Instant Referrals (BUSINESS BOOKS) - Softcover

Sugars, Bradley

Softcover

ISBN 10: 0071466673 ISBN 13: 9780071466677

Publisher: McGraw-Hill, 2005

Synopsis

Turn your best customers into your most passionate promoters.

If you're the kind of business owner who hates cold callingand chasing after new leads, then you'll love the easy referralstrategies in Instant Referrals used by self-made millionaireand entrepreneurial expert Brad Sugars. Discover how to:

• Evaluate a referral-based system that's right for your business
• Determine which customers you want referred to you-and which you don't
• Transform satisfied customers into your biggest fans bycontinually exceeding their expectations
• Create ways to use referrals to generate more buzzfor your business

Get real results right now when you discover all that Instant Success has to offer!

Instant Advertising * Instant Cashflow * Instant Leads * Instant Profit * Instant Promotions *Instant Repeat Business * Instant Sales * Instant Systems * Instant Team Building *The Business Coach * The Real Estate Coach * Successful Franchising * Billionaire in Training

About this title

About the Author

McGraw-Hill authors represent the leading experts in their fields and are dedicated to improving the lives, careers, and interests of readers worldwide

From the Back Cover

Turn your best customers into your most passionate promoters.

If you're the kind of business owner who hates cold calling and chasing after new leads, then you'll love the easy referral strategies in Instant Referrals used by self-made millionaire and entrepreneurial expert Brad Sugars. Discover how to:

• Evaluate a referral-based system that's right for your business
• Determine which customers you want referred to you- and which you don't
• Transform satisfied customers into your biggest fans by continually exceeding their expectations
• Create ways to use referrals to generate more buzz for your business

Get real results right now when you discover all that Instant Success has to offer!

Instant Advertising * Instant Cashflow * Instant Leads * Instant Profit * Instant Promotions * Instant Repeat Business * Instant Sales * Instant Systems * Instant Team Building * The Business Coach * The Real Estate Coach * Successful Franchising * Billionaire in Training

Excerpt. © Reprinted by permission. All rights reserved.

INSTANT REFERRALS

By BRADLEY J. SUGARS

The McGraw-Hill Companies, Inc.

Copyright © 2006 Bradley J. Sugars
All rights reserved.

ISBN: 978-0-07-146667-7

Contents

Introduction
How to Use This Book
PART 1—Understand What a Referral-Based Business Is
PART 2—Is a Referral-Based Business for You?
PART 3—Get Clear on Who Your Target Market Is
PART 4—Know Exactly What You Are Offering
PART 5—The Strategies
PART 6—A Real-Life Example
Testing and Measuring
Conclusion
Getting into Action
About the Author
Recommended Reading List
The 18 Most Asked Questions about Working with an ActionCOACH Business 
Coach
ActionCOACH Contact Details

Excerpt

CHAPTER 1

Part 1Understand What a Referral-Based Business Is

Charlie had always been keen on the idea of sitting back and waiting forcustomers to call and book their cars in for service. And in this respect he isno different than the vast majority of car-servicing businesses. You see, histraining is in the field of motor mechanics and not business or marketing.

But as we all know, the world doesn't work like that, but it can, if you put inplace certain strategies.

I remember Charlie becoming very excited when I first mentioned this possibilityto him. He said that, while this was the ideal business model he dreamed about,he didn't think it was something that could work, even if it were feasible. Healso said that he had never heard of a business that operated that way before.

Imagine his surprise when I told him it was not only a realistic possibility; itwas also very easy to achieve.

"What you want is a referral-based business, Charlie," I said. "But before youdive in and begin changing the way you do business, you need to have a clearunderstanding of just what a referral-based business is."

"Why's that, Brad? I mean, I love the sound of a business in which I don't haveto do all that marketing stuff—I dream about having customers showing upout of the blue and wanting me to service their cars. This, I know, is the idealbusiness because I am not really a marketing type. I'm not comfortable doing allthat stuff. Give me a set of spanners rather than a computer and telephone anyday."

