How much of your current business comes from referrals? I've heard all kinds of numbers and percentages, but what really matters is what your numbers are, not mine or anyone else's. I'm talking about your shop. Someone who is referred to your shop is twice as likely to give you the business as someone who comes to you from other sources.
If you are going to build a long-term relationship with customers, then I suggest you start referring to them as your clients. When I hear customer I think of someone who buys from you with no real relationship, like when you go to the grocery store.
On the other hand, a client is someone who knows and trusts you for advice, like you would your doctor or your attorney. They are two different ways of having a business relationship. Customer implies buying without emotional contact; client implies a long-term trusting emotional relationship. Isn't that what you want - a long-term relationship with your clients? One in which they will only trust you with their vehicle and refer their friends to you. You are the trusted car guy to your clients.
So let's talk about your clients. How much do you really know about them? Do you know where they live, what do they drive, where do they work, how do they take care of their vehicles, what are their hobbies and interests, what are their personalities like?
Do you have a database, customer list, mailing list, or whatever you want to call your list of names of all your past customers? If you don't have a client list, then I want you to start building your customer list and a profile of them now. Your customer list is the most valuable asset your business owns. You should also have a list of all the names of the people who you wrote estimates for, but did not give you the business. You will also need a list of all your non-client names that may be sending you work. We will use these lists of names to start your referral generation systems, so get it together.
Hint - ACT 2000 is a software program that makes it easy for you to build a database. It's easy to install and use, and if you need help, there are consultants in every major city who will get you up and running at a reasonable cost. Once they are in your ACT file, mailing and faxing them is easy.
Step Two: Find out how much a new client is worth!
In step one you figured out who your clients and friends are, and compiled your list of their names. Step two is to find out what is a new client worth to you and how much are you willing to invest to get one. What is the average net money-in-your-pocket value of a new customer for the first time? That means how much are they worth to you? Are they worth $200, $500, or maybe $1000? How about the lifetime value of a new client. How much is that? How many times do they come to your shop? How many people do they refer to your shop? You need to figure this out too.
Right now let's just focus on the first time sale, net value of a client. Let's say your new clients are worth $500 the first time. How much, then, are you willing to invest to get a new client in the door? Do you know what it is costing you right now to get a new client? Would you be willing to invest $50 to get $500? That's only a 1000% return on your money. Even if you invested $100 to make back $500, this would be a 500% return. Where else can you get that kind of return on your money? So instead of saying that you will invest a certain percent of sales in marketing, let's say that you will invest up to $50 to get a new client. This way you have an unlimited marketing budget because you're paying for results, not just spending money.
Step Three: Find out who's your buddy!
Do you know exactly where your business is coming from? Are you asking everyone who referred them to your shop, and why? If you are not asking people why they are using your shop or who sent them, then you don't really know how much about your business is referrals do you? Sure you can guess, but if guessing is the way you're doing your marketing, I can guarantee that you're wasting a lot of time and money on things that don't make you any money. You need to know where all of your business is coming from: referrals, the phone book, drive-bys, past customers, or from your advertising.
Starting today, ask every prospect who referred them to your shop. I think this should be mandatory information to gather when you are getting their personal information for their estimate. This is critically important information, as it allows you to increase marketing efforts that are working and to stop or change what is not working.
Step Four: Tell them what's in it for them!
Now we know who your clients are, what they are worth, how much you will invest to get a new one and where our referrals are coming from. Step four is to determine how you can reward people who refer business to your shop.
Why should your clients recommend your shop to anyone? What's in it for them? What have you done for them and why should they care about you? You have to remember that, for the most part, people are selfish and care about themselves first. You need to think about what you can do for the people who refer business to you. Do you even send them a thank-you card for the referral? Let's see, what can we do for our champions that are sending us our work?. Remember the $50 that we said we would invest to get a new client? Now what if we could bribe everyone with some cash, or dinner, or carwashes, or whatever, just for recommending our shop. Think about how rewarding them could turn your entire client list into a sales force for your shop. So if you could virtually buy new clients for $50 each, my question is: How many do you want to buy?
