly, here are four proven methods that work. 

1. Offer clients a list of neighbors or nearby businesses to identify names from. As part of the process, have a follow-up process in place that allows clients to see how you'll be contacting those people. 

2. Start sending a monthly "Tips" letter out to a select group of existing clients. It should be useful, informative, not be focused solely on insurance, and should remind them about sending you referrals. 

3. Develop a large (100 person) network of other business people to stay in touch with on a regular basis. Send out a monthly mailing to help everyone get to know one another, and highlight yourself each time as well. 

4. Develop one or more "neighborhood" newsletters (similar to the ones real estate agents do) and build awareness and credibility with an ever-widening population. 

Put in Enough Effort 

Each of the above referral systems work. The challenge is to implement them effectively and to use them long enough to see results. The first method will start producing results right away, but takes some groundwork and some follow-through each time to do properly. The other methods also require some strategy to be effective and, more importantly, require time and diligence to produce consistent results. Each method obviously requires more detail than this article can address, but you should be able to get a sense of the various strategies of effective referral generation. 

You CAN generate a steady stream of referrals for whatever you do by taking the time to understand human nature and then consistently apply methods that work. The more people you help, the more success you'll have! 

Michael J Beck