<h2><span style=”color: #2266a3;”>Revenue Through Referrals</span></h2>
“ I need more leads” is a common refrain heard these days. With strapped cashflows business owners correctly understand that cutting expenses can go only so far in generating needed cash. I’m not discounting the importance of closely monitoring your expense but an over dependence on reducing costs could materially hurt your company. I see companies reducing key employees, curtailing marketing, forestalling differentiating programs all to save money. In the long term, perhaps even in the short, these efforts can have dramatic and unintended adverse impacts on your business.
We need to focus your attention on the revenue production side of our business. Efforts to increase revenues and profits fall into 5 areas of focus: 1) lead generation, 2) conversion rate, 3) average dollar sale, 4) number of times clients buy from you, and 5) profit margin. For the next couple issues I’ll be focusing on what you can do to generate more leads.
<strong>Lead Generation – Referrals</strong>
Bob Burg in his book “Endless Referrals” points out that referred prospects are twice as easy to close and buy more in the first two years than clients who weren’t referred. There are two significant reasons why referred prospects are easier to close:
<li>It’s easier to get an appointment – the referrer imparts their trust on you</li>
<li>Price is less of a factor – you are differentiated by the referral</li>
So, certainly every business owner and sales manager must be asking clients for referrals…right? Surprisingly, the answer is no. Most businesses don’t actively ask their clients for referrals. The reasons vary, but two of the more common are:
<li>They don’t know how to ask for referrals</li>
<li>They are embarrassed to ask clients for referrals</li>
<strong>People don’t know how to ask for referrals</strong>
Early in the sales process make it known that your goal in servicing their relationship is to provide exceptional quality, and that you will be asking them for people they know who would benefit from the same service quality. This simple statement lays out your service quality goal while at the same time letting them know that in the future you will be asking for referrals.
When the time comes that you want to ask for referrals, tell your client “I’m never too busy to help any of your friends, colleagues or family members. Who do you know that would benefit from the service I provide?”
<strong>People are embarrassed to ask clients for referrals</strong>
Start by realizing that your clients are interested in helping their friends, colleagues and family members. When you provide exceptional service quality that is valued by your clients, their interest in helping others will compel them to promote you to their interested audience. View asking for referrals as offering to help others with your quality service and not pushing product. Change how you think about asking for referrals…you are looking to help as many people as you can by providing a valuable service rather than pushing products.
If a formal referral program is not part of your sales process you are missing an wonderful opportunity to increase your customer base. Reply to this e-mail if you would like to learn more about the advantages of a quality referral program, how to build a lead generating referral program, or how to raise the bar on your referral program.
You must be clear on the types of customers you want to work with because clients will refer people just like themselves. I bet that twenty percent of your clients generate 80% of your profits and conversely most of your clients take up time, nickel-dime you, complain often and only constitute 20% of your revenue. You don’t need more of these time wasting, low margin and complaining customers.
My clients have found it useful to classify their clients into “A”, “B”, “C” and “D” categories, with “A” being the most desirable customer and “D” clients being either asked to leave or re-priced with a higher fee.
Don’t ask for referrals from “C” and “D” clients. Referrals that are useless or, worse yet, cause you headaches and consume your time are not what you’re after. Focus your referral program on your “A” and “B” clients. By attracting more As and Bs and eliminating Cs (either move them to Bs or move them out) and Ds (move them out) you’ll increase your average dollar sale and will have more time to find these desirous customers.
<strong>“Referrals come through who you are, not what you sell.” </strong><strong>Bill Gates</strong>