When we at J&L Marketing are asked to focus our efforts on a dealership with the mission to generate the greatest positive impact on profit and sales in the shortest amount of time, there are key leverage opportunities we always look for first.
In just about every dealership, there are opportunities lying dormant that can yield a fast payback while still enhancing long-term growth. The most powerful of these we know is vastly untapped. We know this because almost every client we work with cites it as the best source of business, and yet virtually no one has a system to harness it.
Referrals — What process do you have to rapidly grow your sales and profit?
Put a pencil to it: In a perfect world, if you did nothing else but facilitate referrals, your business would grow at warp speed. But, let’s look at a more likely scenario.
Start with 1,000 clients. If each referred another ten, and they each referred another ten, you’d be talking to half the population before the end of the year! Of course, it doesn’t work anything like that in the real world, but when done properly, managing a referral program does work effectively to draw more business. And, in contrast to the often prohibitive costs of mass media or conventional advertising, this word-of-mouth marketing works with virtually no costs.
What if you have 1,000 delighted clients, and just 100 of them refer two others to your business? Your client base would increase by 200 people, or 20 percent — what might be called spectacular growth during any economic time. It’s a technique that can generate absolutely amazing results, and yet, it’s so underexploited, it’s a crime.
So, Why Are Most Referral Opportunities Lost? It’s Because …
1. There is no “response device.”
At worst, we as business people tend to feel like asking for referrals is the equivalent of making a “hard sell,” and we shy away from it. At best, we give out business cards to delighted customers with the faint hope that they’ll pass them on to others. Unfortunately, even this falls far short of a “purpose built” referral program.
On the “hard sell” issue, think about it like this: If you don’t ask for referrals, your clients’ friends and colleagues are going to be thrown to the wolves amongst your competitors. Let’s face it, asking for referrals is not a “hard sell.” Most people are just uncomfortable or inefficient at asking for referrals as they ask for orders.
Even though on the surface, directly asking for a referral may seem like a simple matter, it’s actually much more complex than asking someone to buy something. As an example, when a customer gives a referral, they are essentially putting their personal influence and credibility on the line, and many buyers are hesitant to do that before they are able to experience the product themselves. Some people are reluctant to refer under any circumstances. Over 50 percent of customers are predisposed not to give referrals.
While salespeople may not consciously know this, they often experience this phenomenon as “referral resistance.” They brace themselves for it, and they lose their sales “touch” in the process.
2. There is no incentive to act.
People love to “gift” something of value. Allow them to be the bearer of gifts, and they’ll be out there promoting you.
Furthermore, bear in mind that you can afford to “gift” a great deal through these customers because it’s a way of contacting new clients that costs you virtually nothing. More importantly, the lifetime value of these new clients may translate into tens of thousands of dollars for you.
3. There is no expectation for the existing client to provide referrals.
This is an absolutely critical component to a healthy referral system. You should make every effort to educate your customers to the fact that you expect referrals.
4. The referral system is “one-way.”
Acknowledge the efforts of your most devoted clients by developing a system to follow up with whomever does the referring. It could be as simple as sending a thank you letter, email, call, or text — or as sophisticated as what we call “Instant Appreciation,” a monetary gift thanking them for the referral. (Always be sure to check with your state’s regulations before instituting an Instant Appreciation program. There are a few states that prohibit payments for referrals.)
The reality is this: The reason most dealerships don’t have flourishing referral programs is that referrals are often difficult to obtain, and simply asking for one is not the most effective strategy. Make the decision right now to incorporate a referral system into your overall marketing strategy, and watch your cost of customer acquisition dwindle as your profits explode!