Current Newsletter Article
How To Generate More Referrals Than You Ever Thought Possible
Using Psychology To Help Grow Your Shredding Business
Recently I began implementing a marketing program for an out-of-state shredding company. Since referrals are a great way to generate new business and one of the first sales-building steps I take, I asked my client this simple question…
“Do you have a proactive referral program in place to get new clients?”
Sam (not his real name) assured me that he did and explained his program like this:
“When I get a new client I promise to give them a $50.00 certificate to Chili’s if we sign a friends or associate, based on their referral.”
I wasn’t surprised by Sam’s answer as I’d spoken to other shredding companies that have used a similar approach.
“How’s the program working for you” I asked.
Sam initially told me that the program was working “pretty good” but when we looked at the hard numbers, “pretty good” meant just two new clients in three years.
Now don’t get me wrong. Spending $100 to get two new clients is a good deal. But if your referral program is yielding less than one new client per year, then I think it’s safe to say that your referral program isn’t working.
Why Most Referral Programs Don’t Work
Like most ineffective referral programs, Sam’s program was based on a flawed offer. He essentially told his clients, “I’ll give you something, but only if you give me something first.” Even though many of Sam’s clients thought he ran the best shredding company in the area, this was not the kind of offer that inspired them to give him referrals.
I suggested to Sam that there was a much better way to get referrals and told him about Dr. Cialdini and the rule of reciprocity.
The Rule of Reciprocity
In his groundbreaking book, “Influence: The Psychology of Persuasion” Dr. Robert Cialdini introduced the rule of reciprocity and explained how it worked. To paraphrase Dr. Cialdini, when you do a favor for someone or give them a gift, the person receiving the favor or gift feels indebted to you. Since most people don’t like to feel indebted to anyone, they usually reciprocate with a favor or gift of their own.
Dr. Cialdini illustrated the rule of reciprocity with a story of the university professor who tested the rule by sending out Christmas cards to a large group of random contacts and received hundreds of cards from people he didn’t even know. And the story about the politician who got opponents to vote for legislation they clearly didn’t support, just because the politician had previously done them a favor. But my favorite rule of reciprocity story is the story of the Hare Krishnas.
What The Hare Krishnas Can Teach You About Growing Your Business
If you’re old enough, you may remember a time when Hare Krishna members were allowed to solicit travelers in airports. At first the Krishnas tried begging for money, but they quickly found that it wasn’t working. This was due in part because their members, who shaved their heads and wore full robes, had an appearance that put many people off. So they decided to try a new strategy using the rule of reciprocity. Here’s what they did.
They continued to target people in public places, but instead of simply begging for money, a Krishna would give a gift (a flower or a religious magazine) and ask for a donation. The unsuspecting “target” would try to refuse the gift, but the Krishna would be adamant, refusing to accept the return of this gift. When the target finally relented, the rule of reciprocity kicked in. Then and only then would the Krishna ask for a donation.
How did this new strategy work? Like a charm. It provided millions of dollars of funding and enabled this centuries-old, Eastern religious sect to build temples, houses and 321 new Hare Krishna centers all over the world.
And understand this about the Hare Krishna story. The rule of reciprocity was so strong; countless people were compelled to make donations, despite the fact that…
-
Most had some negative feelings toward the Krishna that had given them the gift
- The “gift” was not something they even wanted, and
- Almost all of the targets knew they were being manipulated.
Making The Rule of Reciprocity Work For You
You don’t have to shave your head, wear a robe, or hand out gifts to strangers to make the rule of reciprocity work for you. To get more client referrals than you ever thought possible, just follow these six simple steps:
Step 1: Identify a gift that you can send to your current clients that costs between $3 and $7. You can use almost any gift, but try to identify one that has a higher perceived value than you actually spend. (I’ve had success with a magazine gift card that sells for $4.95, but has a perceived value of at least $20.)
Step 2: Write a letter to your clients explaining that you have sent them a gift for two reasons. First, you want to thank them for being a loyal customer, etc. etc. Second, explain that you’re trying to grow your shredding business and that one of the best ways to do this is through referrals from satisfied clients. Then simply ask for a referral.
Step 3: Put together a one page referral form with space for at least four contact names. Don’t forget to ask for the prospect’s email address, as well as their other contact information. That way you’ll have a low-cost method to market to these prospects, if you can’t immediately convert them.
Step 4: Send the gift, cover letter and a referral form to your clients. Remember the idea is to send them a gift BEFORE they give you referrals…not as a reward for a referral.
Step 5: Follow up on all the referrals you receive from your clients. Make sure that you mention the referring client by name.
Step 6: Two weeks after sending out the gift, identify the clients that have not yet sent you any referrals, and send them a follow up letter. This letter should say that “since you hadn’t heard from them, you just wanted to make sure that they had received your gift.” This will remind them that they are still in your debt. Include another referral form, just in case they lost the first one.
Tips For Success
-
Before purchasing the gifts, calculate the number of new clients that you’d need to cover the investment. Don’t forget to factor in the lifetime value of your new clients into the equation.
- If you want to go the extra mile, tell the referee that if one of their referrals signs with you, you’ll send their friend a gift in their name.
- Make it easy for your clients to refer prospects by giving them a number of ways to share this contact information. Put your fax number on the form as well as your phone and email address.
- If you’re on a tight budget, consider testing your proactive referral program by sending it out to only a portion of your current clients.
- If you normally send your clients a Thank You gift at the end of the year, try sending a referral form along with the gift and ask them for a referral at the same time.
Remember, if the worst case scenario happens and you don’t get many referrals right away, don’t worry. You’ve thanked your clients and sent them a gift. They’re still in your debt and they will pay you back at some point. How do I know? The rule of reciprocity says so.
Jim Sullivan is a marketing consultant, business growth strategist and president of Shred Marketing. He works exclusively with shredding companies to help them increase their revenues. |
