Word of mouth is like a free lunch. Sure, it’s nice every now and then, but do you rely on it to feed you and your family? By solely relying on word of mouth, you are putting the fate of your business in other people’s hands–hoping that they like and remember you enough to send business your way regularly. This is an extremely dangerous position to be in. Instead, you need to orchestrate and stimulate referrals rather than hope and wait for them to happen.
The Psychology of Referrals
It’s important to understand the psychology behind referrals. Think back to the last time that you gave out a recommendation for a restaurant or movie. Did you do it to promote that restaurant or movie? Unlikely. You wanted your friends to have a good experience. You did it to make yourself look and feel good. That is exactly the concept that we want to use in our referral marketing but with more intent. We want to make it more deliberate and reliable.
Just Ask
Remember Joe Girard, the Guinness Book of World Records holder for selling the most cars? Part of the reason he sent a card each month to his list of contacts was because of the Law of 250.
He observed, after attending a wedding, that there were about 500 people present–250 guests from the bride’s side and 250 from the groom’s side. Later, after selling a car to a funeral home director, he inquired about the average number of guests that attend a funeral–250. Again, after selling a car to a caterer, he asked them, on average, how many people attend a wedding, and again, there were about 250 from the bride’s side and 250 from the groom’s side.
From that, he figured that every person he did business with represented about 250 potential customers. So, he set about building relationships rather than just focusing on the next sale. Part of his process was to follow up a few weeks later with his customer to see how the new car was doing. If things were good, he would ask for a referral. If things weren’t going so great, he would do what he could to fix the problem and then ask for a referral.
This brings us to one of the most important strategies–just ask.
Here are a few points that help make asking for referrals easier:
Thank them for their business,
Tell them they bought the best or cutest items,
Offer a coupon or dollars off to the person they refer, providing real value to the potential new customer while making your current customer look good to their friends.
Give them a reason to give you a referral–something that benefits them.
Here’s an example of how to ask for a referral:
Mrs. Customer, you’ve got some very cute fabric here. Thank you for shopping with us today. If you know anyone who is also looking to get cute fabrics just like you, please give them this New Customer coupon for 15 percent off their first purchase. Getting referrals helps us keep our advertising expenses low, and we pass those savings on to you, our loyal customers.
Review this again; can you identify the four points?
By creating a system around generating referrals, you no longer hope that referrals just happen. While not everyone will give you a referral, many will. One thing is for sure: birds of a feather flock together–meaning that your customers know of others who are similar to themselves. It’s human nature to seek out other people who have similar interests.
Conquering the Bystander Effect
Have you noticed that when there is an accident, there are more people just standing by watching than doing anything? In first aid training, you are taught to give very specific instructions and make eye contact with the person to whom you are giving those instructions. This gives that person a sense of personal responsibility to follow your instructions. Just yelling out, “Someone call 911,” is very ineffective.
The same is true with referrals. You need to be very specific in your request for referrals; this will significantly increase your chances of getting referrals.
To beat the bystander effect, you do four things:
start with a specific problem,
identify a trigger for the problem,
provide the value now, and
set up your customers to look good.
In my previous example, the problem may be tricky to identify, but that is because we talked about the solution to the problem: cute fabric. The problem they had was not having cute fabric or the right fabric. The trigger would be starting a new project or not having enough to finish a project. The value you provide is a 15 percent off coupon. Then, you set up your customer to look good because they can pass that 15 percent off coupon on to their friend.
A side note here: this example of a new customer discount only works if you track all your customers’ purchases–you must be able to identify new versus old customers.
To help you build your referral system, go through your list of customers and start looking for the problems your customers have and what triggered them to buy from you. Then, you can create the first steps in asking for referrals.
Who else has your customers?
Referrals do not have to come from existing customers. They could come from neighboring stores or similar stores to yours.
For example, when my mom started her business, she only offered longarm quilting services out of her garage. To get customers, she went to all the fabric stores within an hour’s drive and asked if she could be a collection and drop-off point for her longarming services. As you might expect, a lot of stores said no because they also offered longarm quilting services, but a few stores welcomed her. For years, she would drive to those stores each week to drop off and collect quilts. She even continued this practice after she opened her own storefront.
A few years ago, my wife and went out to eat at a pizza parlor. When we were greeted by the hostess, she asked if we were there for the painting class. We were not, but I asked for more details about it and the hostess said that once a week a local artist hosted painting classes at the restaurant. It was $20 for the class and 20 percent off the restaurant menu. From my understanding, they are still doing those classes today. They would have stopped if it were not mutually beneficial for the restaurant and art teacher, right?
Who could you do something similar with? Could you attend a guild sewing party and bring a small selection of goods to sell? Could you host a sew-a-thons and invite the local coffee shop, food truck, or dessert parlor?
Other ideas include exchanging coupons with other local businesses, reselling complimentary products from other stores, or even setting up an affiliate program.
Look at who has your customers before you and after you. Where else do your potential customers shop? What do they shop for? Who could you network with?
Stop relying on word of mouth. Create a referral system that stimulates and orchestrates referrals.
What do you do, or are you going to start doing to get referrals? Email me at jacob@curtisaccountingsolutions.com.
If you need help with this and piecing together financial freedom, please schedule a call with me by clicking the link below.