SMART MARKETING: Hey Buddy, Can You Spare Me A Referral

Is it possible that in the now almost three years I’ve been writing this column I haven’t yet talked about referrals? Shame on me!

At our company, two out of every three new customers are, in some way, the result of a referral from a satisfied customer. You read right. Two of every three!

Are we that good? I’d like to think so, and the numbers seem to bear that out.

Our company has grown in double digits for almost 17 consecutive years. Since 1991, all but about 4 percent of that growth has been internal expansion. Yes, we advertise aggressively. Yes, we sell aggressively. But so do most of our better competitors.

There are quite a few pest management professionals in our marketplaces that advertise and sell aggressively. They know quite well how to bring ’em in the front door. Some of them, though, have too many leaving through the back door. Getting new customers is not that hard. Keeping those customers satisfied, and then asking those customers to refer their friends, neighbors, relatives, co-workers, acquaintances, etc., to our company is where we part company with many of our competitors.

Please understand, this is not bragging going on here. This is the model under which we operate. The customer we have is definitely more valuable to us than the customer we’re trying to get. Now what do I mean by that?

THE COST OF OUR CUSTOMERS. When we factor in the cost of each lead we get, add to that the cost of actually selling and starting that piece of business, it’s not unreasonable to expect that in a competitive industry like ours, we don’t make much money on that customer in the first year. So we knock ourselves out making that customer happy so that we can start making money on that particular customer in the second year, third year and beyond.

That’s why we enjoy those growth numbers I shared earlier.

Occasionally, either a technician or sales inspector asks a customer for a referral or we do some internal marketing to our customer base offering an incentive to existing customers if they refer someone to us who then becomes a customer. But make sure the incentive being offered costs less than a new lead!

I’m not going to get too personal here, but I’ve heard numbers of anywhere from $35 to $120 as a cost per lead from people in our industry who have invested in extracting this kind of information. The larger companies need to know this sort of stuff because it helps them make better marketing investment decisions.

Some companies offer a month’s free service for a referral that becomes a customer. I’ve heard of companies offering as much as a dinner for two at a nice restaurant, a gift certificate to a video store or a mass-merchandiser retailer, or cold, hard cash ($25 or $50) depending on whether the referral bought pest prevention, termite protection, etc.

Ideally, your customers are going to be so happy with the service you provide that they will look for opportunities to share their good fortune with others, without need for any kind of incentive. When you’re providing great service, this happens more often than you probably know.

More times than I can remember, I’ve preached the notion that the best way to gauge the success of your marketing efforts over time is to compare revenue growth and net customer gain from the current year to the previous year. Net customer gain happens when you bring in more customers than you lose, for whatever reason. You can’t stop customers from dying or moving. You can stop customers from leaving because they’re dissatisfied with your service.
If you satisfy ’em, they won’t leave. If they don’t leave, chances are good you can get a referral out of them from time to time. Try asking. 

The author is senior vice president of Massey-Persons-Brinati Communications, a subsidiary of Massey Services Inc., Maitland, Fla. He can be reached via e-mail at bbrewer@pctonline.com.