Referrals - Birds of a Feather
Yes, it's true: Birds of a feather do flock together. In the direct marketing world this means that customers who do business with you in all likelihood know other people who need your products or services, too. In other words, your customers may, in fact, be able to point you to your best prospects. And that's true whether you sell to consumers or businesses...or are prospecting for new members for an organization.
So, if you are interested in the cost-efficient acquisition of highly qualified new prospects, you should have a customer referral program up and running. If you don't, you're overlooking one of your most profitable (and practically free and pain-free) sources of new business. Even if you do have a referral program, go ahead and read this anyway. It may be time to re-evaluate what you have in place.
Using Referrals to Build Prospect Files
Referral programs are simple. All you do is ask your customers or members for their help. And do it in a nice way. Here's what you'll find:
• Referrals are more qualified than "cold" prospects generated from other sources.
• Referrals have a higher conversion rate at a lower cost than other prospects.
• By asking your satisfied customers for their help in introducing their friends, neighbors and colleagues to your company, you help solidify customer relationships.
• New customers who come to you as referrals frequently spend more money with you right from the start.
• Referral programs don't take a lot of time or money to test and to maintain.
Catalogers tend to be the most consistent about asking for referrals— sometimes they do it subtly with a check-off box on a catalog request card, as Lands' End does ( see sample on previous page). At other times, they'll use a bind-in reply card or area on the order form such as Title Nine Sports.
By the way, here's a tip from your cataloger colleagues. You'll notice catalogers rarely ask for just one or two names and addresses. Why? They've found if you ask for two, you'll get two. If you ask for five, you'll probably get five.
Other companies, such as White Flower Farm and Chinaberry Books, add an effective twist to their referral offers by providing back-end incentives. In one case, it's for the customer doing the referring; in the other, it's for the person being referred. Chinaberry gives customers who send referrals a coupon for free shipping every time two referrals convert to buying customers. White Flower Farm sends each referral name a copy of the catalog plus a $5 credit towards the first order.
HOW B-TO-B MARKETERS CAN USE REFERRALS
Business-to-business marketers often use customer referral programs to solve the problem of cost-effectively identifying elusive prospects. For example, InterCall, a national provider of teleconferencing services, uses existing customers to help reach others in the same company who may be using a competitive teleconferencing service. This simple two-color self-mailer includes a pass-along/mail-along card with a "Tip Worth Sharing." It has the customer provide his or her InterCall Account Executive's name and phone number along with a simple check-off testimonial.
When the referral calls the AE, the InterCall customer receives a Starbucks Gift Certificate as a thank you.
In the case of ARMA International, the organization was faced with diminishing membership in their long-established organization for records managers. Thanks to computers, not only had the technology used to manage a company's records and filing system changed, the titles of the people doing the job had multiplied and changed, too. As a result, ARMA had a very difficult time prospecting for new members; they simply couldn't find them—until they implemented their strategically sound, multi-step, "Where in the World is R.MaMember" referral program and competition (see sample on p. 58). It not only generated qualified prospective members, but was also recognized as the "Best of Show" by the Kansas City Direct Marketing Association for its creativity and results.
Whether you sell by mail, in retail stores or through a sales force...whether you're looking for customers or members...whether you sell products or services to consumers or businesses...you should have a referral program. It's simple, effective and profitable.