Make word-of mouth work; inexpensive ways to turn your customers into your sales force - includes related article on how to design referral incentives

Home Office Computing, Nov, 1993 by Donna M. Partow

Inexpensive Ways to Turn Your Customers Into Your Sales Force

"The inspiration for my marketing strategy arrived in the mail," says Jeanne Mitchell. She operates jTee's, a wholesale quilted-design T-shirt business, out of he home in Perry, Oklahoma. "For the hundredth time, my book club sent a reminder that I could earn a free book by referring a friend. It suddenly occurred to me that the strategy must work or they wouldn't keep using it."

That's when Mitchell decided to create her own referral-incentive program. She printed 3.5-by-8.5-inch postcards promising her current retailers: "We will reward you for your effort if you help us get the word out." The card, which includes spaves for the names of the referring and ordering parties, explains the system: Existing customers get one free T-shirt for every 12 ordered by the account they referred. When the new client places an order, Mitchell sends the referring party a coupon redeemable for the merchandise.

The program works because Mitchell's target market, quilt store owners, constantly exchange products ideas. She places several cards in each order shipped, so she doesn't even invest a postage stamp. Everyone wins.

"My customers win because they receive free merchandise, and I win because new customers come looking for me," Mitchell explains. In short, her customers have become her sales reps.

You, too, can turn your customers into a powerful sales force. Rather than waiting passively for word-of-mouth to work its magic, why not give people something to talk about? All you need is an effective referral program (see this month's feature "How to Reach the Affluent").

But before you jump into your own program, be aware that referral incentives may not always create a win-win situation. They can backfire if you overstep professional boundaries or put any pressure on your existing customers to send new business to you. An incentive program tends to work best when you never directly ask people to sell for you. Instead, as Mitchell does, just lay the idea of referral incentives before your customers. If they want to pick up the ball and run with it, fine. Otherwise, let go of the idea. Don't push it.

The referral program you develop will depend on several factors, including the nature of your business, who your customers are, and how urgently you need new business. Outlined below are the three key elements: education, inspiration, and communication.

EDUCATE YOUR CUSTOMERS

Assuming you offer high-quality products or services, your existing customers represent your best source of future business. They've experienced the benefits of working with you, so their recommendations carry more weight than a dozen direct-mail campaigns and 10 cold calls combined.

Yet many of your customers probably think you have all the business you need. Others may not realize the full range of products and services you offer. Your circle of influence--family, friends, and former or current colleagues--represents another often-untapped source of referrals. Even if these people don't need your product or service, they undoubtedly know others who do. However, they can't refer customers to you if they don't understand your business.

One easy-to-use educational tool is a capabilities brochure, which presents an overview of your business. After reading your brochure, customers and everyone else in your circle of influence should be able to describe what you do, who needs your products or services, what qualifies you to perform the services or provide the product, what sets you apart from the competition, how long you've been in business, and any noteworthy achievements or customers served.

In addition, include a section in the brochure (or prepare a separate flier) describing your referral-incentive program. It should clarify when--under what circumstances--people should refer someone to your business, what procedures they should follow when referring, and how and when you will reward them for referring customers to you. The essential types of rewards include future discounts, free products or services, a referral fee, and gifts.

Here's a quick test to determine how successful your educational campaign has been to date. "Ask 10 people you know to describe what you do and who your likely customers are," advises networking-seminar leader Joy Pedersen of Rockaway, New Jersey. "Write down their responses and check whether they have an accurate handle on your business." Pedersen, founder of four professional networking organizations, including Express Success, also warns: "You might find their misconceptions very disappointing. Just remember, it's your grade on the line, not theirs."

INSPIRE YOUR CUSTOMERS

A few kind souls will refer customers to you just for the sheer joy of helping others. And a few other business owners will provide referrals in the hope that you'll help them in return. Whatever the reason, though, a little inspiration always helps. So states Dianna Booher, corporate trainer and prolific author of 26 books on business communications.