Referrals and Attrition
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Marketing that Makes Money: Referrals and Attrition The Start: A Customer Centric Mind Perhaps the single best source of increasing business is referrals. But very few companies have systematic processes and disciplines in place to gain referrals effectively and to nurture, and show appreciation to, the referrers. Another great source is getting back the customers who left you (“reduce attrition”). A company first has to be, in body and mind, “customer centric”. It is this market that expands the company’s horizens, allowing it to understand the relationship it has with the customer and – perhaps this may surprise some – the relationship a customer has with the company through the use of its product and service. Is a loyal customer vested in a company? Conversely, how about someone who has had a bad experience? Let us examine both these phenomena starting with customers who like the company. It turns out that loyal customers, customers who have a positive feeling for the company, are happy to share that feeling with friends and others.
Setting up a referral system There are several key steps in such a system. Let’s examine them: Define your ideal prospect: Who are these people, what are their demographics, and what needs of theirs will you meet exceptionally well? Develop a clear, detailed profile of such a customer. Who can you ask for a referral? More sources than ever crossed your minds: clients, especially the loyal ones, employees, vendors, friends, associations, etc. This list is only limited by your imagination. Help you clients help their friends: If your product or service benefits your clients, should they not help their friends get similar benefits? Remind them of the benefits that they receive and encourage them to help their friends.
Show appreciation: When someone gives you a referral, be sure to thank him, or her, both in words and in deeds. Everybody likes to be thanked; remember, you can never thank enough. In addition, express your thanks with a gift, a free bonus. Develop a systematic process: Make the referral an integral part of your activities. Define the who, when, and how. Develop a database, analyze it, while continuously improving it. And, of course, test several different ways of making the program better. Does it work? It is by far the best, and least expensive way to develop your business. Here are some examples of how others have approaced referrals: 1) A land sales company wouldn’t let a prospect buy a piece of desirable land before they provided several referrals. (Of course, this was in the days when there was something called “desirable land.”) 2) A walk-in medical center offered free tours to schoolchildren. Now whenever the kids need some medical care that is where they come to, as do their parents (a different notion of referalls!). 3) A photographer, who shoots graduation photos for seniors, encourages these students to come see him with their friends before the actual graduation date. When they come he tells them about what he is going to do and shoots a picture of the student and their friends, and then sends them all a free copy of the group shot. 4) Has someone ever done a great job for you, or saved you from a sticky situation? Would you give them a referral? Has someone ever gone “beyond the call” for you; would you give them a referral? Has a product really pleased you? Would you tell your friends about it? The possibilities are endless. As are the rewards.
Referrals and Attrition Recovering from a near death experience: Reclaiming lost customers Every business loses customers. The rate of loss is called the attrition rate. Some companies have a high rate, and others – the more customer centric ones – have a lower rate. Given how hard it is to get a customer, losing a customer is also very painful. Look at your customer list. I suspect there is a long list of ex-customers. Now here is the good news – you can get many of them back with a bit of effort. Really! To understand this, it is worth asking the question “why do customers stop buying from a company or stop doing business with it?” There are actually three groups of such people: 1) Out of sight, out of mind: In this case, something happened in their lives, but it is totally unrelated to your company. You are just not in their mindset anymore. About 50% of the lapsed customers fall in this group. 2) Dissatisfied customer: They had a problem with your product or service, which was not satisfactorily resolved. Perhaps 20% of the customers are in this group. 3) Changed circumstances: Something has changed in their lives – perhaps they no longer have small kids, for example, and do not need diapers. Or their financial cicumstances have changed.
How might you get some of these customers back? Here are some approaches that work for the different groups: Out of sight, out of mind: The customers bought your product and liked you. They have just forgotten you. What do they need? How about a simple reminder or an incentive to renew the relationship? If you are a restaurant, why not send them a coupon – buy one get one free – or maybe a free meal if they were a really good customer? Dissatisfied customer: Obviously the best thing to do is not have a customer be dissatisfied with you. Every unhappy customer, on average, tells nine other people, sometimes as many as 20
-2other people (and of course on Twitter you can broadcast your unhappiness to 30 million of your best buddies, immediately!). So, do try extra hard to not upset a customer. The vast majority of the customers are reasonable. If their concerns are respectfully, and fairly, addressed, they will not become dissatisfied. In fact many of them become very loyal users! When a customer complains, listen, listen politely, with empathy, and see the problem through their eyes. Apologize for the problem, fix it, and provide some incentive or bonus to the customer to make up for their trouble. There is a reason that Costco, Nordstrom’s, and Amazon do well. Observe how they treat customers with problems. Do not be fooled by the low number of people who complain. Only about 4% of the people actually take the trouble to complain; this means that you do not even know that there are 24 unhappy customers out there for every one customer who has shared their dissatisfaction with you. Changed Circumstances: True, these customers do not need your services at present. But they were satisfied with you, perhaps delighted with your services, before the changed circumstances. Is it worth keeping in touch with them? Or better still, asking them for referrals? Now there is an idea!
Become Customer Centric A company only exists if it has customers. Take care of them. Keep them happy and they will bring in more customers (ask for referrals proactively). If they have a problem, fix it. Fix it right away. This cost is minimal compared to the lifetime value loss of losing a customer. Increasing referrals and reducing attrition – the inexpensive way to grow a business!