I knew exactly what he meant. I had come across this comment countless timesbefore.

"Charlie, you still need to do a certain amount of marketing. It's just that inthis type of business, you go about it in a different way. There may be a lotless marketing to do, but you still do need to market your business. The realdifference is that the leads you get are more qualified and your emphasis willbe on sourcing customers who will be with you for a long time. This in itselfwill mean the type of marketing, as well as the amount you do, will be radicallydifferent than that done by normal businesses. But before we get into that,let's discuss what a referral-based business actually is.

He agreed, so I pressed on.

"Well, as the name implies, a referral-based business is one that relies largelyon referral strategies to generate business.

"A business doesn't have to always have been set up to run on referrals; it canbe changed to become a referral-based business at any stage."

So if you, the reader, already have a business and would like to alter the wayyou go about your business by tapping into your existing customer base more,then read on. It's never too late.

"Before we look now at various referral strategies, let's first consider what areferral strategy is," I continued.

He nodded.

"A referral strategy is simply a way of introducing new customers to yourbusiness for a low acquisition cost. Basically, it's a way of getting yourexisting customers to promote your business for you. It's a way of getting themto introduce their family, friends, and colleagues to your product or service."

"Hang on, Brad," Charlie interjected. "What does an acquisition cost have to dowith it? For that matter, what exactly is an acquisition cost?"

Here we'll leave Charlie for the time being as we take a closer look at some ofthe concepts involved with business in general.

Acquisition Cost

Imagine having to work out how much your business should spend on sales andmarketing. Setting a budget this way is as hard as finding a needle in ahaystack.

Let me show you how you can have an unlimited marketing budget, andbuy—that's right, buy—as many customers as you want. It's liketurning on the tap to business profits.

Instead of spending a fixed amount on sales and marketing, when you take on theidea of investing in sales and marketing you've got to understand that everyinvestment has a purchase price. In business most people think that you justinvest in the stock you sell—but the same is also true of customers.

In fact, from a marketing point of view, the only thing you've got to buy arenew customers. The question really is, how much are you paying for them?

If you put $1000 into advertising and this generates 100 phone calls, thenyou're paying $10 for each lead. Then if you only sell to one in five of thoseleads, you're paying $50 (5 × $10) for each sale.

Let's look at another example. A clothing store regularly runs an ad in thelocal newspaper. It's the only ad they run, so testing and measuring itseffectiveness is straightforward. The ad costs them $370 a week and itgenerates, on average, 25 inquiries. The owner is understandably delightedbecause he understands that he is paying $14.80 per inquiry. And he knows thathe couldn't get them cheaper. And to make this marketing strategy even moreattractive, he also knows that closing sales is his strong point. Of the 25prospects that come in every week, 19 leave with a purchase. His conversion rateis 76 percent. The net result of his marketing campaign is that each newcustomer costs him $19.47.

Now, here's where this all gets exciting.

Going back to the first example above, imagine that you were a business ownerwho was about to develop a new marketing plan. Let's say your business was acamera shop. Now you already know that each new customer costs you $50. Let'sassume now that you also know, from analyzing your sales records, that eachcustomer spends, on average, $500. This means your average dollar sale is $500.Your records also show that your average profit margin is $100.

What does all this tell you? It tells you that for every $50 you invest you make$100.

The next question you need to ask yourself is this: How many times could youinvest that $50?

The answer is as many times as you want, because every time you spent $50, you'dmake $100. That would be a good deal, wouldn't it? You bet it would.

It almost sounds too good to be true, doesn't it? But it really is as simple asthat! Once you know how much it costs to buy a customer, and as long as you makemore per customer than the acquisition cost, you're ready to start reaping theprofits.

OK, so let's look some more into this notion of "buying" a customer.

Buying a Customer

What's the difference between buying a customer and what you're doing at presentin your business? That's the difference between selling to a customer and buyingone.

The difference is huge.

When you switch from selling to new customers to focusing on buying new ones,you'll start to see a whole new and unlimited world of sales and marketingresults.