Let's say we are going to implement a new referral bonus program and, for the sake of simplicity, we will split the $50 between the person doing the referring and the new client. We could give the referring person their choice of gifts - a dinner certificate, car wash coupon, or a mall gift certificate, or maybe 2 movie tickets and $10 bucks for some popcorn and drinks
When you give a referral gift they will have to enjoy to use, you will be automatically programming them to send you all the work that you can handle. And for the new client, you can give them a new client gift certificate, like a future car wash and detail, or a coupon for $25 off their deductible, or how about movie tickets. I don't care what you do, but you need to do something starting today.
Step Five: Start your referral machine!
Now we need to tell everyone about your new referral bonus program and get it rolling. Even if this is the only marketing you do in your business, it will be worth all the effort.
There are several ways to communicate with your clients about your referral bonus program. You can use postcards, personal letters, or a simple newsletter stating your bonus offer. Your message could start with a headline like: I Want to Send You to the Movies Free, or Free Dinner on Us, or Free Oil Change and Car Wash. Then you tell them a story:
Dear valued client,
I'm sending you two free movie tickets and some coupons for popcorn and soda. I know you have referred several new clients to us in the past and I want to thank you for that.
I also know that we get a large portion of our business from people like you referring their friends to us, and now I would like to reward you for your generosity in helping our business grow. We have started a new referral bonus program which will reward you with two movie tickets and some refreshment coupons for every new client you recommend to my shop.
It's very easy. All you have to do is to recommend your friends to our shop -- like you are already doing. When they come in, we will ask them who referred them, and when they tell us it was you, we will send you a free movie package. Plus we will give a free movie package to your friend as a way of thanking them for trusting us with their vehicle.
Imagine all the great movies that have come out that you wanted to go see. Now you can go see all the new movies when they first come out, on me. You take care of me and I'll take care of you. Isn't that what friends are for?
The Car Guy
Step Six: Keep the engine running!
If you want a system to consistently work for you, you have to consistently work your system. Step #6 is to start your communication with your clients and then do it consistently. This means that you should contact your entire database at least once every month reminding them about your referral bonus program. This is very easy to do and doesn't take a lot of time. (If you've purchased a computer program such as ACT, you can FAX newsletters to business clients and then mail to households. You can use a simple one page tri-fold self-mailer newsletter. Include a story on how you helped someone out, some car care tips, some news-related car stories, or anything that might interest your clients. You will want to remind your clients every month about your client referral reward program. I know of a shop owner who has an annual client appreciation dinner party. His top referring clients get prizes like a big screen TV.
I strongly suggest you do some kind of monthly communication with your clients and let them know you still remember them and will reward them with something for helping you out. They will appreciate the reward and recognition and will be happy to help you out. If you don't like to write or don't have the time, there are several companies you can subscribe to that provide personalized newsletters.. At less than a buck apiece, you can send out 500 a month and break even with only one additional sale.
Step Seven: Pay attention to new opportunities!
As you start sending your faxes, newsletters or postcards, you may have several different versions of the same offer - one that you send to all of your clients and one you send to your business friends that refer people to your shop. You could send a separate letter to all your insurance friends. As you get used to communicating with your client base and friends, I want you to pay attention to new opportunities to add names to your mailing list. This mailing list is your "sales force," and you have to keep them motivated to send you business.
The seven steps that I have explained here are the exact steps I use when we are helping to set up a referral program for my body shop clients. Setting up a referral program will help you to learn a great deal about your clients and your business and will make your shop explode with business, giving you peace of mind and a sense of control. After just a few months, you will be able to predict how many referrals you will be getting each month. So what are you waiting for? Go get started!
Tracy Bains is the president of Body Shop Marketing Inc. and the author of The Body Shop Marketing Success System, a comprehensive marketing how-to system for body shops. He currently has clients in over 30 states and has just released a new marketing report entitled "How To Double Your Sales In Six Months Or Less." You can reach Tracy at 309-663-6192.