Every business should have four to five strategies to generate new prospects.
In the last column I described one strategy, strategic alliances. A strategic alliance brings together at least two complimentary businesses that share and promote a similar customer base. This is a very economical way to develop new leads for any business.
Another inexpensive yet powerful strategy is referral systems.
Personal referrals, or word-of-mouth, are can be a very effective method of generating new business. The key to boosting sales in a referrals-based business is basic — trust-worthy products and service. A satisfied customer is more willing to give a referral, especially when they have purchased the “right” product, received a fair deal and experienced an exceptional service. What better way is there than getting your happy customers to promote your business for you?
Asking for referrals can be tricky because you are asking people to risk something very important to them – the respect of their friends, families and colleagues. People value what other people think of them, and business owners are staking their own reputation when they refer clients to you. They don’t want to be embarrassed or criticized for a bad buying experience. Simply put; if your service or products aren’t up to scratch, you won’t get many referrals.
Let’s look at how important referrals can be in practice. To quantify how you can grow your business through referrals, consider the following numbers.
Imagine that you own an Information Technology business and you currently have eight clients.
You encourage just half of your clients to refer two new clients to you each year.
Let’s assume that you close three of the eight new referrals (37.5%). If each new client is worth an average of $12,000, this translates to $36,000 in new business each year. On a base year of $96,000, three new clients each year would earn your business $122,400 in year one, $158,160 in year two, and $214,344 in year three.
A referred lead is often “pre-sold” – ready to buy, will negotiate less and make a decision sooner.
Position your business up front with new clients. State clearly that your business operates on a referral system. Offer incentives or discounts to those that secure qualified leads.
Carry referral cards with you and have them ready to hand out to colleagues when the discussion arises. Have these same referral cards on your desk or counters where every client can pick them up. Reward anyone who introduces friends and colleagues with a free gift, possibly dining gift vouchers, memberships, or even a referral fee.
Business groups like local Chambers of Commerce or Executive Leads Associations practice business to business referrals and share referrals with other business owners. Be an active member, attend meetings and functions and don’t hesitate to direct a lead to another business. Taking the extra time to personally introduce potential clients to other businesses costs little time and enhances your reputation.
Develop a simple system of communicating to your customers on a regular basis. If they haven’t heard from you in that last ninety days, you are no longer top-of-mind. Cards, newsletters, and quick phone calls enable you to keep your products and services fresh.
Don’t take referrals for granted; a delay may mean a lost customer. It’s imperative to quickly follow-up with each and every lead you receive. Not all referrals will be your “ideal” clients. But a conversation over a cup of coffee allows them to get to know each other. Don’t be afraid to direct a lead to another business. Be known as a friendly and trusted business professional.
ActionCoach is published on the second and fourth Tuesday of every month in the Business section of the Advocate. It is written by John MacKenzie, whose Red Deer business ActionCoach helps small- to medium-sized organizations in areas like succession planning, systems development, sales and marketing, and building/retaining quality teams. MacKenzie’s blog can be found at bprda.wpengine.com and he can be contacted by email at firstname.lastname@example.org or by phone at 403-340-0880.