Monday, June 23, 2008

On Management: Referral Rewards

Do you belong to one or more “rewards” programs? You know what I mean: you get rewarded for your continued loyalty to a particular airline by accumulating miles each time you fly. Accumulate enough miles, and you get a free trip. Hotels have similar programs. Credit card companies have even gotten into the game with cash rewards. Such programs are all about keeping your business by offering you perks. Recently I came across a program that essentially does the same thing to encourage referrals. I thought I’d pass it along.

Whenever I conduct a leads seminar, I always ask the same question to get a feel for the needs of my audience. The question is, “What’s the primary source of your leads?” I usually hear that it’s referrals, so then I ask this, the killer question: “Are these referrals due to an ongoing process that has predictable results, or are they catch as catch can?” In other words, are these referrals active or passive?

What’s the difference, you may ask. After all, a lead is a lead, right? No, that’s not true, not by a long shot. The difference between being proactive with an ongoing referral program versus just taking them as they come is all the difference in the world. It’s about the same as the difference between making a pie and having one thrown at you. The former is more controllable, predictable, and enjoyable.

Nevertheless, I usually hear that referrals most commonly “just happen,” which means they are passive. That’s not too surprising to me. In the majority of companies there is no procedure in place to generate a steady stream of referrals from satisfied customers, even though they’re readily available for the asking. This is really significant since you can most effectively reduce your sale cost by reducing your lead cost. The best way to do that is to actively promote referrals, not only from your sales staff and their customers, but also from the installers, the office staff, and anyone else that has contact with your business.

In the past, we regularly sought new business from our contacts by offering a modest incentive. We called these folks “bird dogs.” It still works when we remember to work it but when things get hectic, a lot can get lost in the shuffle. That’s why it’s smart to have a program in place that will keep your referral program going strong with little effort on your part, a program that encourages your installers and service techs to get add-on business and new prospects as a regular part of the job.

I mentioned a program that would keep your customers, installers, and office staff interested in providing referrals that lead to sales. Think S&H Green Stamps (for those of you who go back that far) or airline miles, and you’re on the right track. All of us like to be rewarded for our efforts, and a member of Home Improvement Entrepreneur, Frank Mumford of Sir Home Improvements in Kalamazoo, Michigan, has created a way to do that by what he calls a “Referral Rewards Program.”

It’s a bit too complicated to explain here, but it basically awards points for referrals and sales that accumulate, and it allows you to redeem those points for gifts of your choice by visiting the Rewards website. It’s a new twist on an old idea, and it’s very well done and looks to be a very low-maintenance way to maintain a stream of referrals.

As I like to say, everything works if we do. The trick to getting leads is choosing a method that you will work at on a regular basis. The only thing better than that is getting everyone else to do the work for you.

Do that, and everyone goes home in a limousine.

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