Try to see the entire function of your business as nothing more than a buyingexercise—an exercise of buying customers, not selling products orservices. Then the only real question you've got to ask is this: can you buycustomers for less than you'll profit from them over their lifetime of buying?

As soon as you start to see your business as a total marketing entity and not aproduction, service, or retail entity, you'll understand why the price you payfor customers is your biggest expense.

But here is something even more powerful. What if you could buy them for lessthan your profits on your first sale, and what if that first sale came withindays of the commencement of your marketing campaign?

It's around this time in the learning cycle that people start getting reallyexcited. And it's only the beginning because when we start getting customers tokeep coming back and spending more per visit, that's when real wealth startsaccumulating.

There's one more concept I want to explain at this stage. It's the lifetimevalue of a customer, and something I referred to earlier.

Lifetime Value

Think about this for a moment. How much are you going to spend in your lifetimeon something as simple as toilet paper? Thousands of dollars?

So let me ask you this. How much will the average customers in your businessspend with you over their lifetimes?

Let me give you an example. In my dog food business, I knew the average personwould spend $800 a year on her dog, and the average dog lives for 10 years. So,assuming a customer only stays with me for half of that time—fiveyears—then she is worth $4000 to me.

Then, what if she refers to me two new customers in the first year. Now theoriginal customer is worth three times $4000—or $12,000.

What if she also then referred another two every year, and every referral sentus another two customers a year? How much is she now worth to me now? Hundredsof thousands?

Now more to the point; how much are your customers worth to you over theirlifetimes of buying from you?

You must establish this long-term view of their value firmly in your mind beforeyou can appreciate how important it is to develop a relationship with customersand to ensure everything is done to keep them for as long as possible.

The Difference between a Promotion and a Business

This raises an amazingly powerful business point. What's the difference betweena promotion and a business?

Many business owners have just a promotion and go through life thinking theyhave a business. Confused? Let me explain.

With a promotion, you have one product, one service, and once you've sold it tosomeone, that's it. You've got to go out and find yourself another customer. Sowhat you have is an ongoing marketing promotion, not a business.

On the other hand, a business is where you buy customers and then sell somethingor many things to them over and over and over again.

By the way, who ever said you can't sell someone else's products or services andget paid a commission for the referral? This happens all the time and it's veryprofitable business. Are you missing out?

Strategic alliances with other businesses can be a very powerful way to increaseyour customer base for a relatively low outlay. And, what's more, by linking upwith the right businesses, you can target the exact type of customer who offersthe best return on your acquisition cost.

What Makes a Successful Referral Strategy?

At this point it's important to consider just what makes a strategy successful.You see, it's pointless to have a strategy in place if it doesn't contribute toyour bottom line.

There are a number of elements which, when combined, make a referral strategysuccessful. These range from finding the right type of customer to the strategythat best suits your type of business. But there are two things you need tounderstand above all else:

Service

Your service must be extraordinary. Having good or even great service just won'tdo. If you want people to refer their friends, then make sure your service isfirst-rate. How do your customers really feel about doing business with you?

The first thing you need to understand is that customers expect to be satisfiedwhen making contact with any business. They have a need they want satisfied.They've also gone to the trouble of finding out which businesses can satisfythat need; then they've done something about it—they've either phoned oractually traveled to your business. What happens next will determine the lastingimpression they have of your business.

They expect satisfaction, but will actually talk to others about your businessif they get more than they expect.

So give them something to talk about.

This is the first step to creating a Raving Fan.

Good customer service is proactive. Don't wait until you have a problem in thisarea before doing something about it—before you think about ways and meansof taking care of your customers. How can you give your customers something morethan they expect?

Think of different things you could do to get them talking. Brainstorm. Consultyour salespeople. Start becoming innovative in this area. Think outside the box.

Make this part of your routine. Get used to constantly searching for new ways ofsatisfying your customers. Keep your eyes open, watch what other businesses aredoing, and keep innovating. You see, customers actually expect you to keepgetting better.

