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As we all know “word of mouth” is by far and away the greatest form of advertising. Why?  Well for starters it’s far more credible.  For you to say in an ad that your services are the best is one thing.  But for a satisfied customer to tell a friend, now that’s worth its wait in gold.

So ok, referrals are great to have. So what’s the point?  My point is that 99% of businesses out there are only gaining referrals REACTIVELY.  Meaning they provide great customer service, fair prices, a quality product or service, in a great atmosphere … and then they only “hope” that customers will tell their friends.

Let me ask you something.  Can you remember the last time you went out to eat at a nice restaurant and you really enjoyed it.  I mean, you loved it!  The food tasted great.  The service was outstanding.  The atmosphere was inviting.  And the prices were fair.  Ok, got that vivid memory in your head?

Ok, now what did you do after you left the restaurant?  Did you immediately call everyone you know on your cell phone strongly urging them all to go try that place?  Or did you rush home to email everyone on your list to rave about your new favorite restaurant?
Probably not right?

Chances are you maybe told a friend or two, but that’s probably it.

Why is that?  I mean you loved that restaurant and couldn’t wait to go back.  Aaahh … because you are busy, isn’t that right?  You had other things on your mind.  Such as the laundry you have to do when you get home.  Or that you have to pack your children’s lunches for school tomorrow.  Or maybe you have to get back to the office from your lunch break.  I don’t know what you do in your own time.  What I am willing to bet though is that you’re pretty busy and you don’t have a lot of time to promote someone else’s business, that’s for sure!

There’s a point I’m about to make and you probably see where this is headed.  If you are not so inclined to go out and tell everyone about a positive experience you just had, what makes you believe that your customers are any different?

So I’ve got some bad news.  Despite your best efforts to provide great service to your own customers, probably only a handful are telling anyone about you.  And even when satisfied customers are referring you, it’s merely a small fraction of what you could (and should) be getting.

So if you are only getting a small portion of the quantity and quality of referrals awaiting you, what can you do?

Here’s 4 Key Steps:

1. Give an incentive to existing customers to refer you to their friends.

2. Give an enticing offer for new customers to try you out.

3. Reward employees for their involvement in your referral program.

4. Perfect the “delivery method”

This final step, the “delivery method” is the difference between understanding “why” you need to be more proactive, and actually succeeding in increasing the amount of referrals you receive.

Tips on perfecting the implementation of your referral program:

1. Keep it simple.  Complicating the details only frustrates everyone involved, including employees who must implement it, existing customers who get easily confused, and prospective new customers who may feel its not worth the trouble if it seems to complicated.

2. Get everyone involved.  Nothing looks worse than when a customer asks a question about a promotion or event in which an employee is clueless about.  It undermines the credibility of your efforts and diminishes the customer’s initial enthusiasm.

3. Be generous.  Now is not the time to try be “stingy.”  Remember your objective for the program is to create more new customers.  That’s it!

4. Be honest.  There is absolutely no reason to hide away from the truth in what your motives are.  A perfectly good explanation is, “Because we’ve tried advertising and consumers today just don’t respond like they used to.  Advertising is too costly and our competitors are saying the same things in their ads that we are.  However, word of mouth is our best way to attract more new customers.  So if you know anyone we would like to reward you for recommending them to us.”

5. Stay consistent.  The worst kind of marketing is marketing that ends too soon.  If it works keep doing it!  If you have a slow week, don’t give up just yet.  Even if it “gets old” to you, as long as the referrals keep pouring in, keep at it!

6. Stay true to your promises.  The whole reason referral programs are so successful when properly developed and implemented is because they play off of your greatest asset — your customers’ goodwill.  The last thing you want to do is promise someone a reward for doing you a favor and then change your mind later and withdraw your promise. Remember, the financial return (dollars in sales from a new customer) will far outweigh any reward you’d give in return for a referral, right?  (And in case you forgot, re-read Tip # 3 about being generous!)

This Marketing article was written by Chris Philippi on 3/18/2005

Chris Philippi is president of Philippi Marketing & Associates, a retail consulting firm specializing in helping independent retailers and small retail chains increase sales quickly, easily, and without expensive advertising. Chris is co-author of The Worlds Greatest Business Mentors and is available for speaking engagements and consulting around the world. Contact him at
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