Should you spend your marketing entertainment dollars to cement relationships with your referral partners or with your customers? If a good referral partner represents 10 new customers a year and a customer represents one new purchase a year, the answer is obvious.
A Michigan business owner, Johnna Goodwin of Changing Places Moving & Services Inc., had to make the choice of spending entertainment dollars on Realtors or past clients. She reasoned that past customers would move again in about five years, while the typical Realtor with whom she worked sent her six new referrals each year.
Obviously, if she could gain the loyalty of a Realtor through her expenditure of entertainment dollars, then she would gain a lot more business than if she spent the dollars to maintain goodwill among former customers who might be loyal to her company and use it again in five years.
In that time span, a Realtor might generate up to 30 referrals, compared to the return business from one customer.
After looking at the numbers, Goodwin held regular wine and cheese parties for Realtors, sponsored Realtor events, and took them to concerts and sporting events. The majority of her advertising and promotional dollars were focused on building these referral partner relationships.
She does not ignore her past clients but has shifted her focus primarily into maintaining and reinforcing referral partner relationships.
As a result, during recent economic tough times in Michigan, Changing Places prospered, while many of Goodwin’s competitors suffered severely.
Referral partners are more appreciative
Not only are referral partners more productive than past clients in terms of the amount of new business they can send your way, but also they are more appreciative of gifts and other acknowledgments or inducements.
Customers may expect to be wined and dined and may take such actions for granted. Referral partners, on the other hand, do not expect rewards; their behavior can be impacted favorably by recognition.
Evaluate your position
Ask yourself where the majority of your entertainment and marketing dollars are being spent. Do you spend time meeting prospects who can give you just one transaction at a time, or do you invest time in meeting referral partners who can send dozens of transactions your way?
By looking at your calendar and your expenses, you can easily see what your current strategy is and whether you need to change your approach.
By comparing the two categories, it should be clear whether you need to shift some of your marketing efforts to your referral partners.
Getting started
Here are some simple steps to take:
1. Block out a few hours a week or (preferably) one day a week when you focus on your referral partner list.
2. Either call yourself or have an assistant call your referral partners and schedule face-to-face meeting times with them.
3. Have a detailed presentation ready when you meet potential referral partners with a clear win-win proposition.
4. Follow through consistently with actions like Thank You cards, referrals, invitations to events, or gifts, depending on the expectations of the referral partner.
Referral partners who are properly positioned to interact on a regular basis with those who fit your customer profile can be a tremendous source of a large number of referrals on a continuing basis. It simply makes sense to spend your marketing dollars where you get the highest return.
Minesh Baxi and Chuck Gifford are authors of Network Your Way to $100,000 and Beyond. Visit www.networkingseries.com.
Tags: marketing, networking, referral partners