So what actually are Raving Fans? Raving Fans are people who can't stop sellingfor you. They do this, of course, by continually referring people to you. Theexciting thing about Raving Fans is they can almost be regarded as part of yourteam. They want to see you succeed. Of course, they continue buying from you allalong.

Your Offer

If you don't give people a good reason, a "what's in it for me?," your strategywill fail. Some of the strategies you'll discover in this book will rely on youroffer more heavily than others, but regardless of which ones you choose, alwaysask yourself this: "Would I refer someone for that reason?"

In the following pages you'll learn how to put a referral strategy into place,which type suits which businesses, the types of customers you want referred toyou, and just as importantly, those you would rather not have.

CHAPTER 2

Part 2Is a Referral-Based Business for You?

"Before deciding which referral strategies to implement first, Charlie, you needto work out whether this is the right overall approach for you and yourbusiness," I explained, not wanting to get Charlie's hopes up unnecessarily. Iwanted him to give this careful consideration because it does require a certainlevel of commitment.

"You need to consider whether adopting a referral-based business model is thecorrect one for your business," I continued. He didn't object, so I pushed on.

"To help you arrive at a considered decision, you need to compare the potentialreturns you will get if your business were structured along referral lines tothat which it is currently getting, based on more traditional lines. You need totake a close look at the marketing implications of the two approaches."

He now had something to say, and I let him.

"So, how do you do that? And what exactly is the difference between themanyway?"

"While a business that is geared predominantly towards referral strategiestypically has a low hard-dollar cost, some referral strategies can neverthelessbe quite time-consuming."

"A referral approach is ideal for a business that stocks, provides, or sells ahigher-priced product or service—just like you do, Charlie," I continued.

"Whereas almost any type of business can benefit from having a referral strategy(or a number of them for that matter), there are some businesses it doesn't suitquite as well. For example, it's probably inappropriate for a fast food outlet,as these businesses tend to have too many customers at any one time anyway. Theywould gain very little from having more referred."

I paused to let that sink in. Then I went on.

"Having said that, a strategy where your customers could take a card or a flyerand pass it on to their friends could work quite well in that business. Youcould also have an offer for groups of four or more. In that business you wantto use the right low-cost referral strategy."

Charlie was nodding away to himself as I spoke. This was a sure sign it wasmaking sense to him.

"What you really need to do first and foremost is to understand what your actualcosts are. Do you know how many leads you get each month? Do you know what yourconversion rate is? This means how many leads are converted into customers whenthey actually do business with you. And what about the average number oftransactions each customer makes? Do you know this number? Of course, you shouldknow the average dollar sale price of your merchandise. And what about yourmargins? Do you know the percentage of each sale that's profit? These are allvital pieces of information that every business owner needs to know. How aboutyou, Charlie? Can you list these figures? If not, read my book Instant Cashflowto find out how you can measure them."

At this point it's time to leave Charlie for a while and turn our attention toyour business. This is where you get to do something.

Do you have a reasonable idea of what those numbers are? If so, it's time tofill in the chart on page 14. If not, take some time now to find out what theyare (even if it's only a best-guess) so you can fill in the chart.

Let's work through it one step at a time.

Leads

This is the total number of potential buyers that you contacted or thatcontacted you last year. Also known as prospects, or potentials. Mostbusinesspeople confuse responses, or the number of potential buyers, withresults. Just because the phone is ringing doesn't mean the cash register is.And what's even more amazing is that very few businesses even know how manyleads they get a week, let alone from each and every marketing campaign. It'sgreat to get a lot of leads, but then you've got to remember your conversionrate.

(Continues...)

Excerpted from INSTANT REFERRALS by BRADLEY J. SUGARS. Copyright © 2006 by Bradley J. Sugars. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Edition details

• Publisher: McGraw-Hill
• Publication date: 2005
• Language: English
• ISBN 10: 0071466673
• ISBN 13: 9780071466677
• Binding: Paperback
• Number of pages: 176